Essay on Evaluating the Two Models for Less Developed Countries
This paper will discuss the two important approaches in improving the level of poverty in less developed countries. Institutions like International Monetary Fund (IMF), The World Bank and Grameen Bank are trying their best to take part in this initiative. The first model is the Top-down which IMF is implementing by means of granting loans to governments to aid programs related to poverty improvement. The other model is called Bottoms-up which Professor Muhammad Yunus is implementing for Grameen Bank. His initiative is similar to what IMF follows but his programs are more focused on the specific area of the society rather diverting it to the government. His approach is to help the very poor individuals to get an opportunity to rise from poverty by means of livelihood projects. This paper will discuss the advantage and the disadvantages of both approach and assess which one is more appropriate in solving the problem of poverty. This paper will also give insights to the ideologies and arguments of Yunus with regards to the programs of World Bank for the poor. The methods of the programs from the two institutions will also be discussed in order to make a fair evaluation of the two important approaches.
Keywords: Bottoms-up, Top-down, poverty, development, advantage and disadvantage
Evaluating the Two Models for Less Developed Countries
1976 was the year when Grameen Bank Project started in Bangladesh in the small village of Jobra. Then in 1983 a special law was created to formally introduce Grameen as a bank and it was known to be the poor who owns the bank consists mostly of women borrowers and it’s exclusively working for them. Today, 95% of the bank’s equity is still owned by the poor and only 5% percent is owned by the government.
The bank doesn’t require any form of collateral in order to grant a loan. To present the poor from being dragged into the court for none repayment, Grameen does not require them to sign a contract of legal instrument. The way the banks works is the borrowers must be a group of five and the group is not being held responsible in providing guarantee in case any of the individuals on the group failed to make a payment. The responsibility of repaying the loan rests solely on the individual and the rest of the member of the groups is the one responsible in making sure that the other members are acting accordingly to their loan responsibility. There is no such thing as joint liability in their loan policy thus, the responsibility of default payments are not to be shouldered by the other member (Grameen-info.org. October 2011).
Bangladesh is a Muslim country, in which polygamy is in practice, in this country, women are considered lesser than a secondary citizen. Yunus thought that he can dole out the loans as equal to all genders. But the problem is women in Bangladesh considering their relevance to the society is not of a higher state. As a result women are less confident about handling financial matters. What he did is to create a group of five members in a village and combine them with other groups and they were given responsibility to oversee the debt of each member (Yukawa, Hideki N.D.). One of the remarkable stories of one of the members is of Syman; a beggar who is in her fifties is knocking door to door in the village to beg for handouts. But her life was changed by the $3 interest free loan she received from the bank. Now Syman is knocking door to door at the village but no longer as a beggar, but a peddler who sells merchandise to people she used to beg before.
Grameen Bank in Comparison to IMF
International Monetary Fund works almost similar to Grameen bank, the difference is the IMF distributes the loans directly to the government of third world countries for utilization in poverty development programs. IMF is one of the most influential institutions in the world in terms of third world and European development. The same as the World Bank, IMF constitutes an annual lending support of $22 billion for programs aiming to develop local conditions of agriculture, energy and transportation which are also considered as key elements in economic growth. IMF follows an approach called top-down while Grameen Bank makes use of Bottoms-up approach. In a familiar term top-down approach targets the upper state division which is the government and results of the development have to manifest down to the constituents. Bottoms-up on the other hand starts from the lowest society division to raise itself up to the mid-level.
There are advantages and disadvantages among those two approaches. Top-down have disadvantage attributes such as limited coverage, tactical, high cost of development, low impact and slow return of investment. But the good thing about is the initial implementation becomes an essential for establishing solution for management and the maintenance and operation of resources are not usually impacted as worst as the bottoms-up approach. In terms of bottoms-up disadvantage is the structure of the organizational establishment needs to be revised after the roll-out phase and the strategies are supported not by business processes but with an existing infrastructure. The good news is the approach has a faster return of investment, high organizational impact; deployment coverage is higher in the early phase and high organizational change visibility (Publib.boulder.ibm.com N.D.).
For a third world country bottoms-up would be the best way around, because it initially targets the specific areas of the society which needs urgent development and for the developed countries no further approach is needed to its people. So the sole focus should be for a general state development on broader scale which makes top-down a better approach for developed countries.
Because of the huge success of Grameen Bank in uplifting the lives of the poor, Yunus was offered by Bangladesh Prime Minister Sheikh Hasina to be nominated as president of the World Bank, but Yunus declined. According to him "I have no interest in taking the responsibilities of the position of the World Bank chief," (Shukur Ali, Syed. March 2, 2012), this is because he wanted to dedicate his life in propagating the idea of social business. Professor Muhammad Yunus also added “I have been a regular critic of the World Bank for its policies and programs. My criticism also included the fact that this Bank’s highest post is always reserved for an American citizen,” (Thedailystar.net. March 2, 2012). His position to the matter is strong standing because of his discontent of the institution’s regulations and activities.
Grameen-info.org (October 2011) Grameen Bank at a Glance Web Retrieved March 4, 2012 from http://www.grameeninfo.org/index.php?option=com_content&task=view&id=26&Itemid=0
Yukawa, Hideki (N.D.) Yunus, Muhammad - Economist and Micro Financier, Career, Sidelights Web Retrieved March 4, 2012 from http://encyclopedia.jrank.org/articles/pages/4045/Yunus-Muhammad.html
Publib.boulder.ibm.com (N.D.) Advantages and disadvantages of the top-down and bottom-up implementation approaches Web Retrieved March 4, 2012 from http://publib.boulder.ibm.com/tividd/td/ITIM/SC32-1708-00/en_US/HTML/im460_plan76.htm
Shukur Ali, Syed. (March 2, 2012) Not interested for World Bank presidency: Prof Muhammad Yunus Web Retrieved March 4, 2012 from http://community.ejc.net/profiles/blogs/not-interested-for-world-bank-presidency-prof-muhammad-yunus
Thedailystar.net. (March 2, 2012) Not interested to lead WB: Yunus Web Retrieved March 4, 2012 from http://www.thedailystar.net/newDesign/latest_news.php?nid=36184