Inspiring story - “Giving Away” $50 Bills

by Mark Skousen, Chairman, Investment U

Muhammad Yunus and the Grameen Bank: The Nobel Peace Prize-Winning Genius Behind the World’s Most Original Bank (Which Is “Giving Away” $50 Bills)

I remember as a young boy people telling me that borrowing money and going into debt were very, very bad.

“Neither a lender nor borrower be,” declared Shakespeare. Ben Franklin warned in The Way to Wealth, “The first vice is running in debt… You give to another power over your liberty… Be frugal and free.”

And church leader J. Rueben Clark says debt “never sleeps nor sickens nor dies… and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.”

Financial advisors warn repeatedly to stay out of debt, and gold bugs publish charts showing the national debt by consumers, business and government climbing to unsustainable levels.

Sounds ominous, doesn’t it?

Going into debt is a serious matter and should not be done lightly. I don’t recommend it for most consumer goods, and certainly not for buying food at the grocery store or 7-Eleven. In short, use cash.

Debt, however, does have its advantages. In this issue, we’ll discuss Nobel Peace Prize winner Muhammad Yunus, founder of the Grameen Bank and the Micro-Credit Revolution. First, a closer look at the virtue of debt as it relates to the Micro-Credit movement…


The Difference Between Starvation and Prosperity

For those of you still skeptical about the virtue of debt, consider this…

Laily Begun and her husband, Atiqullah, were manual laborers in Bangladesh who barely had enough to eat. She took out a $50 “micro” loan from the Grameen Bank to buy a cow, which allowed her to make some extra cash selling milk.

She borrowed another $65 for a second cow, and her little business flourished. Now she had enough to apply for a mobile phone. Laily became known as the “Village Phone Lady,” and before long, she was earning nearly $300 a month. With their savings, the couple set up five shops and a restaurant. They now live in a brick house, own two color TVs, a refrigerator and a cassette player, and send their three children to school.

All because of a $50 starter loan.

The Grameen Bank is not a charity. Billions in foreign aid have been thrown at poor people without effect. Only when a for-profit bank began lending to the desperately poor did anything positive come of it. Grameen Bank charges 18% interest on its micro-loans, and has only a 5% default rate. How is this possible? Borrowers must join small support groups, and if one defaults, the others are forced to take over his debts.

It seems impossible, but so far the Grameen Bank has made more than $5 billion in loans, and its model has been imitated around the world, even by the World Bank.

Yunus founded the Grameen Bank in the world’s poorest country, and today has branches in over 71,371 villages in Bangladesh through collateral-free micro credits to needy entrepreneurs.

While the World Bank has imitated his micro-credit model, Yunus decries the organization in his book Banker to the Poor: “We at the Grameen Bank have never wanted or accepted World Bank funding because we do not like the way the bank conducts business.” Nor does he like foreign aid. “Aid-funding projects create massive bureaucracies, which quickly become corrupt and inefficient, incurring huge losses.”


Posted by: Mimmy Duhaylungsod
Source: http://www.investmentu.com/