DR YUNUS – the man who revolutionised banking with a loan of $27 in the 70s


Joseph Law, Sydney author, speaker and social entrepreneur, recently interviewed Professor Muhammad Yunus, the man who commenced the famous Grameen bank offering microcredit to people previously considered bad credit risks.


Professor Yunus, welcome to Sydney. I would like to start by asking: how did you get started on what you’re doing today and what is microcredit in a nutshell? In Bangladesh we had a very desperate economic situation. I was trying to see if, as a person, I could be of some use to anybody. So I did a lot of small things: helping people individually in the village. And I saw the loan-shark in the village and I tried to get some information. Forty-two people in total borrowed only $27 and they have to suffer so much because of that. So I thought I could solve this problem by giving $27 from my own pocket.


And you basically saved the lives of 42 individuals just by lending out your money. I wouldn’t say saved the lives of. There was harsh behaviour from the loan-shark.


So how was the $27 used for the 42 individuals? They borrowed this money from the loan- sharks. So I told them to return the money to the loan-sharks; that’s what its use was – to return the money. So they become free from the loan-sharks’ clutches.


Are you charging them in interest or are there collateral or credit issues involved? How does it work? At that point I had not even thought about that. My immediate thought was to make sure that they returned the money and remove themselves from the harsh behaviour of the loan-sharks.


So this is how the first concept emerged – from the $27. Yes and then I wanted to do more by linking up the people from the village to the bank. So the bank can lend that money instead of the loan-sharks. But the bank refused to do it. So I offered myself as a guarantor. You give them the money: if they don’t pay back, I’ll pay back. So this is how it all began. We had no problem getting the money back and returning it to the bank. The bank was getting the money; so I had no problem guaranteeing more loans.


So basically based on three principles: no credit history, no need for accreditation and no collateral – and that’s a very innovative concept – but how did you get people to believe in your cause from the beginning and where does the funding come from, from Grameen Bank? Nobody believed in it; so I became the


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guarantor. I was the only believer in it. I had never done it before – I was taking the risk. I mean, lose all the money and have to pay the bank – I had no idea. Luckily everybody paid back so it all worked out. The bank didn’t trust this would work; they were just waiting for the whole thing to collapse.


And how long did this last? And how did it evolve over the years? It continued for several years. Then I thought: why don’t I set up my own bank? The bank was reluctant to agree with this.


That was back to 1983 wasn’t it? I got the licence in 1983 – so in ‘83 we became the bank. Until then, between ‘76 to ‘83 it was a project.


So how has that concept evolved since the 1970s? You know, what’s Grameen like today in terms of the loan size? It became a bank and it became easy for us to lend money – we continued to expand. Today, we work in every village of Bangladesh. We have 8.3 million borrowers, 97% of them are women. We focus on women. They can take small amounts of money.


Why is woman the preferred proposition and the structure? We were trying to see that we were even- ended between men and women because I was critical of the banking system for being totally focused on men. When I began, I wanted to make sure half the borrowers were women. It took us six years to get to 50-50. Then I see that money going to the family through women brought so much more benefit to the family. The children in the family become benefitted especially. Woman took very good care with the money she received; she wanted to get the best mileage out of the money because she was the frontline of the suffering of poverty.


And what has been the repayment rate today? Very high repayment rate: 97-98%.


And how big are these loan sizes? When people first joined Grameen Bank, the loan size would be around $40, $45. And as she pays back the first loan, she becomes more confident at work and has more idea about her work and she would like to take bigger loans. $60, $70 loans. Average loan in Grameen Bank (now) is something like $250.


And how is the money used? For what businesses? Or do you give to a business idea like coaching? They have to feel comfortable with what they want to do. We don’t want to tell them what they should do because my feeling was that we would


be wrong. We would give the wrong advice. We don’t live their life. We have no idea. We think fancy textbook ideas. And in the process, we ruin their life. So we don’t want to advise them. When she looks for an idea, we always encourage her to talk to her friends, to find out something that makes sense to her. If she has an idea, then check it out with her friends so that they can give her advice that we can’t because we come from a different background, not her background. So traditionally it is for income generating activities.


Whatever produces an income. That’s right. Businesses are things people can do on their own. Creating a self environment – me creating an income for myself to take care of myself. So whatever idea that I have, whatever talent that I have, I can do that.


And going back to when you started in the ‘70s, how did you stay motivated and were there moments when you doubted yourselves? We were not doubting because it was working. We never had an occasion where it was collapsing and we can’t find the solution. We never had that. Particularly if you remember the situation of Bangladesh. It is a country of frequent disasters. Even if there is an extreme situation, we found the way out and how to handle it. Still the bank goes on and we convert the whole bank into a humanitarian organisation to handle disasters so that we can save people. We give them fresh capital to start their businesses again. So it’s quite a tough job; it’s not very normal.


Very hands on. Yes. You have to anticipate all of these things. If you don’t, people are not on their feet. If people are not on their feet, the bank is gone, finished. Because it could not help people to get back to their lives, it cannot be a bank any more.


What is the social business and how does it differ from a corporation or a charity? Social business is a non-loss, non-dividend company to solve social problems. There are many problems around us we don’t pay attention to because the only business we have learned about and been told about is the business to make money. Money-focused business. So in the process of making money, we create a lot of problems – problems for the people, problems for the planet [that] we have no time to pay attention to. We always say, while we run the business, while we pay the taxes, the government should take care of it. We have enough creativity, we have enough dynamism, to bring together to solve these problems. Citizens can solve these problems. If all the citizens came together each one is trying to create a problem-solving company, all these problems would disappear. This is the one that I call a social business.


And you told us about the dignity of the individual as well, for them to be separate and self-sufficient. Absolutely, yes indeed because then they are equal. It is a business deal. When I give a loan, she doesn’t feel that I’m doing her a favour because she’s paying it back with interest. So we are at an even level of importance. But at the same time, she gets help because now she can use her unused creativity, unused talent, to make a living for herself and that encourages her children to learn from her that, yes, she is an independent person; she can take care of herself. The family can stand on its feet. Many governments in rich countries give people benefits for welfare because they don’t have a job. So the state takes care of them. Apparently this looks good because the state has responsibilities. Isn’t this correct? But to help them in a way that not only this generation are going to welfare, their children are going to welfare, their grandchildren are going to welfare. The other part, which is a more important part of the responsibility of a society is to help them get out of charity. Otherwise, you are destroying the families, you are destroying the lives of people by keeping them in charity environments. So this is another part of society you have to review and revisit. Social business. One possibility is to create opportunities for them to get decent employment for themselves so they find their own work. They create things and contribute to society. Each human being has unlimited possibility and unlimited potential to create those opportunities to become independent.


So you feel that capitalism is a great way for unleashing the creative potential of people? Yes, but not the interpretation of capitalism that we have today. That is the interpretation that has created all the massive problems right now. So we need to redesign the system which is now obsessed with making money. Human being is not about making money. Human being is about making a happy environment for all of us together. All I’m saying is being developed so that the children, when they grow up, when they go to school, learn there are two businesses: one is for making money, another is for solving problems. Both are businesses. So young people can grow up thinking what kind of business should I work for? Should I create a money-making company, make money for myself or should I create a social company to solve problems I see?


For the full interview please go to YouTube. Key in “Joseph YouTube Yunus” and up it comes, or here’s the full link: http://www.youtube.com/watch?v=M FrowTLjNts&feature=youtu.be


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