Results
in the private sector. Increases in the value of land often did not benefit the poor. Kawaga (2001) The increases in property value, personal observed that they resulted in higher rents or wealth and perceived improvement in tenure to insecurity of tenure, as we often witness in security should be understood as intermediate revitalizing neighborhoods in the United States. metrics in an endeavor to understand how participation in the formal economy affects the most Tenure has had a weaker than expected influence on the availability of services and utilities and the poor. Quantifying the increase in titled property actual strength of legal ownership claims rests or time spent in formal employment simply measures how well the intervention was executed, on unsettled legal questions (Kawaga, 2001). The benefits predicted by Hernando de Soto have not not the quality of its formulation. World Bank project evaluations are generally light on the latter materialized. Ownership of land on which one lives is consideration, but other studies have considered the broader impacts of land formalization in Peru. not typically a short-term investment. Timothy Mitchell of NYU examined the history and shortIn general, they fail to find evidence that titled term fallout of formalization in Egypt. De Soto’s land significantly increases the poor’s access to Institute for Liberty and Democracy worked with credit, undermining de Soto’s main argument (Kagawa, 2001). Erica Field and Maximo Torero’s the Egyptian Center for Economic studies to develop a “Formalization Action Plan” that led to the study (2004) found a small increase in public parliament’s passing of numerous reforms meant sector construction loans, but only a slight to facilitate mortgage financing, property titling decrease in interest rates—not loan availability—
and small business licensing in 2001 (Kagawa, 2001). Mitchell comments that while the impact of the legislation “was uncertain, the PR campaign was an immediate success.” (Mitchell, 2004) In his eponymous magazine, Steve Forbes predicted that Egypt’s new legislation would “dramatically transform its economy into a wealth-creating, wealth-distributing dynamo” and “deal a devastating blow to global terrorism.” (Forbes, 2004) In reality, the reforms were a flop. The nation’s first mortgage company, established by the legislation, remained alone and undercapitalized. Mitchell declares, “there was no dead capital to unlock… so the reforms stalled.” Beyond this, investment in the new mortgage industry was lackluster because of “a fear that new provisions giving mortgage companies the power of foreclosure would not be enforced.” (Mitchell, 2004) De Soto’s theoretical assertion that formalized ownership would lead to the possibility of property foreclosure and
The world’s poor are not absent from the formal economy because they cannot meet its prerequisites, but because it does not serve them well. therefore creditworthiness did not hold true. Mitchell’s discussion of why these reforms failed suggested that Egypt’s relative lack of progress was not based on a social and cultural rejection of the attempts to reform the system. He suggests that the current land tenure system, a result of a mid-1950s coup, granted tenant farmers and urban residents extensive security, and served as a strong resistance against modern investment in the Egyptian land market.
Banker to the Poor When she finally receives the twenty-five dollars, she is trembling. The money burns her fingers. Tears roll down her face. She has never seen so much money in her life. She never imagined it in her hands. She carries the bills as she would a delicate bird or a rabbit, until someone advises her to put the money away in a safe place lest it be stolen. —Muhammad Yunus, Banker to the Poor
I
1976, Muhammad Yunus began to visit the poorest residents of Jobra, the small village between the highway and the university where he headed the Economics Department. There he met Sufiya Begum, a twenty-one-year-old mother of three and a stool-maker. Wary of moneylenders and their usurious rates, Begum would borrow money from middlemen in the market to buy bamboo n
on the condition that she sell back what she made with it (Yunus, 2007). The initial loan for material was worth twenty cents. Her profit from the sale of each stool amounted to just two cents. Yunus sent his students to poll the village where they found forty-two people dependent on similar arrangements with traders. The sum of the debt, for which they were all bound in an endless cycle of hard work and poverty, was less than twenty-
seven dollars (Yunus, 2007).
Intervention As he tells it in Banker to the Poor, Yunus went to the local bank branch on behalf of the stool makers of Jobra and encountered the numerous attitudes and obstacles faced by poor “banking untouchables.” For example, a borrower had to be literate, but 75 percent of Bangladeshis were
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