First Blog Post
by Raheem Parpia
LAMN joins Empowerment Works!
The Los Angeles Microfinance Network is officially a 501(c)3 non-profit organization within the organization Empowerment Works!
First off, welcome to the newly-founded blog of the Los Angeles Microfinance Network. We hope to keep all of you updated on the various ideas and organizations impacting the Microfinance industry. From harsh critics to scholarly advocates – our goal is to provide you with consistently fresh and interesting material, like a sushi chef…but far more delicious.
Melanie St. James, Executive Director & Co-Founder of Empowerment Works
Empowerment Works is a global sustainability think-tank dedicated to the advancement of whole-system, locally-led solutions for a thriving world. Their goal is to solve global problems by way of supporting local, community-driven projects. They foster a global network of Partners in Empowerment (PIE…delicious) that is united in action by a collaborative framework that EW has built. Through a variety of amazing events that they spearhead, and the proper framework for implementation, Empowerment Works provides the tools necessary to bridge the gap between local communities (YOU!) and global partners.
You can see why LAMN fits so perfectly within the Empowerment Works mission. With the recent advances of technology, someone can provide a microloan from anywhere in the world and help alleviate global poverty. Now I know what you’re thinking, a $25 loan doesn’t seem like much. But one of the most beautiful aspects of Microfinance lies in the strength of its sustainability. When a family is helped above the poverty line, and now have enough money to provide their children three square meals a day along with a proper education, their opportunities increase exponentially, and for generations to come.
Dr. Muhammad Yunus, the Economics professor who was awarded the Nobel Peace Prize in 2006 for his creation of the Grameen Bank, realized how devastating the cycle of poverty can be when he ventured into the Bangladeshi village of Jobra in 1976 and spoke to its inhabitants. Often speaking behind a wall or a curtain, since that was the custom for married Muslim women in such a rural areas, he learned about the average day in their lives. Out of 42 people, he calculated that it would take less than $27 USD to dissolve the vicious grips that the village loan sharks had on these 42 people. Only $27 USD. You can’t buy an iPhone charger for that much.
These village loan sharks would lend a borrower a small pittance (about $0.22) with which the borrower would buy raw materials and then slave all day long to build their product in order to sell it. When it came time to repay the lender, the borrowers were charged such exorbitant interest rates that they would leave with only $0.02 in profit. These women, who were often in their early 20s with 2 to 3 children of their own, would earn $0.02/day. Dr. Yunus realized that if he intercepted the process from the start and just gave the borrower the money that they needed – the entire system that the loan shark depended on would collapse. However Dr. Yunus also realized that simply giving these people the money would not suffice; after all they weren’t asking for charity and simply giving someone money was not addressing the problem in any permanent way.
So what could he do? These people weren’t in this tragic situation through any fault of their own; they weren’t stupid or lazy but they worked themselves to the bone every day doing complex physical tasks. As Dr. Yunus put it, “They were poor because the financial institutions in the country did not help them widen their economic base.” He realized he would give them the money that they needed to break the vicious cycle, in total less than $27, and he said they could repay him whenever they could without interest.
Now you go back to the initial question of how much can $25 really do? Well, these individuals were often born into this poverty without the slightest notion that there was any other life possible for them. Women currently comprise 96% of the borrowers of Grameen Bank, which is just another amazing aspect of this Microfinance process. Like a puzzle, the benefits of micro-loans so perfectly align with one another, and in such a cohesive and intuitive way – it’s impossible not to see this process as one of the most sustainable ways of solving global poverty, that also brings social issues to the forefront that have otherwise plagued the Developing World for decades.
I will leave you with an excerpt from Dr. Muhammad Yunus’ Banker to the Poor:
“Once all members pass the exam, the day finally comes when one of them asks for a first loan, usually about twenty-five dollars, in the eighties. How does she feel? Terrified. She cannot sleep at night. She struggles with the fear of failure, the fear of the unknown. The morning she is to receive her loan, she almost quits. Twenty-five dollars is simply too much responsibility for her. How will she ever be able to repay it? No woman in her extended family has ever had so much money. Her friends come around to reassure her, saying, “Look, we all have to go through it. We will support you. We are here for just that. Don’t be scared. We will all be with you.”
When she finally receives the twenty-five dollars, she is trembling. The money burns her fingers. Tears roll down her face. she has never seen so much money in her life. She never imagined it in her hands. She carries the bills as she would a delicate bird or a rabbit, until someone advises her to put the money away in a safe place lest it be stolen.
This is the beginning for almost every Grameen borrower. All her life she has been told that she is no good, that she brings only misery to her family, and that they cannot afford to pay her dowry. Many times she heard her mother or her father tell her she should have been killed at birth, aborted, or starved. To her family she has been nothing but another mouth to feed, another dowry to pay. But today, for the first time in her life, an institution has trusted her with a great sum of money. She promises that she will never let down the institution or herself. She will struggle to make sure that every penny is paid back.”