Banker to the Poor: Micro-lending and the Battle Against World Poverty

by Muhammad Yunus

when we discovered that support groups were crucial to the success of our operations, we required that each applicant join a group of like-minded people living in similar economic and social conditions. Convinced that solidarity would be stronger if the groups came into being by themselves, we refrained from managing them, but we did create incentives that encouraged the borrowers to help one another succeed in their businesses. Group membership not only creates support and protection but also smoothes out the erratic behavior patterns of individual members, making each borrower more reliable in the process. Subtle and at times not-so-subtle peer pressure keeps each group member in line with the broader objectives of the credit program. A sense of intergroup and intragroup competition also encourages each member to be an achiever. Shifting the task of initial supervision to the group not only reduces the work of the bank but also increases the self-reliance of the individual borrowers. Because the group approves the loan request of each member, the group assumes moral responsibility for the loan. If any member of the group gets into trouble, the group usually comes forward to help.