Muhammad Yunus founded Grameen Bank, the microcredit ‘bank for the poor’, that is now lending over one and a half billion dollars each year. He explains his philosophy behind his caring approach to commerce
What does it feel like to win a Nobel prize? For Professor Mohammed Yunus, it was the legitimacy that the prize brought to his work with the poor, rather than any accolade, that meant the most to him. “Winning the prize was an exciting experience. It gives you an opportunity to communicate what you have to say. Before winning the prize, no one was paying attention. They used to say: ‘Who is this guy? He’s crazy!’ After winning the prize, people start listening to you. The doors that weren’t opening before are now open."
It was in 2006 that the Norwegian Nobel Committee jointly awarded Yunus and Grameen Bank the award “for their efforts to create economic and social development from below”. The prize recognised an effort that was started three decades earlier.
1976 was a time of hardship for the newly independent Bangladesh, struggling to recover in the aftermath of the Liberation War. Poverty was widespread, particularly in the areas around Chitt-agong, where Yunus was born in 1940 and where he returned to serve as the Head of Economics at the local university after receiving his PhD from Vanderbilt University in the US in 1971.
Why do you only lend to people who already have lots of money, rather than the poor who really need it?
Yunus was able to observe first-hand the impact of the famine that had hit the country at the time, and of the unscrupulous lenders who were preying on the vulnerable. Against this backdrop, Yunus decided to offer the rural poor an alternative, and started lending small amounts of his own money to the people who needed it the most. “Grameen Bank was not a thought-out plan,” he explains. “It was a spur-of-the-moment thing, a reaction to a moment of frustration and extreme devastation,” he explains.
Success was immediate. “Everybody wanted to take money from me,” he recalls. Yunus observed a similar phenomenon in nearby villages, and with the sponsorship of the Bangladeshi central bank and support of the nationalised commercial bank, went on to set up microcredit projects in other parts of the country. Some of the more disreputable lenders, who were offering loans at unaffordable rates of interest were, understandably, not happy to see their business taken away – “they started to spread all sorts of vicious rumours” – but a new movement was born.
Within seven years, Yunus’s initiative, delivering a credit-delivery system to provide banking services targeted at the rural poor, officially became Grameen Bank. With this new type of bank, which offered “appropriate and reasonable” loan terms and conditions, there was no need for collateral: it was based on trust, accountability and participation.
Today, the ‘rural bank’, as it translates, has more than 8.4 million borrowers in Bangladesh, and has lent more than US$12.5 billion since its inception. One interesting factor behind its success is that 97 per cent of the bank’s customers are female. At the start, Yunus was lending to all, but ended up lending to females only. First, because the banks he visited to raise funds only wanted to lend money to men, and only rich men, which infuriated him.
“Why do you only lend to people who already have lots of money, rather than the poor who really need it?” he used to tell them. At the time, fewer than one per cent of women in Bangladesh had access to banking. Initially, the plan was to lend the money equally between men and women. Despite initial difficulties – it took Yunus six years to reach the ratio of 50 per cent of women – he then decided to only lend to women.
“With women, you see the money better distributed, and the impact for the family is much greater. Children get better fed, better clothed and better housed. And women are very cautious with their money... men are more casual about it.”
Since 2006, Yunus has focused on spreading and implementing the concept of “social business”. There are currently more than 50 social businesses in operation in Bangladesh alone – some are the largest companies in the country. Yunus believes this business model, which aims to solve economic and social problems while staying financially self-sustainable, can help solve acute problems. His Yunus Centre is a one-stop resource centre for all Grameen social-business-related activities in Bangladesh and around the world. Offshoots of Grameen span several sectors beyond banking, from healthcare, insurance, sanitation and agriculture. Any profit that these companies make is not given back to the owners; they only recoup their initial investment, which means that the majority of profit can be reinvested in the companies.
“Social business is now popular even in developed countries like France, the UK, Germany, Sweden and Italy, with many university courses, institutes, funds and initiatives all over the world.” So why the enthusiasm for social business? Have people had enough of capitalism?
“There is some frustration with the current system. Youth unemployment, even in rich countries, is high. With the gap between the rich and the poor increasing, this is not leading us to the right place: there is a lot of selfishness, and people are looking for an alternative. Social business is about doing something for others. Young people love it, even large companies now try to do it, like Danone in France, or Uniqlo in Japan.”
For Yunus, social business does not stipulate the end of profit-making businesses. “It widens the market by giving a new option to consumers. It does not intend to monopolise the market and take the existing option away. It adds to the competition. It brings a new dimension to the business world, and a new feeling of social awareness among the business community.”
Yunus’s whole life may have been dedicated to creating businesses that help others, but he is a strong believer in personal drive and taking charge of one’s destiny. When he talks about youth unemployment in Europe and North Africa, and whether social business can provide solutions, he says people should not wait for somebody else to take care of themselves, and calls for an entrepreneurial spirit. “If they wait for someone else to create jobs for them, it will be a long, long wait,” he warns.
So what drives Yunus? For this Bangladeshi, success is measured in the positive impact one has on others.
“Helping people around you, making other people happy: that’s super- happiness,” he says. ‘Making it big’ in Yunus’s eyes is the point at which a company is generating enough profit to be reinvested in exciting and helpful new projects. “I don’t make money for myself,” he says. “I am not interested in that.”