Grameen micro-lending comes to Scotland with help of Tesco Bank

Yunus Centre Press release (25 October, 2012): 

The Grameen micro-lending system, which has helped lift millions of people out of poverty worldwide, is to be launched in Scotland early next year with the aid of Tesco Bank and other major supporters.

Tesco Bank will provide half a million pounds of the loan capital for what will be Grameen’s first venture in the UK. The supermarket bank will also offer savings facilities and business support for aspiring entrepreneurs who wish to start businesses in some of Scotland’s most deprived communities.

The Grameen Scotland Foundation, a charitable body run by a board of trustees, will oversee the running of Grameen-style lending in Scotland, a system originally devised by Nobel Laureate, Professor Muhammad Yunus, the new Chancellor of Glasgow Caledonian University.

The Foundation has already attracted significant backing from a range of sources, including the Scottish Government, who have donated £100,000, and supporters such as businesswoman and philanthropist Ann Gloag, who has also given £100,000. In addition, the Foundation is in advanced discussions with the European Investment Fund and is expected to exceed its initial funding target of £1 million in the first year of operation.

The Scottish Grameen collaboration was jointly announced by Professor Yunus, Tesco Bank Chief Executive Benny Higgins, the Principal of Glasgow Caledonian University and Trustee of the Grameen Scotland Foundation, Professor Pamela Gillies, and Martin Cheyne, the Chair of the Foundation, at the University onThursday, October 25.

Tesco Bank – which has created around 1400 new jobs in Glasgow over past three years – will provide basic savings accounts to Grameen borrowers as well as a range of other services, including business advice and advertising space in local Tesco stores, for the new enterprises which will be funded and developed through Grameen loans.

The Grameen micro-lending model was founded by Professor Yunus in his native Bangladesh in 1983 when he established the Grameen Bank. The idea sprung from an earlier ‘experiment’ when the then university lecturer gave $27 of his own money to 42 workers who were in debt to loan sharks. The loans, which were secured by agreeing social contracts, saved the workers from punitive interest repayments which in turn, together with personal commitments, allowed them to support their families better. The borrowers repaid all the loans in full.

Professor Yunus and the Grameen Bank won the Nobel Peace Prize in 2006 for the bank’s anti-poverty work.  It now operates in 38 countries – with similar models functioning in around 60 more – and has made more than 100 million loans.

The announcement of the formal launch of the Grameen system in Scotland coincides with the installation of Professor Yunus as Chancellor of Glasgow Caledonian University at a high-profile ceremony to be held on campus on Friday, October 26.

The Grameen Scotland Foundation will oversee the activities of Grameen Officers who will work closely with low-income communities, initially in the west of Scotland, to identify prospective entrepreneurs currently locked out of the financial system who would benefit from small loans charged at competitive rates of interest, known as ‘microloans.’  What makes Grameen unique is that borrowers are not required to provide collateral and are asked instead to evidence a pattern of saving and are encouraged to focus on family health and education.

 

The initial Grameen pilot scheme will serve Glasgow, North Ayrshire, West Dunbartonshire and Inverclyde, four of the five most deprived communities in Scotland.

The Grameen Scotland Foundation will now move to recruit a Chief Executive Officer and plans to raise an overall target total of £3m over the next five years, which will ensure the project can be expanded into other parts of the UK affected by serious social problems. Borrowers will be represented on the Foundation as they will also be stakeholders in the Grameen system, holding the CEO accountable.

Glasgow Caledonian University has worked to facilitate the introduction of the Grameen system to the UK since awarding Professor Yunus an honorary degree in 2008. In 2010, the University set up the Yunus Centre for Social Business and Health, which, under the supervision of Professor Cam Donaldson, will undertake research into the long-term social impact of Grameen lending, including the health of borrowers and their communities.

Professor Muhammad Yunus, Grameen Bank Founder and GCU Chancellor, said:

 

“I’m not saying change all business – I say give people an option. Poor people need to be given the right opportunities to be able to succeed in their own lives and this is what Grameen helps them to do. We must encourage people to envision their own futures and once that is done find out how to get there – once a person has a vision, it can be made real, and this is what the Grameen Scotland Foundation will work to achieve.”

Benny Higgins, Chief Executive Officer, Tesco Bank, said:

“I am delighted that Tesco Bank can support Grameen's expansion into the UK with the launch of Grameen in Scotland. At Tesco Bank, we aim to play an active role in the communities we operate in, helping to provide opportunities and support to those who need it most. In partnering Grameen in Scotland, we will provide loan funding, professional guidance from our staff and access to our stores to help set up new businesses which, over time, can improve the local economy.”

Professor Pamela Gillies, GCU Principal and Vice Chancellor and Grameen Scotland Foundation trustee, said:

 “Although microcredit and community banking has been available in Scotland for many years, it has not been able to break through the deep-rooted economic and social inequalities and persistent poverty which affects too many individuals, families and communities in parts of the UK. The success of the Grameen system in other parts of the world, including the USA , demonstrates that this community-centred approach can make an important contribution to improving not just the economic and social well-being but also the health of those who have the very least in society.” 

 

Dr Martin Cheyne, Chair of the Grameen Scotland Foundation, said:

“Professor Yunus has already demonstrated that this model of microfinance works in many different economies. It is about more than simply money – Grameen can lift people out of unemployment, improve health and give families a real opportunity to be independent. I would like to take this opportunity to thank Tesco Bank, and the many other individuals and organisations who have supported us in bringing this unique social innovation to the UK and Europe for the first time.”

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Source: Yunus Centre

Updated Date: 4th January, 2017

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