The innovative Grameen Bank helps poverty-stricken Filipinos by giving them small loans.
Interview with Fr. Sean Connaughton

Fr. Connaughton describes how the Grameen Bank has changed the lives of the poorest people in the Philippines.

Q. How did you become interested in the Grameen Bank concept?

A. In the 1970s, I was chaplain at some universities in Manila, the capital of the Philippines. As summer projects with students, we ran seminars training people how to set up livelihood cooperatives. We set up 26 in all, many of which still flourish today.

I noticed that within six months, a third of participants were forced to leave because of a lack of money. They could not keep up payments of the fixed deposit, the savings deposit, or put up the necessary collateral required by the cooperative.

In 1989 I met people from Bangladesh who spoke of the Grameen Bank, a system that seemed to be just the kind of institution very poor people need.

Q. Did you quit promoting cooperatives and start promoting the Grameen Bank?

A. Yes, with the result that in many areas where we formerly set up co-ops, there are now many more successful Grameen banks.

In 1989, I discussed the idea with other people: university professors, a forestry expert and a businessman.

We set up a Grameen Bank in Jala Jala, the area where I then worked. By lucky coincidence, Professor Yunus visited the Philippines and our parish to give us encouragement.

By 1993 Jala Jala had 10 centers and 300 members. I was also able to spend a month in Bangladesh observing the system.

Columban Father Sean Connaughton talked with these Grameen Bank members about their responsibilities to pay back their loans.

A. Above all, Grameen banks are agents of change. As the movement grows, we hope to change the attitude of commercial banks.

When we asked the First National Savings Bank for a loan, they offered it at 28 percent interest. Funds given to the Filipino government by other countries to alleviate poverty are available to us at 12 percent a year, provided that 95 percent of the capital is repaid annually. This, of course, makes it inaccessible to poor people.

Q. How does a newly created Grameen Bank group typically evolve?

A. Group members must be poor and committed to following the organization’s rules, such as loan repayment and attendance at weekly meetings. They are told they will be divided up into groups of five (who know each other well), and that if one fails to pay the weekly installment, the other four will have to cover it.

About half of the people at this first meeting lose interest when they hear this.

In the following six training sessions the basic principles are studied. These are designed for our local situation and cover topics such as work discipline, home hygiene and education of children.

After these sessions, there is a formal ceremony at which participants dress up and invite their friends to the final oral exam called the “Group Recognition Test.” The participants are questioned individually about the 16 basic principles. If one of the group members does not pass, this testing must start over.

A key objective is teaching respect for money. Two participants, for example, were forced to get rid of their gambling machine before they were allowed to join, because it represented a lack of respect.

The next step is for the group of five to determine their projects. One might say, “I am going to raise chickens;” another, “I am going to make nets,” and so on.

The group discusses the individual projects and can raise objections such as, “You don’t know enough about chickens. Do something else.” Group members are aware they will have to pay for the irresponsibility of one of their members.

People who have been removed from the program for misusing funds often reapply and are accepted. The second time around, things generally work out. The group pressure ensures a high level of responsibility.

This Grameen Bank member got her first loan of 3,000 pesos—about $55—to establish a fishing venture.

A. Yes, about 30, many of whom are trained teachers who do not want to work in the Philippines educational system. They are all good teachers and understand non-formal education.

The bank we set up in Jala Jala has 1,300 members. They pay six employees from its profits and will soon be able to pay all its own expenses. The bank was started with money from an Irish government aid agency.

Q. Does that mean that survival can be precarious?

A. Yes, but if we can continue to grow at the present rate of 11 branches (each with several groups) in seven years to 25 branches, the bank should become self-sufficient. Some initial mistakes, which proved costly, slowed down that progress.

One must take into account the disadvantages some of the participants face. In one area, where there once was a big U.S. military base, many of the members are former prostitutes who have been given a whole new start in life by their participation in the bank. But outside money is still needed.

We have about 700 families waiting to join, but we cannot accept them simply because we haven’t the money to put up the first loan.

Q. Does the Grameen Bank work with local parishes?

A. One of the five committees that make up a Basic Christian Community (a type of parish) deals with economic affairs. Often, this committee is the Grameen Bank.

Many Columbans have taken an interest in the Grameen Bank because they see that the organization provides jobs, that the money is paid back and that benefits such as loans and emergency funds are established.

Q. How are you involved in the bank?

A. I am currently a member of two boards that deal with staff and seek outside loans. A branch of the bank becomes financially viable when it has 1,800 members with half of them on their third loan. To achieve this level, you need outside financial help.

Q. In addition to Bangladesh and the Philippines, where are Grameen banks set up?

A. Countries where there are Grameen banks include Malaysia, Indonesia, Sri Lanka, Papua New Guinea and, recently, in China. There are about 20,000 members in the United States where it is working particularly well among the black community in Chicago.

Q: Does anyone ever comment that you are involved in work that doesn’t appear particularly priestly?

A. It was the dire poverty of the place where I worked that brought me to promote co-ops and later the Grameen Bank. Even today the daily wages of many we work with cannot buy a kilo of fish.

We started the co-op in the Manila squatter settlement of Tondo with 200 pesos (about $3.50 ). To date, it has lent 35 million pesos ($625,000) and improved the lives of many poor people. Its 900 members are the core of the local economy and markets.

“Spiritual things” that take place inside the church are obviously important. But if people are literally dying of poverty and scourged with delinquency, something more is called for.

A bit of capital in the hands of the poor can transform the life of the individual and the community in which they live. And, of course, if justice is not being promoted, the Gospel is not being preached.