DEVELOPMENT-ARGENTINA: Bank for the Poor Opens New Branch

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jan 19 2000 (IPS) - A bank with operations in more than 60 countries, with some 1,100 branches and more than 2.5 million clients has arrived in Argentina. Its profile is far from conventional as it grants loans to the very poor, and the vast majority of its customers are women.

The Grameen Bank (meaning ‘villages’ in Bengali), created in 1974 by Bangladesh economist Muhammad Yunus, opened its Argentinean branch a month ago, linking dozens of social organisations throughout the country.

A broom factory, a metal shop, a doll-making workshop, a family- run car rental service are the kind of small businesses – often with just one owner, who may be the sole employee – that allow loans to be repaid while also building self-esteem and self- sufficiency.

Yunus’s philosophy has won the support of the World Bank, the International Monetary Fund and the United States government.

President Bill Clinton personally invited Yunus to set up a Grameen Bank in the United States, where the economist once studied.

The World Bank reports that the financial institution has seen an average annual growth rate of 35 percent in recent years. The need for the Grameen Bank’s services are evident in the expanding informal economy, shrinking government and high unemployment. In Argentina, more than 30 percent of the economically active population are potential clients.

The bank targets individuals with very low incomes, who do not hold property or other material or financial wealth, and who would find it nearly impossible to obtain a loan from a traditional bank.

Loan recipients form groups of five, who then give each other mutual guarantees. The loans are small sums – 40 to 50 dollars in India, or 200 dollars in Argentina – that are returned in weekly payments, with interest much lower than the market rate.

The Grameen programme, intended for people whose loan requests would be rejected by traditional banks due to the lack collateral or guarantees, has a repayment rate of 98 percent. Apparently, the poor, in this case mostly women, are at least as dependable as the rich.

In Argentina, more than a third of the population is poor and unemployment has been one of the economy’s most acute and persistent problems since the mid-1990s. In opinion surveys, a majority of the respondents rank the lack of work opportunities as their number one concern.

Given this context, the idea spawned by Yunus – who visited Argentina in April 1999 – had a profound effect on a group of economists and social workers. They went to Bangladesh to learn about the system first-hand, and offered to represent the Grameen Bank in Argentina.

The director of the new Grameen Argentina Foundation, Pablo Broder, told IPS that conditions here are sadly ideal for the project: high unemployment, growing social inequalities, lack of government assistance and bankruptcies in the provincial economies.

The first national meeting of the Grameen Argentina Foundation was held in Buenos Aires last December, attended by interested individuals, volunteers, leaders of several organisations, who wanted to participate in the Foundation’s plans.

Institutional representatives who participated in the conference expressed interest in reproducing the Grameen programme in their towns or provinces. Bank leaders told them they would have to meet a series of methodological requirements in order to ensure success.

In one Argentinean case, a woman requested a loan of 200 dollars to buy a sewing machine in order to produce stuffed animals more quickly. She earns only 30 dollars a week, but she uses it to pay back the loan and buy food for her family.

She made the loan request through the Protagonizar (Take the Lead) Foundation, which operates in a Catholic parish in Villa Mitre, located in Buenos Aires province. Protagonizar already handles 15 clients under the Grameen programme.

Yunus’s philosophy does not contradict liberal economic ideas, though it calls for government intervention in the social sphere, but not in industry or services.

“We believe in reducing State intervention. We support the market economy and the creation of businesses, but we defend social objectives: eliminating poverty, universal education, medical coverage and employment, as well as contributing to gender equality and the well-being of the elderly,” says Yunus in his writings.

Broden explained that putting the economist’s methods into practice requires a co-ordinating entity, leaders trained in the bank’s policies, a financial base for loans, an operating structure to carry out banking transactions, and close co- operation with the Foundation.

Loan recipients must participate in weekly or bi-weekly meetings – depending on the country or the region – to receive training. The loans are granted to groups of five people, beginning with a loan to the first, who must then begin to make payments within two weeks before the other four can qualify.