Richard Hopper is a doctoral candidate at the Harvard University Graduate School of Education, Cambridge, MA 02138 USA. Email: <Richard_Hopper@gse.harvard.edu> This initial study was supported with a travel grant from the Harvard Institute for International Development and is reprinted from the Spring 2000 Issue of the International Educator.

In October 1998, education policy leaders met at UNESCO’s first World Conference on Higher Education and signed the Declaration on Higher Education for the Twenty-first Century: Vision and Action. The intention of this document is to provide direction to the diverse and rapidly changing higher-education systems of the world. The dominant theme which emerged from the declaration was equity: expansion of access to and affordability of post-secondary studies, particularly for underprivileged and disadvantaged people in developing countries. This appeal for enhanced higher education equity has come during an era of frequent tuition hikes, emerging fee-based cost-recovery schemes, and mushrooming growth of high-priced private universities in developing countries. The Declaration emphasized that admission to higher education should be based on a candidate’s academic merit and not on the ability to pay, so as to make even expensive post-secondary education available to the most capable aspirants, irrespective of socioeconomic status. This document urged governments in developing countries to remain not only the primary supporters of higher education, but also to become advocates for higher education equity measures. Policy makers in higher education asserted that government sponsorship of innovative financial aid programs would be the most effective way to assist underprivileged students in gaining access to and paying for higher education, thereby encouraging greater social and economic mobility of individuals throughout all societies. In spite of the UNESCO Declaration, most Third World governments have done little to support policies on higher education equity, and some have actively suppressed such measures in favor of programs at lower levels of education.

In this climate of government disinterest, one non-governmental organization (NGO) in Bangladesh has unexpectedly begun its own effort at financial aid in the higher education sector. Grameen Kalyan, the welfare division of Grameen Bank, famous since 1983 for its innovative lending programs for the landless poor, has expanded its objectives beyond micro-enterprise to include higher education. The Managing Director of Grameen Kalyan, Mr. Shaikh Abdud Daiyan, states that NGOs must now begin to "consider the economy of the poor… and help them to rise to the highest levels of education." To assist the poor in attaining and completing higher education, Grameen Kalyan has devised a program which seeks to identify intellectually talented young villagers and help them to finance their university education through loans. Using Grameen Bank’s network of 1,118 branch offices throughout rural Bangladesh, Grameen Kalyan wants to encourage poor children not only to complete the equivalent of secondary education, but also to attend public university. The hope of Grameen is to create a new generation of highly educated poor who will have one more weapon with which to attack the cycle of poverty. In the context of Bangladesh, one of the least developed countries in the world, such a task would seem enormous if not impossible.

Bangladesh, with a land area the size of Wisconsin, sits on a low-lying plain located at the delta of the Ganges River between India and Burma. Ninety percent of the country’s 130 million inhabitants live in flood-prone rural areas where the average per capita annual income was estimated at $277 in 1996. Using a poverty calculation formula which includes both Cost-of-Basic-Needs and calorie intake measures, the Bangladesh Bureau of Statistics estimates that 53 percent of the population live below the poverty line, while 35 percent are considered "hard-core poor" – not only earning little if any income, but also consuming less than 1800 calories per day. UNESCO estimates the adult literacy rate in Bangladesh to be only 42 percent. While over half of Bangladeshi children progress beyond elementary school, far fewer ever complete secondary education. The limited number of seats at the nine public and 16 private universities are concentrated in the cities of Dhaka, Chittagong, and Rajshahi, thereby attracting wealthy urban students and further contributing to one of the lowest higher education enrollment ratios in the world: less than five percent for individuals between the ages of 18 and 24 (compared to an average of 20 percent in Latin America and more than 50 percent in industrialized countries). After gaining initial independence from Britain and India in 1947, enduring a bloody struggle for a second independence from Pakistan in 1971, and suffering damage from a devastating cyclone that same year, this war-torn Muslim nation emerged with tremendous reliance on international non-governmental relief agencies. With decades of unstable governments, assassinations, and some bitter political rivalries, Bangladesh has relied on the domestic growth of NGOs to fill the development gap where government has failed. Public failure in promoting higher education equity has opened the door for Grameen Kalyan’s experiment: the Higher Education Loan Program (HELP).

The objective of Grameen HELP is to seek out and nurture academic potential among the poor, by identifying scholastic aptitude and offering capable young people loans sufficient to pay for expenses related to university studies. The branch officers of Grameen Bank canvass their local communities and encourage adult borrowers from Grameen microcredit programs to identify the most promising children for student loan consideration. Due to the lack of formal schooling opportunities in some rural areas of Bangladesh, many candidates emerge from non-traditional education programs often organized by non-governmental organizations. Even if a poor student can gain admission to university, expenses associated with studying at that level in Bangladesh can easily surpass $400 per year – an astronomical sum for the sons and daughters of rural families that typically live in grass huts and survive on less than one dollar per day. To be eligible, applicants for HELP loans must be the dependents of Grameen Bank borrowers, the asset-less poor who have previously qualified for and repaid a loan through the Bank’s existing microcredit program. Under Grameen’s definition, a dependent is not necessarily a child related through birth, but can also include a child "who eats regularly from the same pot" – an important criterion in rural Bangladesh where village families often share food and child-rearing responsibility. Most Grameen microcredit borrowers are women – fully 94 percent. All Grameen borrowers are considered "members" of the Bank.

The loan qualifications for first-time "members" at Grameen run counter to the lending criteria of traditional banks: rather than show collateral or income to guarantee repayment, Grameen borrowers must demonstrate poverty and propose an income-generating activity that they will establish with their first loan at market interest rates. The average micro-enterprise loan dispersed by Grameen Bank is approximately $195. As part of their loan agreement, borrowers must join a local five-member Grameen "group" that meets each week and assumes collective responsibility for the other group-member loans. Groups are free to add members, but they must conduct the initial screening of borrowers for Grameen, further strengthening the internal system of accountability and support. Groups, therefore, expand carefully and look for trustworthiness and cooperation as the main criteria to expand their borrowing circles. Borrowers contribute a very modest membership fee to Grameen Bank for each loan, giving them small, yet important shares of ownership in the Bank. This membership system has actually shifted the majority ownership of Grameen from the donor agencies and Government to the individual borrowing members who now control fully 92 percent of the shares, up from only 40 percent in 1983. After a first-time borrower of Grameen repays her loan, she obtains a guarantee of lifelong credit from the Bank. Today, Grameen members have an added benefit: the opportunity to have their dependents eligible for HELP loans.

In 1998, the first year of the Higher Education Loan Program, the welfare division of Grameen dispersed loan installments averaging about $350 per person and bearing five percent simple interest – a much lower interest rate and easier terms than the standard Grameen microcredit loans. The 65 student loan recipients identified and selected by Grameen Bank branch officers are currently working toward degrees in subjects as diverse as medicine, engineering, business administration, agriculture, humanities and social sciences. Though the time to degree at the public universities in Bangladesh is generally from three to five years, these students will receive annual HELP loans until graduation as long as they maintain good academic standing. Loan recipients will therefore incur an average total indebtedness of more than $1,200. Grameen expects the graduates to begin repaying their loans just one year after completion of their respective degree programs, with a total of five years to complete the repayment schedule. Officials at Grameen believe this ambitious student loan program provides a "rare chance for the poor to rise up to the highest levels of the employment market... [the results of which] will be felt in the villages [as the graduates] do their part to assist their home communities." Clearly there are many risks involved in providing multiple collateral-free loans to extremely poor students for a long course of study, not least of which is the specter of default. Grameen Kalyan seems prepared to assume these risks.

Previous research on higher education loans in developing countries has produced some generally disappointing conclusions about the success of such programs, citing problems in administration, management and loan recovery. Scholars in education suggest that the most likely reasons for program failure are high default rates and the institutional expense of interest subsidies prior to repayment. Student loan programs in other developing countries have typically targeted the middle class. There is now understandable concern about saddling the very poor with years of debt, a burden which has yet to be assessed. The student loan programs recently examined in developing countries were almost all created and managed by governments. One study sponsored by the World Bank proposes that loan defaults might be reduced if private institutions with the capacity to collect payments managed the programs. (Altbrecht & Ziderman 1992) Grameen Bank represents just such an institution.

The Founder and Managing Director of Grameen Bank, Muhammad Yunus, considers most poverty alleviation efforts made by governments and other NGOs to be palliative rather than empowering, providing only stop-gap measures instead of offering sustainable self-help solutions to the poverty cycle. Dr. Yunus has been traveling around the world for nearly two decades convincing others that the poor are credit-worthy. He cites Grameen’s 16 years of experience in loaning small amounts to more than two million poor in Bangladesh to encourage the growth of income-generating activities. According to internal estimates, the Bank maintains a 97 percent loan recovery rate through its community-based system of accountability that has produced what is widely considered "the most successful self-sustaining antipoverty program in the world". (Bornstein 1996) The Grameen model of microcredit has spawned more than 200 replication programs in more than 50 countries including the United States. Grameen Kalyan already has plans to double the number of its student loans in the next year and hopes that HELP will serve as a model for other NGOs in the Third World.

Might the Grameen Higher Education Loan Program actually be a good equity prototype for other developing countries? At this time it is difficult to say. The recovery outcomes of this non-governmental student loan initiative in Bangladesh cannot be fully evaluated for many years, since the initial beneficiaries of these loans are just nearing the end of their first year of university studies. It is important to note that repayment is not the sole measure of success. Grameen’s approach must be judged on many levels, and perhaps most significantly on its dedication to identifying and supporting the poorest of the poor. This mission is no small feat when the target population typically lives in a grass shelter, subsists on agricultural production, and has minimal access to educational resources at the basic and secondary levels. According to Mr. Daiyan, "The chance for the brightest children from these poorest areas to rise to this level of society is extremely rare. We want to see this program grow. My only worry is the possible unemployment of graduates. Having come from poor families, however, these students are very resourceful." In spite of their apparent resourcefulness, HELP loan recipients still face the looming problem of high unemployment in Bangladesh. In addition to the Higher Education Loan Program, Grameen will likely need to develop a parallel system to aid its loan recipients in finding and maintaining jobs. If Grameen is successful in the employment of its graduates, this non-governmental organization will have likely created a higher education equity program worth replicating.