The Nobel Laureate Professor Dr. Muhammad Yunus of Bangladesh founded his Grameen Bank in Dhaka some 40 years ago. This bank has helped some 40 lakh very poor families to rise above the poverty line during the last 40 years. Socio-economic activists the world over have been impressed with its success and Grameen Banks have sprung up in many countries, including the USA and South America. India has been late in following suit but has reportedly opened such banks recently. Similar work is, however, being done in India by social activists like Vikram Akula under the name of ‘Microfinancing’ on quite a large scale. His organisation is working in Karnataka with an outlay of hundreds of crores of rupees.
Self Help Groups and Cooperative Credit Societies are two other vehicles used in India for alleviation of poverty.
Prof. Yunus’ methodology: He gives loans only for small businesses. He gives loans only to a group of 8-10 women which submits a project to his bank and which the bank approves, if found feasible. He gives no more than 40,000 to 50,000 takas as loan per group. He does not ask for any mortgages in kind; instead he asks for each woman to keep herself, her house and her children clean, to educate, groom and bring them up as good human beings. He accepts this effort as her guarantee for her loan. Also, default by one woman results in the disqualification of her whole group from receiving any further loan. Result: the rate of return of loans to his bank is very high – at 98 per cent!
There is one negative aspect though: Both he and Vikram Akula have not been able to get rid of ‘interest’ and to the best of this scribe’s knowledge, the Grameen Bank does charge a high interest of around 24 %.
Interest is banned in Islam as well as in the pristine form of many other religions, for the reason that it is highly exploitative. In the four cornered ‘depositor – bank/lender – businessman / producer and provider of goods and services – consumer’ relationship, interest hits only the depositor, who is also the consumer of the goods produced by the businessman. On the other hand, the bank receives assured returns through accrual of interest on loans advanced by it while the businessman stands harmless as long as he is able to pass on the ‘interest’ to his customers.
Muslim social activists in India can follow the Grameen Bank methodology though they must find a solution as to how to eliminate interest.
While Prof. Yunus has found men to be unreliable as they did not return loans and did not spend their earnings on their families, another group, the Al Khair Cooperative Credit Society of Patna Ltd. (KCCSP), has not reported such problems. Going by this experience, the Indian Grameen Banks can give loans to groups of men as well.
In a recent issue of Radiance (8-14 March, 2009) a fairly detailed interview with Mr. Arshad Ajmal, the Chairperson and CEO of the above Society has been published. It presents a positive and encouraging picture of this method of alleviation of poverty and is strongly recommended for further study and adaptation.
CAPITAL FORMATION FOR SMALL BUSINESS LOANS
Sadaqaat or Returnable Deposits from the wealthy come to the mind almost automatically but this scribe does look up to the religious leadership of the Indian Muslim community to advise as to how to make it possible that all the Nisaby (a word coined as an equivalent of ‘Sahib-e-Nisab’) and the wealthy pay their money in a manner that the madrasas that currently receive Zakat and Sadaqaat continue to receive these while capital becomes available for new madrasas, new schools, adding trades and skills training facilities to both existing and new madrasas and schools and finally, as capital for lending to small businesses proposed above.
If all the Nisabies pay their Zakat, the annual sum for the whole of India will be about 10,500 crore rupees or about 2 billion dollars. One third or slightly more, say 4000 crore rupees out of this may be assumed to be from the North Indian Nisabies.
The amount available annually from Sadaqaat, Muslim Trusts etc. may be another 2000 to 3000 crores from North India.
It should of course be kept in mind that as far as capital for small businesses is concerned, it will be handed out as loans and will come back. The need for this capital is, therefore, not of a continuous or recurring nature.
On the other hand, we should give consideration to reducing expenditure on infrastructural facilities for both schools and madrasas. It is reasonable for a poor community like the North Indian Muslims to opt for cheaper buildings and facilities, designed to last for say 30 years, so that capital expenditure can be reduced and more funds can be made available for expenses such as better salaries for teachers, better teaching aids, skill training ‘add-ons’ etc.
Traditionally, an important part of the infrastructural facilities, especially of the madrasas, is the provision of free lodging and board for students coming from distant places. It needs to be studied in depth whether it is necessary to provide these facilities at all madrasas or should these be confined to the madrasas which are recognised for providing outstanding quality education and attract students from far and wide. The current practice relieves the wealthy from supporting the education of the children of their poor by transferring their responsibility to the wealthy living in bigger cities of the country, and even in other countries.
The approach of Mr. Arshad Ajmal of KCCSP based on his experience on the ground during the last eight years is as follows. To quote from his interview published in the above issue of Radiance:
‘….microfinance on the basis of local resources is possible…. For example, our Phulwari Sharif branch is working in an area that has approximately 12,000 families but our reach till date has been up to only 3,000 families. The deposits we are getting from these 3,000 families are more than 4 crore rupees per annum and we are lending solely on the strength of these deposits.’
LEADERSHIP: INCLUSIVE AGENDA A MUST
Having said all the above, one of the most important challenges that the North Indian Muslim community faces is that of a second line of leadership. That may be of mature age, be God fearing, possess the necessary qualities of head and heart and be able to learn from the collective wisdom of the present leadership as well as from its past experiences, in order to tackle the task of alleviation of poverty in the light of new realities.
The first line of leadership will need to focus its attention on creating that holistic framework which would allow the task of poverty alleviation to be done in a secure, peaceful environment. This is easier said than done but is absolutely imperative.
This scribe also humbly urges the leadership not to commit the suicidal error of confining its concerns to Muslims alone but to follow an inclusive agenda. We should work with even handed love and concern for the Indian people in general and for the poor and the wretched in particular.
This scribe knows that this article must present many opportunities for corrective intervention by the readers. He also knows that he has not touched on many important aspects of the process of poverty alleviation. For these reasons, he humbly requests the readers to critically review it and to kindly send their observations to him on <[email protected]>. (Concluded)