Moonshot Thinking in Economics: Grameen Bank

Throughout the discipline of economics, scholars study models of perfectly functioning markets and what these markets would look like if all of the right conditions were met. It is a fascinating discipline which shows what a perfect world could look like, but the difficult reality of things is that often these models represent unrealistic expectations based on human behavior, availability of resources, and allocation of land, capital, and labor. We do not live in a perfect world where capitalism is a well-oiled machine that works perfectly for all people, or where everyone in the world embraces a single communist ideology. No, we live in a very diverse world with people from different backgrounds who have different interests, beliefs, norms, and values. This diversity is a fundamental element of our existence that makes our world more beautiful, but also more complex, and this is something that is often left out of economics.

When the Grameen Bank in India was founded in 1983, it was met with a lot of criticism because people expected it to function the same way any other bank functions, by loaning money with high interests and making a profit. People held the Grameen Bank to the standards of what people already knew, without thinking that they could ever operate differently. Instead of operating for profit, the Grameen Bank is a rare institution that offers microfinancing opportunities to poor communities by loaning them money to expand their operations, but offering very low interest rates that give the customers flexibility and reduces the pressure of paying back the loans. This model of operations is extremely risky from the perspective of a bank that runs on making a profit, because society leads us to believe that poor people are a liability when it comes to managing money. The Grameen Bank didn’t see poor people as a liability, but more as an opportunity to give back to the community and allow rural areas to develop and grow.

Not only is the Grameen Bank the first microfinancing institution of its kind, but it is also the first that favors women entrepreneurs and empowers women to become business managers and participate more actively in societies where they were often oppressed. According to statistics by the bank, around 95% of the women that took out loans from the bank consistently managed to pay back their debts and the interest, showing a high rate of success.

Why is this bank an example of moonshot thinking in my opinion? No one ever believed that there could be a “Bank of the Poor” and people never believed that a banking system could have the effect of reducing rural poverty and protecting social capital whilst also empowering women in local communities. The Bank was met with much opposition from people that believed that it was merely exploiting the poor and believed that the bank just put poor people into more debt that previously, or people criticized the bank for overstepping and intervening in the role of the government in providing poverty alleviation strategies, but it is undeniable that this Bank has brought a new way of looking at poverty alleviation and has generated a new conversation looking specifically at how this could potentially provide solutions for people not just in India, but around the world as well.