Whether it’s the "end of welfare as we know it" or the shakeup at the World Bank, there is widespread re-thinking how we’ve been addressing poverty. Among the most successful innovations is the Grameen Bank, founded by Muhammad Yunus some 20 years ago – it is now the largest rural bank in Bangladesh and a model worldwide for its innovative micro-credit program. The bank lends money to the poorest people of Bangladesh, 94 percent of whom are women. Borrowers, who own over 90 percent of the shares of Grameen, meet in groups where they provide each other with encouragement, advice, and support.
The model has inspired the development of micro-credit projects in over 50 countries, and a Micro-Credit Summit has been scheduled for early February with the goal of reaching 100 million of the world’s poorest people by 2005.
Sarah: What was it that inspired you to begin a micro-credit program, and when did you realize that you were on to an important concept?
Yunus: I had been teaching in the United States and I returned to Bangladesh after independence to participate in rebuilding the nation. I came with the arrogance of a PhD; I thought we could solve the problems of Bangladesh. Once I was there, I was confronted with a nationwide famine and the arrogance melted away. I felt humbled; I couldn’t do anything.
Then I decided that, rather than worrying about what happens to the whole world, or Bangladesh, or the famine situation, I would just find out what I could do to help one person have a better day.
I started going to people’s houses, talking to them, trying to understand their life. I saw how people suffered for lack of a tiny amount of money. One dollar, two dollars can make so much difference in a life. We made a list of 42 people who needed a total of only $27, less than one dollar apiece. That was the biggest shock. How can people suffer for want of such small sums of money? The government was allocating millions of dollars, yet nobody cared how people suffered for such a tiny amount.
My first response was to loan them money from my own pocket Then I thought once I started, I would have to keep on lending my money. I should arrange with the bank to make the loans.
I approached a bank, but the bank manager said, "No, no, no. You cannot lend money to poor people. They will not pay you back."
I said, "How do you know? Have you ever tried?"
They said, "No, we don’t have to. We know they don’t."
I said, "We’ll find out. I think they will pay it back."
It’s a long story, but in the end I offered the bank my services as a guarantor. I borrowed the money from the bank, loaned it to the poor, and people paid it back.
But the bankers still said, "Oh, you’re a fool. They will repay the money this time, but the moment you loan more, they’ll stop." I was told that the loanswere repaid because the borrowers were all from one village where I had been meeting and talking with the people. So I did it in two villages, then five, 10, 20 villages, 30 villages, 100 villages. Each time it worked. Each time the bankers waited for the whole thing to collapse, and it did not. It grew.
Finally I decided to set up my own bank. The government thought it was a funny idea; poor people cannot borrow money. I showed them the examples, the reports, but they didn’t pay any attention. I lobbied, knocking on doors for two years. Finally, I was given permission, and we became a bank.
Sarah: From what I understand, the work you’re doing leads to changes in people’s lives that go beyond their immediate economic well-being. These are changes that enhance people’s capacity, strengthen community, affect their relationships, outlook on life, and perhaps even their spiritual experience. Can you talk a little bit about the changes you see?
Yunus: This work is not just about loaning money, paying it back, and hoping that things will change. We also engage the people who borrow from us in discussions about the social problems that they face in their lives and the kind of solutions they imagine for themselves.
Something we call "The 16 Decisions" emerged out of thousands and thousands of these sessions. For example, one of the 16 Decisions says, "We shall grow vegetables all year round, eat plenty of them, and sell the surplus." This decision helps to overcome malnutrition; a lot of children have night blindness due to vitamin A deficiency. Another one is, "We shall send our children to school so that they can become educated."
An especially important one is "We shall not take any dowry at the time of marriage of our sons, and we shall not give any dowry at the time of marriage of our daughters." A dowry is a curse; it destroys family after family who have to find the money to arrange the marriage of a daughter. As a result, a daughter becomes a family liability. The moment she is born, the family looks upon the daughter as a kind of punishment. Throughout her life the daughter lives in a very apologetic way. "Sorry I was born to be a daughter. I wish I was not born."
The only way to resolve this is for people to start thinking differently, to agree not to take dowries, and not to give them.
Another one of the 16 Decisions is "We shall keep our families small, increase our income, and reduce our expenditures." Studies show that Grameen families adopt family planning practices at twice the rate of the national average.
Sarah: What other ways have you seen changes in society growing out of the Grameen process?
Yunus: We had a national election in June. We had a tremendous voter turnout, 73 percent average nationwide. The fascinating thing was that for the first time in the history of Bangladesh, women voters turned out in larger numbers than male voters. One common explanation is that more women voted because organizations such as Grameen and other micro-credit groups have organized them. Women are attending weekly meetings and developing leadership and greater awareness. When the election came, women wanted to be sure their voices were heard.
In the process, the fundamentalist party, which had 17 seats in the previous Parliament, was completely wiped out. They won only three seats, because the women don’t vote for them. The message was very clear – they were defeated everywhere.
These are the things that generate power and change consciousness. One thing leads to another. With money and empowerment, people start seeing themselves as people who can make decisions.
Sarah: I understand that Grameen has moved into other areas beyond micro-lending. Could you tell me a little bit about that, and why you’ve chosen to do so?
Yunus: We have observed that while Grameen credit helps people increase their income, several leakages in the system keep people from moving ahead. Oneis the expenditures for health care; as income rises, the expenditure for health care increases disproportionately. When you’re extremely poor, you don’t spend any money on your health because you are preoccupied with getting food. Once you satisfy that basic need, you start diverting your additional income to health issues, and you can’t move ahead. So, we decided that Grameen should look into Bangladesh health care.
In Bangladesh, child mortality is extremely high, one of the highest in the world. Maternal death at delivery is also very high. There is no prenatal examination or postnatal treatment of the mother.
The government organizes health services in Bangladesh, but does so very poorly. We decided to develop a modern, self-financing health care program that addresses the issues of the poor, emphasizes prevention, and is also very affordable.
For the last three years we have been operating an experimental Grameen health program at ten different sites. Our plan was that the village borrowers would contribute to the program and help set it up. We found that for about two dollars a year per family, we could develop a very good health care program with modern facilities for an entire area. Currently, we can cover 65 percent of the cost. We are trying to get to the point where we recover 100 percent of our costs so that we can expand the program throughout the country.
Sarah: Why were you able to do this when the government seemed to have such difficulty providing the services?
Yunus: Somehow, whenever the government is involved, corruption becomes an issue. The Bangladesh government spends a lot of money on health care, but the program is doctor-oriented. There are beautiful hospitals, clinics, and so forth, but people don’t get health services. Doctors have a private practice somewhere else, and come back at the end of the month to pick up the check. The government cannot change anything because the people in the programs are so powerful.
Sarah: Why wouldn’t you run into the same difficulties when your program starts getting larger?
Yunus: Our decision making process is different – it is performance oriented. The government is
oriented toward supporting its cronies and maintaining the status quo. They are not interested inthe health results themselves.
Another area of involvement is our hand-loom products. Bangladesh has more than a million families of hand-loom weavers – those who make fabrics.
At one time, a Bangladeshi hand-loom product called muslin was the coveted fabric in the royal courts of Europe. When the European colonial powers came, machine-made fabrics came with them, and the colonial rulers forced the hand-loom industry nearly out of existence. It survives only to meet local needs, but now even the local hand-loom market is getting squeezed by imported machine-made fabric and by shiploads of very cheap used clothing.
So we thought we could help the weavers survive by expanding the export market for their fabric. We created Grameen Check, a good quality 100 percent cotton fabric, light on the body. In the first year, we didn’t do so well, but this year we will easily exceed $10 million. Once the business is successful, we’ll start selling shares to the weavers and they’ll become the owners of the company. We created another company, Grameen Products to make and sell Bangladeshi shirts and saris.
Another project, the Grameen Social Venture Capital Fund, invests venture capital in businesses that have possibility but are too risky for anyone else. For example, a lot of Grameen borrowers buy cows and sell milk, but there are no good processing facilities in the country. If someone would build processing plants, we could process the milk and market it in areas that need it. The milk price would go up, and our borrowers benefit.
We are also in the process of creating a mutual fund, a kind of retirement fund for our borrowers. Most families want to have a large number of children because they’re unsure about their future. We believe their eagerness to have more children will diminish once they know that their old age is protected.
Then we got a license to operate a telephone company and created Grameen Phone. Most telephone companies in Bangladesh concentrate only in the cities. The telephone is a symbol of authority, and we want to break that image and bring cellular telephones to the poor women in the villages.
We see this as a business proposition, but at the same time it has a social dimension. For example, one village woman could become the "telephone lady." Anybody who wants to make a call will come to her house, or invite her to their house. She could charge for the house-calls and makes it a business.
At the same time, a telecommunication network could be extended all over the country, not justconcentrated in the cities. Rural people could have access to market information. Having telephones will also help women, because most of the abuses of women in villages happen because of the women’s isolation. They can’t tell anybody because they have no means to communicate to the outer world. If the telephone is introduced gradually into village life, we think useful changes will emerge. We hope that within the next six months we’ll be operating from the villages in Bangladesh. In the next 4 or 5 years we hope to be in place throughout the whole of Bangladesh.
Now that we have Grameen Phone, we decided to create Grameen Cybernet. Our aim is to bring Internet facilities to rural areas, so that the whole world can be at their doorstep. They can get information and send information, and even start new businesses like data-entry, or software development, right in the villages.
Over the next 20 to 25 years the world will become a sort of borderless, distanceless place. The villages should not be excluded from that world. They should be integrated into it so that a village in Bangladesh and a city like Seattle are just next door to each other.
Sarah: Do you have any concerns about the western culture of Hollywood and Madison Avenue, and all the values that go with it, coming in force into village life?
Yunus: Information is not a one-way flow. Of course, western culture has a lot more strength because it’s more organized, it’s marketable, and it comes on strong. But gradually, the other side will get organized and say "We have a market too. You’re interested in our music, our culture, our art, and our things." Lots of interchanges will take place, and a global kind of culture will emerge with, of course, local variations.
While we dream about the Internet and cellular telephones, we have to face the reality that 85 percent of the villages in Bangladesh don’t have electricity, so we created another company called Grameen Energy. Conventional energy will never get to those villages, so we are seriously negotiating with solar companies around the world to bring in solar energy.
We are also considering electricity produced by biomass, gas, and wind power. Through the Grameen network, we can reach out to any village and find Grameen borrowers who can be the energy suppliers to the village, like the telephone lady. We can create micro-power supply companies.
Sarah: I notice you’re focusing on renewable energy sources that don’t, for the most part, contribute to global warming.
Yunus: Yes, we worry about global warming. Our survival will depend on how the whole world community behaves, particularly the industrialized nations that contribute the most to global warming. If global warming raises the water level by a foot, a part of Bangladesh will be submerged – the land is very flat, just slightly above sea level.
We also know that we have to be careful about the environment because our survival depends on a sustainable environment. Our soil feeds 120 million people today. In the next 25 years, at the present rate, the population will probably double. Where will we find our food if we destroy our soil? We have to look critically at chemical use and consider organic ways, including returning biomass to our land. Insecticide is another concern because in the process of attacking pests, we also destroy the friendly creatures that help the soil and plants.
People must become very aware of what we do to our environment, because it is not going to get any bigger. How do we maintain energy supplies or the capacity of the soil to produce food for us 20 years from now, 50 years from now, so that we can still have a world that will sustain life?
Sarah: You’re talking about businesses that operate under a very different set of environmental and social principles than most business, resulting in a very different set of effects.
Yunus: Behind all of our projects is the idea that business doesn’t have to be greed-based, it can be run with social objectives. For example, I am interested in making good health care available to all people in a businesslike way. My purpose is not to make myself rich.
Some might say "Oh, that may be true in the East, but there is nobody like that in the West."
But people everywhere feel pleasure when they do something for a fellow human being. That pleasure is much more important than the one that comes from making tons of money and being on the list of billionaires. I want to feel that I’m useful to my neighbor, to my friend, and to somebody else. I want people to say, "You’re a good man."
In any area – education, health, communication, fashion – you can achieve social objectives and still be in the marketplace and be competitive. I think that as more socially motivated people enter the marketplace, greedy people will begin to be squeezed out because people will support those who are in business for the good of all.
We have to redesign the marketplace by attracting socially-motivated people. A global network of such people could help provide the support to achieve these objectives. They can learn from each other to be innovative, creative, and to solve problems – problems of the inner city, the villages, the problem of poverty in the world.
Sarah: It sounds as if you’re really talking about the possibility of eliminating poverty.
Yunus: Yes, very much. I don’t understand why anybody should be poor on this planet. There is more than enough to make everybody happy – not by giving things away, but by enhancing the capability of each person and by creating an enabling environment. There is enough inside each person to take care of himself or herself.
Every person has the ability to create his or her own job. If society was structured for self-employment, there would be no reason to fear becoming poor. We worry because we look to those who are hiring rather than to ourselves. We really can create our own job, make money, and take care of ourselves.
The problem is we have built a society in which some are excluded from the marketplace. That’s why I am critical about the financial institutions that bar large numbers of people around the world from entering the marketplace. Grameen is a mechanism for integrating people back into the marketplace. It opens up opportunities so that you can build your own life. Micro-credit brings people together.
Sarah: In your view, how is the situation different for the poor in industrialized countries, as opposed to the poor in Bangladesh?
Yunus: It is basically the same. It’s a rejection by society. The poor do not create poverty. The institutions we build and the policies we pursue create poverty. If you want to cure the cause of poverty, you have to change the mind-set of the institutions.
If we have this kind of change in the marketplace, a new civilization can be built. I see a world that is absolutely free from poverty. I’m not talking about a remote future, but in our lifetimes, perhaps the next 25, 30, or 40 years. It can happen.
Muhammad Yunus, the founder and director of Grameen Bank and winner of the 2006 Nobel Peace Prize, is a founding and current board member of .