Grameen Bank began with a $27 loan
The Guardian on February 16 2008 on p33
His pioneering Grameen Bank began with a $27 loan and went on to lift millions out of poverty. Nobel prize-winner Muhammad talks to Madeleine Bunting.
The figures tell their own extraordinary story. In 1974, an economics lecturer at the University of Chittagong, Bangladesh, lent $27 to a group of impoverished villagers. He went on to set up Grameen Bank to ensure that the poor had access to loans, and over the next 34 years, it disbursed $6.6bn (£3.6bn) in millions of tiny loans to those living in poverty. Last year, there were 7.4 million borrowers, 98% of whom were women. Most of the lending is for income-generating activities - small street vending, farming. In 1984, Grameen began giving small loans to build and repair homes; a total of 649,714 have now been built. The bank offers student loans - 20,000 last year for higher education - and provides 50,000 scholarships for schooling. There are few people in the world who can claim to have had an impact on this scale: Muhammad has become one of those rare beings, an idealist whose work has transformed the lives of millions of poor people. Yunus's bank has been copied across the world and microcredit, small loans to the very poor, is now a mainstream strand in dealing with poverty in almost every country including the UK.
Given such an achievement, the only surprise when he and Grameen Bank won the Nobel Prize in 2006 was why it had taken the Norwegians so long to clock one of the most striking successes in development in recent decades. But Yunus, 67, is a restless man, and rather than retire to travel the world graciously accepting the prizes and awards now being showered on him, he has a new idea that he hopes will be as successful as microfinance: social business.
His idea is that multinationals set aside funds to run not-for-profit businesses; and social investment funds and "social stockmarkets" trade their stock. The problem with capitalism, he argues, is a rigid distinction between companies pursuing profit and charities pursuing good. What he proposes is a form of triangulation: the innovative, risk-taking approach of business combined with the social objectives of a charity. The idea is not original - there are many people talking about social enterprise models - but Yunus's clout raises the game. First, because he insists all profit must be recycled, no fudges with "double bottom lines" where people try to make money while doing good, and second, because he can take this message into places no one else can. Even the tough business executive weary of pleas for money can't but be impressed by what Yunus has achieved. He sells his message with a calm practicality - with as much understanding of the lives of poor people as of the structures of capitalism. It's a combination of idealism and pragmatism that could be picked up by politicians eager to trim the welfare state as much as businessmen keen to improve their image. And why not, says Yunus, who argues that any service could be delivered by social business, including health or education.
If social business sounds a bit vague, his new book, Creating a World Without Poverty: Social Business and the Future of Capitalism, is designed to make it look very straightforward. It's designed for the airport bestseller market, but with an important twist - this is for those troubled by twinges of conscience on the long-haul flight. Yunus has spotted his target market: the growing sense of discomfort among even dedicated capitalists at running an economic system that consigns a large proportion of the population to grinding poverty.
He points to Warren Buffet's move in 2006 in giving $31bn in shares to the Gates Foundation. "He could have set up a social business to fund health insurance for the 47 million in the US without it - and there are lots like him," says Yunus. "There are lots of people who want to hear what I have to say, particularly young career executives; it's in their hearts, but they haven't had the opportunity to put it into practice."
Yunus is already involved in negotiations to set up social businesses with several multinationals, including the water firm Veolia, and an unnamed IT business, which he says will transform the lives of poor Bangladeshis. The prototype of his social business model is his venture with the European food multinational Danone. Grameen-Danone may be an unlikely coupling, but Yunus is eulogistic about how the two have collaborated to produce a cheap nutritional yoghurt that is to be sold by a network of low-income women in Bangladesh. It meets the social objective of improving the diet, particularly of poor children, and providing a livelihood for women, but it also meets Danone's objectives to extend its brand in developing countries and maintain its reputation for social responsibility. Awin-win, then?
Yunus is emphatic it is, but one cannot but feel a little uneasy that the type of story that has ended up in Yunus's book is what corporate PR teams dream of: he opens with several pages on Danone's chief, Frank Riboud. Are you being used? "Wasn't I using Danone? They get no profit. I was using that story to explain social business. It is an equal trade," says Yunus.
He may be right, as he has proved before. Others may have tried micro-credit, but it was Yunus who managed to develop it to its current scale in Bangladesh, and Yunus who, by listening carefully to the impoverished villagers, ensured that women would be its main beneficiaries. He identified the fact women use family resources for the wellbeing of their children more effectively than men. When I ask him which aspect of his success he is most proud of, he cites the fact that 67% of Grameen Bank deposits belong to women. These financial resources give them an unprecedented measure of independence. One criticism is that microfinance helps those just above and below the poverty line, not the very poor. But it's something Grameen Bank is trying to tackle; it now has 100,000 beggars on a "struggling members" lending scheme.
There is more to the bank than just the balance sheet; it ties lending to a process of social engineering. New borrowers sign up in peer groups to "the 16 Grameen decisions", a range of pledges on everything from vegetable growing to no dowries. It earns the bank criticism for being paternalistic, but others argue that it gets crucial issues onto the agenda in remote rural areas; even if dowries are reduced by only 10%, that is a start on a pernicious tradition.
Grameen is one of the most famous brands in Bangladesh; there are 27 Grameen companies ranging from the country's biggest phone firm to one supplying affordable healthcare. All aim to alleviate poverty and, in time, the plan is to convert them into social businesses. Among all this innovation, Yunus's step has faltered only once. A year ago he announced he was going into politics to deal with Bangladeshi corruption, only to withdraw two months later, horrified by what he describes as "dirty, violent and greedy" politics. The bruising experience has reinforced his lack of faith in the state and the political process to meet the needs of the poor; instead he emphasises the entrepreneurial skills of the poor. This kind of thinking finds an enthusiastic audience, particularly in the US, as it appears to offer a capitalist answer to development without asking for increased aid. Yunus insists there is still a need for aid. Once, Yunus spent his time in the mud huts of the villages around Chittagong, now he lives in a flat in Dhaka with his second wife and children and spends time visiting corporate HQs, gatherings such as the World Economic Forum in Davos and presidential palaces. For a boy from a large family of modest means, its been a long journey but there's a common thread. Yunus has great faith in human nature - both its ingenuity given the opportunity, and its desire to do good, given the opportunity. He's made it his business to work out how to provide those opportunities.