Track 10

Unit 5b.

Economics.

Microcredit: changing lives.

Pages 86 and 87.

Listen for main ideas and listen for details.

Today I’d like to talk about world economics.

In particular I want to look at one idea that’s improving the lives of many poor people.

This idea is called the village bank, it was started by a man named Muhammad Yunus an economics professor in Bangladesh.

Let’s talk first about why professor Yunus started the bank, then we’ll look at how the bank has changed people’s lives.

In 1974 a famine killed more than 1.5 million people in Bangladesh, professor Yunus saw thousands of poor and sick people coming into his city looking for work and food, he knew that somehow economics could reduce their suffering.

To study this idea further he went to a Bengali village to learn more about the lives of the poor, there he talked with many people, for example, he met Sugai Beakhem a single mother who bought food for three children by making bamboo stools.

These are like small chairs, each day Sugai got money from moneylenders called middlemen.

She’d take five taka for about 22 cents U.S. and used that money to buy bamboo which interestingly was sold by these same middlemen who loaned her the money.

Hmm, well then she’d labor all day making bamboo stools, and at the end of the day she’d sell them for a total of five taka and fifty paisa or about twenty-four cents total.

So after working all day she’d earned a total of two cents.

And guess who purchased the stools?

Right, those same middlemen.

Now, her bamboo stools were worth much more on the free market, but the middlemen were the only people who lend her money.

They controlled the market, so as you can see there was an economic problem here.

Well Sugai wasn’t alone, professor Yunus talked to other villagers and learned that many were just like her in this same strange business relationship with the middlemen.

So professor Yunus loaned each of these people the money they needed about sixty two US cents per person.

This freed them from the middlemen and let them buy and sell on the open market, and guess what?

All of them were able to pay professor Yunus back. so professor Yunus had found a new way to fight poverty with microcredit, M I C R O, microcredit that is making small loans to poor people so they can grow their businesses and earn more money.

Well then professor Yunus tried to take this discovery to traditional international banks, but they weren’t interested in lending money to the poor.

They didn’t believe that poor people could earn the money they need to repay their loans so professor Yunus and a few others decided to start a bank that would be very different from traditional banks in three important ways.

First unlike traditional banks that require people to already have some money in order to get a loan, the village bank gives loans to the poorest people.

This means giving loans to mostly women because about 97% of the world’s poor are women.

Second traditionally banks give loans to individuals or companies, but the village bank works with small groups usually five to ten people, the group members decide who’s the poorest and those people get their loans first.

Everyone else receives their loans only after the neediest members have repaid theirs so members feel support but also social pressure to work hard and repay their loans.

The third way the village Bank differs from traditional banks is location, most banks are in cities right?

And who does that exclude?

Yep villagers, so the village bank has set up more than 2,000 branches throughout villages in Bangladesh and each branch has what are called bicycle managers. Why?

Because they go by bicycle to borrowers houses where they discuss how business is going and give advice.

Now, do these small loans really have an impact on people’s lives?

Well, I think the story of Brazia beacon will answer that.

For years Brazia lived with her family in Bangladesh in great poverty some days having nothing to eat.

Then one day she went to the village bank and got a $30 loan, with the loan she bought a cow in a turn she began selling things like milk and butter, she then used that money to buy more cows after a while she’d saved enough money to buy land then she sold the land and used those profits to send her son to Saudi Arabia to work, from the money he sent home to her she bought more land and sent her daughter to school, the first girl in the family to get an education.

So on a $30 loan the Brazia Begum moved from poor to middle-class.

It’s quite a success story huh?

And this story is typical among village bank borrowers.

About 64 percent of them have crossed over the poverty line.

So you tell me can a little loan make a big difference?