GRAMEEN BANK: HELPING TURKEY'S POOREST

UNCLAS SECTION 01 OF 02 ADANA 000029 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON TU SUBJECT: GRAMEEN BANK: HELPING TURKEY'S POOREST ADANA 00000029 001.2 OF 002 Summary -------------- ¶1. (SBU) Using the micro-credit model established by its parent bank in Bangladesh, Grameen's branch in Turkey has been offering loans - and life-coaching - to poor vendors, craftswomen and farmers in Diyarbakir. Though Grameen now has six offices with ambitious expansion plans throughout SE Turkey, project director Khan Chowdhury cautioned that micro-credit does not fix poverty; it gives poor families slightly more resources and hopefully allows them to keep their children in school. Grameen's initiative in SE Turkey should be welcomed - especially since it may compete with charities associated with religious fundamentalists - but serious economic development in the region requires expanding the formal economy rather than making life a bit more bearable in the informal sector. End summary. From Dhaka to Diyarbakir -------------- ¶2. (SBU) Grameen has been operating in Turkey since 2003 after a Diyarbakir AK Party MP, Aziz Akgul, learned about the program and encouraged their leadership to expand here. Khan Chowdhury, a Bangladeshi, was sent to open the office, which operates with support from the governor's office. They now have six branch offices, five in the southeast (both in big cities and in rural areas) and one in Ankara. In the coming years Chowdhury plans to open about six new offices per year. Offices are financed with support from the Soros Foundation, the Ministries of Finance and Interior and private companies including Finans Bank and HSBC have helped provide start-up funds. Other regions, including Samsun, Van and Sanliurfa have used the Grameen model to establish their own micro-credit programs. ¶3. (SBU) Grameen uses the same model in Turkey as in other countries, providing micro-loans to poor entrepreneurs whose lack of assets denies them access to the banking system. All of their members are women. In Turkey, first-time borrowers take loans as small as YTL 100 (USD 70),with an annual interest rate of 15 percent. The program has about 4,600 members who generally return for credit multiple times; some have expanded their business and now secure larger loans of YTL 1,000-2,000. Chowdhury cautioned, however, that poverty alleviation is a slow process and it is too early to claim that loan recipients have "graduated" and are no longer poor. "We're allowing them to raise 4-5 goats rather than 2, so it's a matter of small increments," he said. "Discipline, Unity, Courage and Hard Work." -------------- -------------- ¶4. (SBU) In the Cami Kebir neighborhood, a warren of narrow streets and ramshackle apartment buildings inside Diyarbakir's imposing Roman-era grey basalt walls, we joined Grameen members at a weekly meeting with one of the loan officers. A second-floor room in an ancient apartment was filled with about thirty women, ranging in age from mid-20s to late 50s; nearly all wore traditional head-coverings. They sat on rugs scattered across the floor clutching their Grameen ledger-books and small amounts of cash. ¶5. (SBU) At the top of the meeting, they chanted Grameen's four principles: "Discipline, Unity, Courage and Hard Work." These principles form one of Grameen's 10 "decisions" (adapted from 16 in Grameen's native Bangladesh, http://www.grameen-info.org/bank/the16.html),which encourage healthy, industrious habits in addition to the core goal fostering of sound financial management. In SE Turkey, the decision urging members to keep their children in education is particularly important and Grameen is hoping to establish a scholarship fund that will provide support to help members' children attending secondary school or university. Chowdhury noted that many members, because they can't read, memorize the 10 decisions. Members must, however, learn to write their names before they can join the program and Grameen provides rudimentary training for those who need it. ¶6. (SBU) The members then gave progress reports to the Grameen officer, handing in the interest owed on their loan, which is labeled a "service charge" in Turkey and other Muslim countries. Both the officer and the member then sign the ledger-book that charts the progress of the loan. The members briefly described their businesses: making embroidery for sale in street markets; purchasing cigarettes for resale; buying fabric and sewing clothes; making dough for a "borek" (cheese pastry) bakery; and operating a small hair salon at home. In rural areas most loans are for the purchase of livestock: 200 YTL funds the purchase of a sheep. ADANA 00000029 002.2 OF 002 Reaching Down to the Bottom of the Ladder -------------- -------------- ¶7. (SBU) In Diyarbakir Grameen is beginning to offer small loans with no interest rates to beggars, who are encouraged to sell small items to supplement their income from hand-outs. If their vending activities increase, they could eventually give up begging and join the mainstream economy. The fact that Grameen is introducing "beggar loans," a program used by 70,000 in Bangladesh, underscores the depth of the poverty in some areas of southeastern Turkey. A recent study by TESEV, an Istanbul-based think-tank, indicated that per capita income in the region is less than half the Turkish average and overall development (based on the UN Human Development Index) in the poorest provinces is lower than in India. Comment -------------- ¶8. (SBU) In Diyarbakir, Grameen's assistance provides the least fortunate with desperately needed working capital as well as useful guidance regarding the need to educate their children and practice sound money management. While such bottom-up poverty reduction can deliver marginal improvements to families scraping by in the informal sector, for the SE to grow out of its systemic poverty it needs to pull more of the population into the mainstream manufacturing and services sectors. Meanwhile, in the same neighborhoods where Grameen operates, growing numbers of families are coming under the influence of religious charities, some of which are reportedly connected to Turkish Hizbollah, a shadowy Islamic organization that is also stepping up its charitable activities. GREEN