University of California Exponential Financial Needs the Grameen Bank Responses

After viewing the speech by Mohammad Yunus, founder of the Grameen Bank and 2006 Nobel Peace Prize winner, comment on the following two post: (100 words)

The following video describes the Grameen Phone Company and a phone lady.

First post

1. How are conventional banks different than the Grameen Bank?

The Grameen bank is almost a reversal of the conventional banks. The conventional basic principle is the more you have the more you get compared to the Grameen bank basic principle which it is the less you have, the more attracted you are to them. Grameen bank does not required a collateral or guarantee to their clients.
2. Why do they lend primarily to women and what is the poverty reduction strategy in doing so?

The Grameen bank lend primarily to women after finding out not in conventional banks women do not even form 1% of their clients. They wanted to make sure at least half go the borrowers are women. By doing this they allow women to be part of the householder and now 86% poor families have access to microcredit.
3. Why do people pay back the money if the people are not punished for not repaying?

People pay back their money even though they are not punished if they do not pay because it is in their interested to pay back. They know if they do not pay back they would not allow to borrow more money and this leads to them asking the loan sharks for money.
4. Profit maximization is the only type of business that is presented. Why is Mohammad Yunus “uncomfortable” with this idea?

Mohammad Yunus is uncomfortable with this idea of maximize the profits because he feels the theoreticians presented this idea of humans beings as money-makers machines and Mr. Yunus knows that humans are more than just money-makes machines.
5. Carefully explain the other business-type Yunus proposes? Provide examples.

The other business-type Yunus proposes is a social business that have unlimited lives (it can be used more than once). He compared this idea with charity. Mr. Yunus points out that charity is only one used, you give charity dollars and it goes to one thing, there is nothing you will get back from it (he’s not saying it is wrong). He points out that social business like creating a social stock markets, housing for poor people or even creating accessible health insure, business that are mainly based on helping others rather to just earn profits.

6. What is the impact to the family when the money enters the household through the phone lady?

There is huge impact tot he family when the money enters the household through the phone lady. She was able to improve her family’s living conditions and providing a better education for her children.

7.How would money impact your family if it entered through your mother, or the female-householder?

At the moment the householder of my family is my mom, she is the one who works and pays all the expenses at home ever since I was a little girl. She of course struggled a lot to maintain us and provide for us but she managed to always gives us what we needed.

Second post:

1. How are conventional banks different than the Grameen Bank?

Conventional banks cater to the people that already have collateral (assets) just in case they are not able to pay back, when the Grameen Bank caters to the people that have nothing and become the bank’s main priority. The conventional banks are looking only to managing/zeroing their risk while lending you (virtual) currency that they use to make a profit from. The conventional banks are only interested to offer loans to the people that can most certainly pay it back.

2. Why do they lend primarily to women and what is the poverty reduction strategy in doing so?

The bank saw more benefits lending primarily to the women than to men, because women made sure the home was more taken care of and the bank could actually reach the family better to eradicate them out of poverty. They also looked at the conventional banks and realized those banks didn’t provide loans to at least 1% of them.

3. Why do people pay back the money if the people are not punished for not repaying?

The bank doesn’t penalize anyone, but still people repay their small loans, because if they don’t the bank loses credibility in the borrower and the bank doesn’t offer any more loans to the individual. This way, they don’t have to go to the loan sharks that take advantage of them and that makes their lives worse. They can now trust the bank in this case and their only incentive is that in the future the bank will be there for them to give them more loans, as long as they repay their old loans back.

4. Profit maximization is the only type of business that is presented. Why is Mohammad Yunus “uncomfortable” with this idea?

He is uncomfortable with the idea that people are only money-making machines; this is a false narrative perpetuated by the capitalist society. The business should have only one purpose, and that is to make people happy and not to be only focused on profit maximization. A business should exist (only, I think) to help improve people’s lives and society around them.

5. Carefully explain the other business-type Yunus proposes? Provide examples.

Besides bringing the bank and telephone services (Grameen phone) to the poor villagers, he also wants to bring internet services, solar energy in the rural areas to bring solar energy, sell their work of solar to other companies. He also started a water business, because of the arsenic that’s polluting the drinking waters of the country. He is also thinking of starting a sanitation business, environmental business, social stock market, health insurance.

6.What is the impact to the family when the money enters the household through the phone lady?

She has been able to send her children to a higher education, probably higher than hers, he purchased land and two milk cows. The woman is planning her family’s wellbeing more effectively and with her business model she also provides her community with a great service.

7. How would money impact your family if it entered through your mother, or the female-householder?

The question is too simplistic to be answered easily. One would need to know if the mother is a single-mom, or not. From the angle of a woman being the only earner, with one or two children, I think in today’s society she would have a very hard time dealing with the ever growing prices for everything including rents, food, insurance/medical bills, etc for the family. She would probably be able to maximize benefits for her family given that she is the only decision maker for the family (the only adult) holding the money, but her success also depends on her education to make sense of the opportunities around her and then finding ways to benefit from them. This is not easy to accomplish.