Microfinance: The Grameen and BRAC Experience

Two of the most widely recognized microfinance institutions in the world today are both located in Bangladesh: the Grameen Bank and BRAC.

The Grameen Bank was founded by Mohammed Yunus in 1976. Since then, they have loaned nearly 13 billion US Dollars to almost 4.5 trillion borrowers. In November of 2012, the bank had 8.4 million active borrowers with more than one billion US Dollars in outstanding loans. The Grameen Bank’s repayment rate for all its loans is nearly 97%.

The Bangladesh Rural Advancement Committee (BRAC) was started in 1972 as a relief organization following the War of Liberalization. In the early 1970s, BRAC began lending microcredit to landless people in some of its development projects.  In November 2012, BRAC had 5 million active borrowers with outstanding loans totaling 725 million US Dollars. BRAC has a repayment rate of 99.36%.

In Bangladesh, the poor account for one fifth of the total loan portfolio for the entire country.

Both of these microfinance institutions (MFIs) follow a similar structure in the way that they lend to their borrowers. They provide “solidarity group lending” in which prospective borrowers must be part of a lending group in order to receive a loan from one of these institutions. Every group member is accountable to, and liable for, all the other members’ loans. Given that the poorest communities in Bangladesh lack financial capital or assets that can be used as collateral for loans, these lending groups act as a form of “social capital”:

These organizations have become increasingly powerful and important to the economic environment in Bangladesh. According to their financial statistics they seem to be doing rather well.  But, are they having the desired economic impacts set out in their mission?

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Frustrations from the World’s Youth at the UN Climate Conference

For the past two weeks, leaders from over 190 countries have been negotiating the future of climate change at this year’s UN Conference on Climate.

The negotiations have taken place between member countries of the UN international treaty titled the United Nations Framework Convention on Climate Change (UNFCCC).  The treaty was ratified at the Earth Summit in Rio De Janeiro in 1992.  The ultimate objective of UNFCCC is “to stabilize greenhouse gas concentrations at a level that will prevent dangerous human interference with the climate system”.

Since the UNFCCC was established, the member states (today totaling 194) meet annually at the Conferences of the Parties (COP) to “assess progress in dealing with climate change”. This year’s COP, the 18th since its inauguration in 1994 (referenced as COP18), is being held in Doha, Qatar.  One of the main issues being addressed this year is the future of greenhouse-gas emission reduction and the Kyoto Protocol, which is set to expire at the end of this month.

The conference began with some very dark projections from international organizations like the World Bank and the United Nations Environment Programme (UNEP).  In a UNEP report, published just before the beginning of COP18, they state that in 2010 greenhouse-gas emissions rose to 50.1 gigatons of carbon equivalent.  This figure represents a 25% increase from 2000, and is 14% higher than the projected emissions required (44 gigatons) to maintain the desired 2°C increase in climate temperature; the 2°C increase that scientists believe is the “threshold” to avoid “dangerous” climate change.

Naderev M. Saño, the lead negotiator from the Philippines, gave an extremely heart wrenching appeal to world leaders this week:

Mr. Saño´s plea has become a popular speech amongst news reporters and bloggers covering the conference.  The delegate’s raw emotion and evident frustration regarding the lack of leadership and action being taken by the UN delegation is rarely seen in an international setting such as this.

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