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D.H. Wright shows how the micro-credit programs pioneered by Muhammad Yunus are changing the lives of poor people around the world.


    Is it possible to create a market economy where financial well being relies on how well a person or business interacts with society, where well taken care of people equate sustainable profits, and where credit stands for trust over dividends and loan shark tactics? To the 2006 Noble Peace Prize recipient Muhammad Yunus: that answer is a resounding YES!

As he wanders Bangladesh in a traditional Punjabi, Muhammad Yunus is sometimes referred to as a modern day Gandhi or “ banker for the poor.” After seeing the turmoil caused by economic uncertainty in his home country of Bangladesh, Yunus, a professor of economics, decided to move away from academia to pursue a calling to bring greater social equality to the area.   He created a business model called Social Business.  The

aim of a social business is to end poverty as a result of creating healthy sustainable companies through micro-financing, with no expectation of returns higher than the original investments.  Dr. Yunus created Grameen Bank, or Village bank, in 1983 as a source for funding these Social Businesses.  The bank is now the largest bank for the poor in the world, with 94% of the bank owned by the poor, while the remaining 6% belongs to the Government of Bangladesh. The idea of Social Business is spreading around the world, with branches of Grameen Bank in New York and California.  Even in a country with a sophisticated banking system, the need to help the under-served millions is stronger now than ever.  To understand how Social Business works, along with the principles behind Grameen Bank, it is important to see how Dr. Yunus first got his start.

Trained in economic theory at Vanderbilt University in the United States, Yunus returned to Bangladesh in 1972 and took a chair in economics at the University of Chittagong. In 1974 the country's famine caused by the War of Liberation had effected everyone in the country.   The poor people in the college town of Jobra had become a majority and in order to survive, had become targets for loan sharks and money lenders expecting high returns of interest, usually over 10% a week, in return for the small loans they had given, usually of less than one US dollar. Becoming tired of analyzing economic theories in the class room while people were starving of hunger outside, Yunus took to the streets,  tracking down everyone in the town of Jobras that owed money to the lenders.  With a list of 42 names, Yunus lent 856 taka or roughly 27 US dollars out of his own pocket to 42 craftsmen , telling them that they could pay the money back when they could afford to. After the 42 people all paid him back, Yunus gave the matter a great deal of thought, and decided that there would have to be an institutional solution.

"Lend the poor money in amounts which suit them, teach them a few sound financial principles, and they manage on their own", says Muhammad Yunus.  The result was Grameen Bank, which is present today in the vast majority of Bangladesh's thousands of villages, and which since its formal opening in 1983, has lent almost six billion dollars. Today the bank has almost seven million borrowers. Grameen Bank lends 800 million dollars per year in loans averaging just over one hundred dollars. The bank is self-financing and makes a profit. The repayment percentage is very high and the structure of development from below has served to advance democracy and human rights.

Yunus attempts to recognize humans as multidimensional figures where profits are only part of the  solution.  That happiness comes from many sources, not just from making money, is a key idea to Grameen Bank.  The existence of countless social institutions around the world supports this selfless generosity.

Yunus sees the need for two types of business structure in today's economy.  One is for personal gain or traditional capitalism, another is dedicated to helping others; this is what Yunus refers to as a Social Business.  A social business can be described as a non-loss, non-dividend company, dedicated entirely to achieving a social goal.  This kind of business makes a profit but no one keeps the profit.  The owner can take back over a period of time only what was invested.  Part of the social surplus that will arise out of a social business is invested into expanding the business and to cover uncertainties, creating a sustainable model for operation.

Yunus hopes that the poor he lends to will use the money to start small businesses that will eventually grow to become sustainable.

Over 95 per cent of the borrowers from Grameen Bank are women, and their equality is a major concern for Yunus and Grameen Bank. The emphasis on women may have been the most important factor in the success of Social Businesses in India. Women were not alone to begin with, but their proportion and accountability for repaying loans rose rapidly over male counterparts. In Yunus's words, "For women to be granted the loan has a definite effect on the family... Children benefit automatically, with better clothes and food. We can see the situation changing".  The bank's practice has meant a social revolution in Bangladesh. One of the borrowers, Mazeda Begum, has put it like this: "My parents gave me the birth, but Grameen Bank gave me a life". In today's terminology, micro-credit is indeed "female empowerment".

Today, the idea of small and collateral free loans for poor women has spread around the world.  There are now micro-credit programs in nearly one hundred countries, including Norway.  Yunus runs a program called Grameen America in Queens, New York City, and is expecting to spread Grameen across the country.  But the question still remains, where does the money come from?

Trillions of dollars are spent each year on corporate giving programs.  As a means for funding micro financing, Yunus suggested that to create low cost start-ups, entrepreneurial individuals will need to seek to redirect social responsibility programs toward financing low income businesses owned and operated by the poor.

The struggle is long, and education into proper spending and financial stewardship, along with rehabilitation in some cases, is necessary to give low income individuals sustainable help, but the possibilities are endless.

By taking part in social responsibility programs and creating social businesses, corporations and local governments will face evolutionary leaps toward greater sustainable value.  This will be achieved by investing in members of the community as well as potential buyers and sellers of products who are currently too poor to ever be customers.  Corporations have been knitting together the fabric of civilization since their inception, and through taking part in the concept of funding social businesses, they will continue to survive as positive structures shaped by the societies that made them.

In his book, Building Social Business, Yunus writes, “Poverty is not created by poor people.  It is created by the system we have built.” Banks refuse service to nearly two thirds of the world's population and this has given rise to a system of loan sharks and debt seekers.

Poverty is created not by poor people but by their circumstances.  Every human is born into this world fully equipped no only to take care of themselves, but also to contribute to the well-being of the world as a whole.  Some get the chance to explore their potential, but many others never get the chance to unwrap the wonderful gifts they were born

with.  They die with those gifts unexplored, and the world remains deprived of their contribution.  Poverty is an artificial, external imposition on a person.  It can be removed.

Muhammad Yunus believes the issue of poverty will someday exist solely as an artifact in museums, as a place where people will blame their ancestors for tolerating the inhuman condition for so long. Visit his website and read one of his books, and it is hard to not agree with him.


For more articles by D.H. Wright visit his blog.