Muhammed Yunus: Social way to shift people out of poverty

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Microfinance can help communities out of a poor state of mind, writes Muhammad Yunus

Banks and lending institutions with an established social purpose have a long tradition in Scotland, but there is still more which can be done to harness these powerful ideas in a way that can better break through the entrenched poverty which blights many communities.

The Grameen model of microfinance – the provision of community-based financial education and unsecured loans for social business development – has already demonstrated its impact on alleviating poverty and promoting economic growth for the most disadvantaged citizens in countries across the world, including the United States, where a rapidly expanding new movement is already enabling thousands of people to run their own businesses, supporting themselves and their families for the first time.

An idea, which began when I offered a small loan to a group of villagers in my native Bangladesh in 1976, has grown into a worldwide network of more than 20 million people in 40 different countries.

My work comes from a faith that all human beings have unlimited capacities. But society does not allow people to become acquainted with their capacity. With the right support, individuals and communities can start to create an environment where people will gradually start to discover themselves. Most of the time people are made dependent and turned into passive beings. I want to find ways to encourage people to explore their capacities, to give them a chance for self-help.

The size of the challenge is great. In Scotland, and in the rest of the UK, there are pockets of poverty and welfare dependency which have not changed in the last 40 years. In the West of Scotland, around 300,000 people live in the poorest category of household income. Too many families are blighted by third or even fourth generation unemployment. More than half of the poorest households do not make savings of £10 a month or more. Predatory lenders sometimes target these communities and families, charging huge rates of interest.

But despite these grim statistics, there remains a great deal of hope. Hope gives a poor person a chance. It empowers an individual, and through them a family. Grameen can provide that opportunity for change, and in doing so challenge the cycle of welfare dependency in the UK. It does that, very often, by paying special attention to the central role which women play in helping their families and their communities move to financial self-sufficiency.

Tomorrow I will travel to Glasgow to meet a group of women who are already working in the spirit of these ideas. From communities across Glasgow such as Provanmill, Pollokshaws and Maryhill, they have refused to let a testing set of circumstances hold them back. After a Church of Scotland sponsored trip to India to learn more about how ideas of self-reliance work in other countries, they have become inspired. Some run a community lunch club, saving the small amount of profit for future investment. Others have decided to set up a laundry repair business.

When these ladies are asked what kind of impact a small amount of credit would make to their lives the answer in clear. One woman would use the money to renovate the room where she and her colleagues work, the other to buy cutlery for the lunch club, the last to pay for extra training in sewing and stitching which, at £15 an hour from a teacher, is currently out of her reach. These answers are united by a common theme: access to affordable credit, designed to support social businesses or enterprises such as theirs, would make a real and substantial difference, not just to their lives, but to the lives of their families and to the communities in which they live.

This is the reason why – working with Glasgow Caledonian University (GCU) who are facilitating our work in this area – we believe the Grameen model of microfinance has such potential for change here in Scotland. A new charity has been set up – the Grameen Scotland Foundation – to raise money to support the process of bringing this lending model to the UK for the first time. With more than £100,000 raised so far, the charity is well on its way to reaching its initial £1m target.

With a central administration office hosted by GCU, the project will serve the local authority areas of Glasgow, North Ayrshire, West Dunbartonshire and Inverclyde. The project will have two goals: to encourage and support individual effort to get out of a welfare-dependent, jobless, low income situation, and thus to encourage economic and personal development of the individual, their family and their community; also, to ensure that the Grameen branch reaches sustainability as a social business in its own right.

The method is community focused. A person living in poverty selects four people she trusts to form a group. The group attends an initial five-day training programme. Each member contributes to a savings account. Borrowers meet weekly with Grameen Centre managers to make loan and savings payments and to receive financial training. The meetings are held at borrowers’ homes or at a convenient location.

The Glasgow pilot is just the beginning of the process. I believe that the track record we build in Glasgow and the surrounding area, where pockets of poverty, low employment levels, multi-generation welfare dependency, poor health and shortened lifespan remain entrenched, will inform the growth of second and subsequent branches across the UK.

• Nobel Peace Prize-winner Prof Muhammad Yunus will visit Glasgow Caledonian University tomorrow where he will announce the creation of the Grameen Scotland Foundation, a new charity set up to raise money to introduce Grameen microfinance to the UK.