Banking on Bangladesh's Destitute Women

RAMPURA PARA, BANGLADESH -- Malekha Khatun was deserted by her husband when she was a teenager. Later her 3-year-old son died in her arms from malnutrition. Determined to keep her older son from a similar fate, she scratched out a living for more than 20 years by teaching women in her rural village to make fishing nets, earning 2 takas -- about 5 cents -- for a day's work.

Then Khatun heard rumors about a bank that loaned money to destitute women. One morning she stole to a neighboring village in this region south of Chittagong in southern Bangladesh and shyly approached a bank worker. The bank eventually granted Khatun a 2,000-taka loan -- about $50 -- to buy a milk cow and thread for making fishing nets so that she could sell them herself.

Now, six years and six loans later, Khatun, 47, has two cows, a tiny square of land and a solid straw hut for her family, which includes her son and his wife, her two granddaughters and her ailing mother. With an income of about $14 a week, Khatun credits the Grameen Bank with her survival.

The Grameen Bank is banker to the poorest people in one of the world's poorest nations. Its customers are primarily rural women like Khatun -- women who can barely afford to feed their families, much less qualify for conventional bank loans.

The bank is a rare success story in the world's most densely populated nation, where average per capita income is $208 a year and most foreign-financed anti-poverty programs have been dismal failures. The bank has not only defied the rules of conventional money-lending, but has challenged tradition and cultural taboos in a Muslim-dominated society where women are seldom allowed even to touch money or to work outside their homes.

Despite the poverty of its clientele, the Grameen Bank has a repayment rate of 98 percent, high even by Western banking standards. In just over a decade, the institution has grown from an experimental project to a bank with 1.2 million customers and 973 branches scattered throughout this nation's most isolated villages. It has become a model for banks serving the poor, from Africa to Chicago's South Side.

The bank's leaders make no claim that the loans, which average $67, lift their clients out of poverty. Rather, the money -- which is used to buy milk cows, bamboo for weaving and herbs for village medical practices -- gives women a chance to provide their families with the bare essentials.

A loan may mean the difference between "life and death, starving or eating," said Muzammel Huq, general manager of the bank, headquartered in Bangladesh's capital, Dhaka.

The bank is the brainchild of Muhammad Yunus, a former economics professor who became a crusader for rural women while visiting poor villages near Chittagong University. With only $30, he started an experimental loan project, then spent several years convincing government authorities and commercial backers that his venture could succeed. In 1983, Yunus founded the Grameen Bank, which means "rural" or "village" bank in Bengali.

Initially, the bank's loans were divided about equally between men and women, but within the first 2 1/2 years, Yunus made a discovery. "In the families in which the women received the loans, the children were better cared for, the houses were better maintained," he said. He found that women spent the money to improve their families' lives, while men often squandered it on luxuries or drugs. In addition, he said, virtually all of the women repaid the loans, whereas men frequently fell behind in payments or defaulted.

"I realized women were the real agents of change in rural society," Yunus said.

The bank began focusing on rural women, a highly controversial move in this 86 percent Muslim country. Religious leaders accused the bank of undermining the Muslim way of life, in which men are considered breadwinners and protectors and women are generally forbidden to converse with men outside their immediate family. Husbands viewed the bank as a threat to their authority.