Want to Do Finance for the Poor? Then Use Microcredit to Labor Among Beggars, Addicts, and Thieves

Speaker: Warner Woodworth (professor emeritus, Marriott School, BYU; co-author of Working Toward Zion) Venue: Guest lecture in a BYU personal-finance course (Finance 201), the day after April 2014 General Conference URL: https://www.youtube.com/watch?v=kqFo98OTas4 One-line: Microcredit is a hand up, not a hand out — the tool through which everyday Latter-day Saints can practice the law of consecration and build Zion by empowering the poorest of the poor to author their own lives.

Kyle’s notes

• Not the economics of men, but of the United Order.
• What are “Mentorship Enterprises”?
• Members tend to over-institutionalize their service. We’re waiting for the big groups to set up programs and tell us what to do.
• Microfinance is a hand up, not a hand out.
• “The United Order is the full economic plan of Zion.” — Spencer W. Kimball
• Examples
• Grameen Bank — no collateral for creating self-employment.
• People lack opportunity, not because they’re lazy. It is our duty to teach them to be healthy, wealthy, and wise. (Paraphrase of Brigham Young.)
• Traditional bank
  • Excludes women
  • 70% repayment
  • Land as collateral
• Grameen Bank
  • 50% women
  • 98% repayment
  • No collateral
• Women are more likely to spend loans toward micro-enterprise, whereas men are more likely to spend it on consumption (gambling, drugs, alcohol, and prostitution).
• Bottom line
  • Prepare to change the world
  • Take risks
  • Seek YOUR personal mission
  • Don’t just serve Wall Street — take it on, reform it, humanize it!
  • Practice consecration and stewardship
• “A man filled with the love of God is not content with blessing his family alone, but ranges through the whole world, anxious to bless the whole human race.” — Joseph Smith

Transcript

Lightly cleaned from the auto-generated YouTube captions — filler and transcription noise removed, garbled names restored, meaning preserved. The recording opens with the course professor’s announcements and introduction, then Woodworth’s lecture. It cuts off mid-thought at the end of the posted video.

Course announcements and introduction

Professor: Let me make a few announcements Toshi asked me to pass along. Please check the announcements on Learning Suite — there are at least half a dozen you’ll want to see, including when we meet during reading days, how you can look at your exams, and how to study and be ready for the final. Remember, Monday is the last time we meet, and it will be my review — the only review, because there’s no TA review for the final. So please be there.

One of the biggest announcements: there’s a grade-check form. Let Toshi know by Friday if there are any problems with your grades. He has a form you can fill out and he’ll check it by hand. If you don’t let him know by Friday, then your grade stands. With a thousand students, you understand we have to keep some control on the exam.

I’d like to congratulate everybody — literally the highest average score in my fifteen years of teaching at BYU on a 201 exam: an 84 median. Give yourselves a hand. We had eleven perfect scores — another record. You guys killed it.

Next time — Wednesday — is Personal Finance, and your spouses are welcome. We’ll talk about significant others, whether you should rent or buy a home, the process for buying a home, and developing your credit scores. Then next Monday is the last day of class and the review.

About 280 of you took the test. People keep asking me about the curve — I have no idea what it will do. Roughly 300 opted not to take the first test, and about 290 not to take the second. I don’t know if those are straight-A students who don’t need to take tests and will match on the final, or students who aren’t prepared and will have a hard time cramming for the final. So I honestly don’t know what the curve will look like.

I do ask you to take notes today — this may become testable. Please don’t text; you can go an hour and fifteen minutes without texting your sweetie. And please put your computers away — you can go an hour without the internet and give your undivided attention to Brother Woodworth. The reason this matters: he’s going to give us examples of ways we can help the poor. He’ll tell you a story about how three students decided to do something and changed tens of thousands of lives. There’s stuff you can actually be doing right now. What I want is for you to catch a vision of what Brother Woodworth has spent his entire life doing.

I invited my wife — I’m going to embarrass her. I told you I married my best friend and the most spiritual person I could find, and her good looks were just a bonus. This is Michelle. She’s friends with women, and she’s friends with Warner too.

Warner is going to send me links to some of his NGOs, in case you haven’t fully planned your summer and have a couple of weeks between classes — places where you might volunteer to work among the poor.

Let me introduce our guest. He’s a very humble man — he told me I don’t need to introduce him — but when you have a Wikipedia page, you use it for your bio. Warner P. Woodworth is a professor emeritus from the Department of Organizational Leadership and Strategy in the Marriott School — our home school. He’s a leading advocate of microcredit and has been involved in researching and developing such programs. Woodworth graduated from South High School in Salt Lake City in 1960 — so you can do the math on how long he’s been at this. He holds bachelor’s and master’s degrees from BYU, and a master’s and PhD from the University of Michigan. He’s held various visiting-scholar appointments. He was co-editor and founder of the Journal of Microfinance. Among the organizations he’s helped found are Enterprise Mentors International, Unitus, and HELP International — three of the NGOs he’ll tell us about today. He currently serves as chairman of the board for HELP and on multiple other boards. Among his books is Working Toward Zion — an amazing look at how he ties gospel principles to the work of microfinance and microcredit.

I met Warner in 1999 when he was in our bishopric. I’ve watched him ever since; we’ve done research papers together. He is one of my heroes in life, and I don’t have many. Please pay attention and feel, through the Spirit, what he’s going to teach us about helping our Heavenly Father’s children.

Woodworth’s opening

Warner Woodworth: How many of you heard anything at Conference the last couple of days? To me it was an inspiring set of discourses — visions for us as a people. I especially loved President Monson on love, on charity, on community, on working together.

I taught my last class at BYU last spring — a class on microfinance — and in one of those last sessions we went to Salt Lake to hear my colleague and friend Muhammad Yunus of the Grameen Bank. We’ve collaborated on research and will keep doing so. I quit my job at BYU last fall, so I’m a free spirit now. I got back from Cuba a couple of weeks ago — I had grown a beard, and I felt so liberated to be around Communists and socialists and Catholics with a beard.

Raúl Castro is basically running the show now, and they’ve laid off a million Cubans — out of about twelve million on the island, so it’s a huge problem. I’m going to start a microfinance program in Cuba, because since the Soviet Union collapsed and stopped supporting them, and then Venezuela’s troubles, they’re hurting — and they’re now more interested in entrepreneurial, pre-market ideas. Hopefully that leads to the Church being able to open up there. There was a wonderful branch of twelve people — three of them Cuban, nine from other countries — who went to Cuba to learn to be medical doctors, all expenses paid, and then go back to Costa Rica, Nicaragua, Brazil, even Atlanta, Georgia (which is also part of the third world). I was there to help ordain a young Black convert who had joined the Church in Cuba.

Here’s the deal: I want to talk about how we can use this set of concepts and methodologies to fight poverty. I hope we’ll have fun, and please feel free to ask questions. I’ll walk us through an array of projects and organizations — some short-term, some long-term, some hugely successful, some modestly so — around the globe.

Who we’re really talking about

I want to talk about what we do to empower and bless the so-called dregs of society: the criminals, the addicts, the prostitutes, the thieves, the beggars who are supposedly just too lazy to get up and work. That’s our stereotype of a huge portion of the world — here in the U.S. as well as in other countries. I want to talk about how microcredit can author people’s lives: how it can give them dignity and purpose, how they can overcome their weaknesses, and how they can build strong, healthy, happy families — the kind of ideals mentioned in the Proclamation on the Family.

Here’s a simple outline. We’ll look at the problem quickly, then at microfinance as a strategy for change; how we might build global platforms to address poverty using microcredit; a few short cases, some relevant to your world as students, others created by professionals, businesspeople, and folks in the public sector; and we’ll end on the responsibility to build family and community self-reliance.

Over the last few decades — especially the last ten years — we’ve seen huge disasters: typhoons in the Philippines, earthquakes in Haiti, conflicts and genocide in many parts of the globe, 9/11 in our own country. It’s hard to stay alive in many parts of the world, and to have any quality of life. A huge chunk of the world’s population is just trying to feed their kids today. And I’m talking not only about people generally but about members of the Church who will never be in a building like this, never have an education like yours, never own a car like the ones some of you are parking outside. So do we have an opportunity? Do we have a responsibility? I think we do.

Meeting Muhammad Yunus

I first got into this in the ’80s and early ’90s. I met Muhammad Yunus and convinced BYU to bring him here a couple of times, and then to give him an honorary degree — the first Muslim to receive an honorary doctorate at BYU. We’ve been partners ever since; he’s come to campus probably twenty times. He’s so generous with his time — he’s collaborated with me and served on some of my little boards.

What I like about him is that he breaks tradition. He looks at the way poverty exists — the way people are chained to their extreme situation — and asks: what would happen if we took some tools and broke those chains? He says the day is coming — I think in your lifetime, in the next fifteen to twenty years — when extreme poverty will be eliminated from the planet. When that day comes, you’ll take your kids on a tour to Chicago or Salt Lake or L.A. and say, “Let’s go into this interesting museum” — a museum of poverty. Your kids will walk in and discover that there used to be a day when people starved to death on this planet, when a huge percentage of women were oppressed, couldn’t get jobs, and couldn’t make their own jobs. I’m an optimist, and a lot of signs suggest that day is coming — but you and I have to do the work to get there.

About two and a half billion people live on two dollars a day or less. Whether in our Church or any other, whether in the U.S. or any other society, this is a major crisis. Brother Brigham suggested we can never solve the spiritual problems if we don’t also solve the temporal problems — because in the end everything is spiritual.

While we’re on this planet, about thirty thousand little children die every day — most of whom could be saved with a little medicine or a little protein. And we have child exploitation: in so many countries kids can’t go to school because their parents need them to beg on the street, work in a factory, or plant and harvest in the fields.

The gospel case: consecration and Zion

If we reflect on the Church’s teachings: Spencer W. Kimball argued that what we need is a United Order — a little different from traditional capitalism. It’s the full economic plan of Zion, where everybody is lifted up. Lorenzo Snow taught that we should use our surplus to employ the poor — not invest it in gold and silver, but create jobs so that many more men, women, and children in those early pioneer towns could work if they wanted to. John Taylor said the main calling of a stake president was to be sure everyone in their stake had employment. Ezra Taft Benson taught that the law of consecration is not some crazy experiment — it’s a mandatory law for us to practice, and you and I can do it.

Those who’ve been to the temple know we’ve already covenanted to live the law of consecration — not when Jesus comes, not when there’s some big shake-up and the prophet says “now we’ll all live the United Order.” Brigham asked, why can’t we live it now? We can be doing this in our own lives and families now, and eventually we’ll change the world. Brother Maxwell argued we need more consecrated Saints, not more worldly things.

Brigham Young didn’t say the poor are poor because they’re lazy — the way you often hear even in the halls of BYU. He said the poor are poor for lack of opportunity. Go to the third world: the poor are always busy, always working, always scraping. They’re extremely entrepreneurial people — that’s how they survive on a dollar or two a day. They don’t lack effort; they lack opportunity. And that’s our job as Latter-day Saints: to help them, to teach them how to become healthy, wealthy, and wise — not to keep them impoverished, but to enable them to live the gospel more fully.

What microcredit actually is

Some definitions. Microcredit is the term usually used for tiny loans to the poor to create a business — not to buy an iPad. The entrepreneur receives that micro-loan and starts some kind of income-generating activity: a micro-enterprise. Usually this happens through a communal or village bank.

Here’s how it works on the ground. If I’m on the staff of an NGO doing microfinance, I’ll come to a town and ask the mayor or the village elders, “Where are the poorest people living?” They’ll point to the folks living under tarps who’ve been there twenty years since the volcano hit, or ten years since the floods hit Central America. I say, “You’re the people we’re looking for. Come next Saturday to the town square.” Over a few Saturdays, I train those who show up: this is what finance is, this is a loan, this is interest, this is principal — a loan is not a gift, you have to pay it back. I get them thinking about little businesses.

Then I say, “You four or five, get yourselves together with others in this group of thirty — people you like and trust, whom you’ve seen showing up and learning. Form a little solidario — a solidarity group.” When the day comes, we give a hundred dollars to each person, and you commit to paying off your loan in four or six months — but you’re also jointly responsible for everyone else’s. So pick good group members, not just relatives. And for you men, be sure you include some women, because they’ll be a lot more responsible than you slackers.

If your whole group pays back on time with interest — say four months at five or ten percent — we give you a larger loan next time, maybe two hundred, so you can grow your capital, grow your business, hire more people, buy more raw material. We meet every Saturday to review how everyone’s doing and collect the payments.

An MFI is a microfinance institution. “Microfinance” often refers to more than just lending: micro-insurance, micro-loans for schooling, micro-savings. Many of these NGOs require you to save for a couple of months in an account first, so you learn the value of family finance and managing your resources. And they may also do healthcare, technology, agriculture, and literacy work.

Grameen: turning the traditional bank upside down

Let me talk about Grameen. The most unique things about it are two: it’s for women, and it’s for the poor. If you’re somewhat wealthy in Bangladesh, you won’t get a loan from Grameen. It started as a rural bank and still is mostly rural, focused on the poorest of the poor, and no collateral is needed. If you have collateral, a traditional bank will already give you a loan — Grameen wants to lend to people who have absolutely no collateral, no credit history, no credit card.

Look at the two columns. Traditional banks often leave out women, require land or collateral, and run repayment rates of 70 to 75 percent. In most cultures women depend on men for money, so they’re abused or ignored, the kids aren’t allowed to go to school, and there’s no money for healthcare. Grameen looked at all of this and said: let’s turn it upside down.

They started lending to both men and women, but soon shifted most of their loans to women. Why would a bank whose whole interest is helping the very poor mostly lend to women? Because when a woman gets a loan and starts earning income, she tends to use that money for her children — books for school, better nutrition, a doctor when a child breaks an arm. Most men, around the globe, don’t do that with their money. What do men tend to spend it on? Alcohol, drugs, gambling, prostitution. For whatever reason, men tend to be pretty irresponsible with financial resources. So Yunus said, let’s give it to the women. Grameen shifted from a fifty-fifty split to lending mostly to women — and the woman feels more dignified; she has purpose in her life.

Grameen started in the ’70s and in 1983 was restructured into a formal bank for the poor in Bangladesh, government-approved, focused on rural areas, lending to groups. I’ve been to Bangladesh three times, and every time I’m amazed at how much better the villages with Grameen are than those without: a woman’s old rundown house replaced by a new one, girls getting the chance to go to school. Grameen figured out the same thing Brigham Young taught: if parents can only send one child to school, send the girl — because she’ll grow up to be a mother who trains the next generation. These women have learned to start businesses and solve problems as a group and support each other. They don’t believe in a capitalism that says “it’s you or me, I’m going to destroy you and take over your business.” Their notion is: let’s lift each other. A little idea we can call Zion.

Yunus has had enormous recognition — from the government, the White House, the U.S. Congress, and the Nobel Peace Prize. One of Grameen’s great powers is that it inspires people all over the globe. It wasn’t known in the ’70s or ’80s, became known in the ’90s, and is now a huge success. I’ve been blown away by the number of Latter-day Saints who look at Grameen and ask, “Why can’t we do that? We’ve got the priesthood, we’ve got the Holy Ghost, we’ve got money — what can we do to change our own world using Grameen as a model?”

Case: Yehu Microfinance and Jamii Bora in Kenya

One of my friends, an entrepreneur here in town with about a thousand workers, said, “I’m making too much money. It gets tiring going to Disney World and on cruises to Hawaii. Let’s do something.” He started a non-profit — Yehu Microfinance Trust in Kenya — that now has about 30,000 clients. When Louis started it, colleagues told him, “You’re just washing that money down the drain. Africa doesn’t want your help; they’re irresponsible, lazy, uneducated.” He went over and started with ten women in his first little bank, and now he has something like 30,000 clients among the very poorest.

He partners in Nairobi with Jamii Bora Trust, which operates in the biggest slum in Nairobi — in fact the biggest slum in Africa. They go into those slums and find the most bitter and angry — the ex-cons, the guys with guns, the drug addicts, the pushers, the prostitutes — and say, “You’re exactly the person we’re looking for. We want to help you, give you a loan, empower you.” They now have over a thousand employees, almost all of them not only from the slums but former addicts or criminals, and they’re handing out thirty thousand dollars in loans every week. Somehow this process of getting a micro-loan gives a person a sense of dignity and meaning.

Case: reaching out through the Church’s humanitarian era

Back in 1985, many members were writing to Salt Lake saying we should do something to help East Africa. CNN was just starting up, and we’d see live video from Ethiopia — mothers with babies dying right on camera — and members said, “We should do more as a church with our offerings.” You should pay your tithing and give your offerings to the Church first. But some of these folks wanted to do more, and out of that the Church began its humanitarian program, and later Latter-day Saint Charities, the Perpetual Education Fund, and other ways of reaching out.

As soon as the Church started its humanitarian fund, a group of businesspeople, housewives, students, one of the Catholic bishops in Salt Lake, Elder Marion D. Hanks of the Seventy, a Young Men and a Relief Society general presidency member — got together and said, “The Church is starting to do outreach; what can we do ourselves?” They picked a place that was really suffering: not just south of the reservation or inner-city Detroit, but a district in southern Mali — twenty-five villages, made of mud, no electricity, no paved roads, best transportation a bicycle, no money — to reach out to Muslim people in a country that’s 96 percent Muslim.

For over two decades, a group of LDS families ran a village bank and an agriculture co-op there, where about fifty women farmers banded together to grow crops jointly. They kept a vision of what Gordon B. Hinckley taught. He once asked, “What is the world’s worst pandemic?” People yelled: war, climate change, this and that. He said, “For me, at least, it’s poverty. And what are you doing to reduce it?” He told students here it’s not enough to get a job, get married, and work hard for a decent income — you need to go beyond that.

Case: HELP International and the students of hurricane Mitch

Hurricane Mitch hit Central America at the end of 1998, destroying billions of dollars across the region. Honduras was set back fifty years, according to the U.N. Tegucigalpa was basically destroyed: twenty thousand dead, twenty thousand missing, a million homeless.

I was blessed to have some crazy students who said, “Warner, let’s take what we’re learning in microfinance and go practice it in Central America.” We formed teams. The class started with four people; the next session had eight, then fifteen, then twenty-five — it grew exponentially. The dean told me if I wanted to teach microfinance as a class I’d have to give up one of my regular assignments. I said fine, because we’re going to go help Central America anyway. By the end of the semester, eighty-six students had taken the class — though only forty could get credit, because the rest heard about it too late to add it. (We didn’t have all this technology you have now; I just put flyers up around campus.)

One of my favorite clients from that first year was Maria Elena. We went into a town — I think it was Comayagua — found the poorest families, and told them we’d hold training sessions every Saturday afternoon under the big tree in the town square. After about half a dozen meetings, they organized themselves as a bank, elected leaders, and we agreed to give each qualifying person a hundred-dollar loan the next Saturday.

That Saturday, we brought balloons and soda, sang the national anthem, and celebrated. The leaders said, “Warner, come up front and give out the first loan.” I announced Maria Elena would get the first one. Everyone cheered — but she tried to hide behind the other women. I asked the students to help her up, put my arm around her, and explained, “This loan will create a better life for you. This is your sacred trust. We know you’ll pay it back, we know you’ll grow your little business.” I went to hand her the hundred dollars in Honduran money, and she wouldn’t take it. Finally she blurted out: “Señora, I am just a poor Indian woman. I am not worth a hundred dollars. My life is not worth that much money. I have no dignity, no self-respect. I’ve never even seen that much money.” I got tears in my eyes. I told her, “I know you can do it. We trust you.” And she did. She had two chickens and wanted twenty, and a little chicken coop. About seven or eight years later I went back — she had 20,000 chicks. She and her sisters had bought a piece of land behind their little shack and built a big chicken coop with chicken wire. The transforming power of this is pretty amazing.

Out of that first year — where we also shoveled mud out of schools and refurbished homes after the floods — the program grew. The next year we went to El Salvador and focused more on empowering women. We launched square-foot gardening: with a small plot set up right, with the right organic nutrients and planting pattern, you can triple your produce. Members and non-members began to grow two or three times more in their little gardens — better nutrition for the family, and enough surplus to sell in the town market.

Between 2001 and 2013 the effort shifted. We started as HELP focused on Honduras and broadened it into HELP International — “Help Eliminate Poverty” — reaching many more countries with various technologies, systems, and income-generating practices. For the students, they found they could actually make a difference in one person’s life, one family’s, one village’s. Some came back having delivered babies. One student — Vicki — had faked her honor-code approvals and didn’t much like BYU, but went to Honduras with her roommate to avoid staying home. That experience transformed her life. She delivered five babies that summer, got active in the Church, learned Spanish, and went on a mission. When she told me she’d delivered five babies, I said, “I didn’t know you were in pre-med.” She said, “I’m not — I’m an accounting student.” I asked, a little scared, how many of the babies lived. She said, “They all lived.”

Case: action groups and rich Latter-day Saints who want to do more

Out of these experiences come people like Jack and Lisa Williams in Elk Grove, California, who heard about this, read Working Toward Zion, and asked, “What can I do? I’m a stake president, busy with my business and my calling — I can’t go live in the third world.” We talked about creating a little microfinance action group. They invited a few neighbors and LDS friends to their home one night. It works like a neighborhood book club, only you read and act. Every month or two they read a new book on poverty or microfinance, pool donations — about twenty people generating three or four thousand dollars — and give it to an NGO, which lends it to women’s banks in El Salvador. They’ve gone down to meet the banks they’ve been funding.

There are also tons of Latter-day Saint entrepreneurs, CEOs, nurses, and schoolteachers who want to do something beyond writing checks to the government for taxes or to the Church for tithing — they want to get more involved. Back in 1988–89, some of them — former missionaries and mission presidents with businesses across the U.S. — came to me and said, “We hear what the Brethren say, we read the scriptures about building Zion. How might we do that?” One of them said, “As a mission president I gave out about a thousand dollars to poor members — every one of them a loan they said they’d pay back. How many do you think repaid me? Zero.” Why? Because they took it as charity, a gift from member to member. I told him, “You’ve got to de-personalize it — create a system to provide the loans, manage them, and get them repaid. If it’s just you, they know you won’t come after them; you’re a mission president, not the cops.” So these men were saying, “We don’t know what to do.” So I describe— [recording ends here.]

How it connects

• Warner Woodworth — the speaker; BYU organizational-behavior professor turned microfinance evangelist, co-author of Working Toward Zion, and founder/board member of Enterprise Mentors International, Unitus, and HELP International.
• Working Toward Zion — Woodworth’s own book (with James W. Lucas), the text several of the people in these stories read before acting. It makes the same argument at book length: Grameen and micro-lending as a contemporary instance of the United Order and the law of Stewardship — “a hand up, not a hand out.”
• Muhammad Yunus and Grameen Bank — the model at the center of the talk: no collateral, women-focused, ~98% repayment, turning the traditional bank upside down. Kyle’s notes capture the traditional-bank-vs-Grameen contrast directly.
• Microfinance / Microcredit — the mechanism: tiny group-liability loans that fund micro-enterprise rather than consumption.
• United Order, Law of Consecration, Consecration, Stewardship, Zion — the gospel frame Woodworth builds on: microfinance as a practical, present-tense way for ordinary members to live consecration and build Zion. Ties to the “economics of the United Order, not the economics of men” note.
• Spencer W. Kimball, Lorenzo Snow, John Taylor, Ezra Taft Benson, Neal A. Maxwell, Gordon B. Hinckley — the chain of prophetic teachings Woodworth cites on employing the poor, consecration as a mandatory law, and poverty as “the world’s worst pandemic.”
• Brigham Young — the load-bearing paraphrase: the poor are poor for lack of opportunity, not laziness; our duty is to teach them to be healthy, wealthy, and wise, and to educate the girl first.
• Joseph Smith — closing quote in Kyle’s notes on the love of God ranging through the whole world to bless the human race.
• Poverty — the problem the whole talk organizes around: ~2.5 billion living on ≤$2/day, ~30,000 child deaths per day.