By Michael Hathaway
I suspect that Muhammed Yunus is a saint as well as a genius. The Arlington, Santa Barbara’s largest indoor venue, was filled to the doors with happy buzzing. Energetic, expectant people, many from UCSB where he’d been lecturing, and from SBCC. Exciting, that an anonymous donor had bought 2,000 copies of Muhammed’s new book for free distribution. And the very long signing line later suggests that hundreds more of his two books were sold that evening.
Why a saint as well as genius? With his almost permanent generous smile, he seems completely relaxed, just talking easily with you, as he is doing with large audiences everywhere, ever since his Nobel Peace Prize. Harvard, New York, Austin É. And he’s lining up several more major enterprises, in many countries. He has helped millions to improve their lives radically; has learned how to inspire and organize a hundred thousand others to carry out the work of further inspiring and organizing still others. Yet there is no heaviness or weariness about him, just the ceaseless vitality, the fresh readiness to engage. His is one of the world’s most amazing recent stories, and he is quite at home retelling it as needed.
Some seven-and-a-half million poor Bangladeshis currently hold small loans at his Grameen (meaning “Village”) Bank, founded in 1983. And since the beginning, their repayment rate has held at 98%+. The idea has spread like a contagion of hope — many more millions are being served all over the world, even here in the ‘first’ world. (His audience loved it that the poor third world is bringing financial advice to the first!)
Yunus knows that even the poorest, least fortunate people have a basic desire to survive, and that with respect and credit, they themselves will figure out ways to do so. He one day learned that a poor village woman making fine bamboo stools earned only two cents a stool, for she had to borrow money to make them, and the lender took all the rest. In just that neighborhood, his students identified 42 others in the same situation. He resolved to act. Buying up all their debt and offering them loans cost Yunus only $27!
He’s an economist — really, a professor — and finds it funny that he’s now famous for becoming a banker. A banker!
The interest Grameen charges (up to 16% simple annual interest) can only seem high until you realize how much service is involved with millions of small loans. And the village mo-neylenders were charging as much as a predatory10% a week! As the very poor have no collateral and no one to guarantee a loan, he dispensed with that. Contracts, realistically, would be unenforceable, so: no contracts and skip the lawyers. Instead, there would have to be a sense of solidarity, respect and simple trust. “We wanted people to feel natural about this, not intimidated. After all, we are serving them,” says Yunus. So Grameen’s 75,000 employees go out to visit the 7,500,000 customers in their homes, each week. “We don’t even require any business knowledge, which they don’t have. We are looking for special qualities in the people we make loans to. Usually these are women who think of themselves as having no special talent, and because of social custom, most of them have never sold anything or even handled money.”
Almost all the loans go to women, as they turn out to be far more reliable than men. They repay in weekly increments. As the women do better, they increase their businesses, and begin to pay to have their children educated. This, after millennia of illiteracy and poverty. (In the world of “normal” banking, Yunus points out, there is the glaring irony: the larger the sum and the richer the borrower, the higher the default rate!)
When Yunus learned that some of these least-favored children were excelling in their schooling, he had Grameen establish scholarship rewards, with 75,000 winners currently. They also offer school loans for borrowers’ children, at no interest. A generation later, he could see that millions of families had lifted themselves out of poverty* and several thousand of the children were in colleges. This so thrilled him that he established full scholarships — books, board, everything — for all borrowers’ children who could get that far, and there are now several thousand of them each year.
All this, Yunus says, follows naturally from the bank’s active interest in the welfare of their borrowers: the bank is co-owned by all its employees and its borrowers.
“You are turning banking completely upside down,” an early banker upbraided him. “Yes,” he retorted, “because banking was standing on its head!”
When Bangladesh was opened for cell phone service, Grameen formed a new company. Within a few years this company had become the largest single business in Bangladesh. Most Bangladeshis had never seen a phone, but Yunus had had the idea that women might start businesses charging their neighbors for individual calls. “And you should see how fast and knowledgeable these women are, about rates and prefixes and all.” But how were they to recharge the phones in the countryside, where there was no grid? They started Grameen Shakti, a solar power company. Even though these home budget units are very expensive for Bangladesh, they have now sold over 400,000 units and expect to reach one million within a few more years.
Grameen is also partnering with the French Dannone yoghurt company. As malnutrition is a serious problem, they produce a supplement-rich yoghurt and sell it at very low cost to millions of customers. These and other enterprises are what Yunus calls “social businesses,” as Grameen and Dannone only get their original investment back. After that, the business is run on a “no dividends, no loss” basis.
Grameen also makes homebuilding loans, at 5% interest. But they require that the builder own the land on which the home is to be built. Very few women in Bangladesh own any property, but the favorable terms lead many husbands and families to put these properties into the women’s names. Divorce is fairly common, and very easy for men, Yunus says, but almost unheard of in these familiesÉ.
To those who argue for larger and grander projects, Yunus simply says, “Twenty million women with some experience of money and of independent action are a very different twenty million than they were a few years earlier. We make our social progress as we can.” He also argues that most “development” actually benefits the already most-advantaged part of society, and does nothing for the poorest third or half. There is where his concern lies, squarely there.
And yes there are already microcredit groups in the U.S., some here. He was invited to Arkansas as long ago as 1986 to help start one, by a forward-looking governor, Clinton. Yunus’s people are negotiating with the U.S. and other governments to alter banking laws sufficiently to ease the opening of such banks. “We are trying to create windows of possibility, just for those who would like to try things these ways. Big corporations will continue, and charities will continue, and we are something different.”
“Credit is a fundamental human right.” Poverty is not caused by the poor, he claims to have proven, poverty is caused by our social structures and ideas, and these must be changed, “until we have poverty only in special museums, which will explain to our descendants what it was like.”
There’s much more. Read his Banker to the Poor, Micro-Lending and the Battle Against World Poverty and his newer Creating a World Without Poverty. Learn more at www.grameen-info.org , and DO make the effort to see him, if ever you can!
* Grameen Bank has provided 3.8 billion dollars to 2.4 million families in Bangladesh. By their own (more stringent than UN) statistics, poverty has gone from 74% of the population to 40%, population growth has halved, the economy is growing 3-5% per year, and more children are going to school. Micro-credit now reaches most poor Bangladeshis. Grameen has branches in Costa Rica, Guatemala, China, Inner Mongolia, all over. More than 250 institutions in nearly 100 countries operate such micro-credit programs.