Dec 4, 2007 at 9:48 pm

Microcredit is best tool to fight poverty

Why is 31 years of positive global experience insufficient for the World Bank to grasp the importance of using microcredit to reach and empower the very poor?
In 1976, a young economics professor named Muhammad Yunus lent less than $1 each to 42 craftspeople laboring near starvation, freeing them from perpetual debt to a moneylender so they could profit from their own hard work and care for their families.

Now, 7 million Grameen Bank borrowers and a Nobel Peace Prize later, it is even more confounding that World Bank President Robert Zoellick couldn’t agree to the primary requests that 29 members of Congress (including 3rd District Rep. John Yarmuth, D-Ky.) made in a face-to-face meeting on Oct. 3.
So what did those members of Congress want Zoellick to do? They wanted him to: 1) double World Bank spending for microfinance from less than 1 percent of bank lending to 2 percent; 2) most important, commit half of loan funds to families living on less than $1 a day; 3) require the use of cost-effective poverty measurement tools to ensure compliance; 4) report annually on results.
Why did Zoellick struggle with those requests? Perhaps the simple answer is that the World Bank is, after all, a bank.

Yunus’ response to those who ask what his strategy was in forming Grameen Bank sheds some light on the World Bank’s blind spot. “I didn’t have a strategy in forming Grameen Bank,” Yunus would reply to questioners. “I just kept doing what was next. But when I look back, my strategy was, whatever banks did, I did the opposite. If banks lent to the rich, I lent to the poor. If banks lent to men, I lent to women. If banks made large loans, I made small ones. If banks required collateral, my loans were collateral-free. If banks required a lot of paperwork, my loans were illiterate-friendly. If you had to go to the bank, my bank went to the village.
“Yes, that was my strategy. Whatever banks did, I did the opposite.”

It’s time for the World Bank to look beyond its traditional notions of credit risks and embrace the best tool we have for eradicating poverty. Zoellick should listen less to his advisers and look instead to microfinance leaders in Africa for the lessons he desperately needs to learn. Ingrid Munro started Jamii Bora in Kenya eight years ago with loans to 50 beggars in the worst slum of Nairobi. Six years later, she had 170,000 savers and 60,000 borrowers.

Zoellick’s main promise to the members of Congress was to meet regularly for more discussion. But while the World Bank talks, 28,000 children die each day from largely preventable malnutrition and disease, and some 90 million children of primary-school age are not in school, according to the United Nations’ Children’s Fund estimates.

Let’s make sure that all state representatives join other members of Congress the next time they meet with Zoellick. Let’s ensure that Zoellick — as head of an institution that says it is committed to building a poverty-free world — sees the light so that the world’s poorest families see the loan funds they need from the World Bank.  

Sam Daley-Harris is founder of RESULTS ( and the Microcredit Summit Campaign. For information on the Louisville Chapter of RESULTS, contact Cindy L. Happel at [email protected]. Contact the writer at [email protected]