XL Results Foundation Blog

One of the great challenges of those working to eliminate poverty is to find truly effective ways to move people from needing a handout to where they are taking care of themselves. Since 1976, when Bangladesh was struggling with widespread famine and dire poverty, Professor Muhammad Yunus has been doing just that in a micro manner that has had maximum results

In 2006 the Norwegian Nobel Committee awarded the Nobel Peace Prize,

divided into two equal parts, to Professor Muhammad Yunus and Grameen Bank “for their efforts to create

economic and social development from below.”

Freed from Limitations

“When I lent US$27 to 42 people in 1976,” Professor Yunus said in his acceptance speech, “in a small village next to the university where I taught, I had no idea that it would be the beginning of a new banking methodology and it would spread in every country of the world. It feels very strange to realise that until then we lived with a banking methodology which kept the doors of the banks closed to the two-thirds of world population. Grameen freed banking from the limitations of collateral.”

In announcing that Dr Yunus was to receive the award, the Nobel Peace Prize Committee stated:
“Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights.”

An Impossible Idea

The Professor with the micro idea turned out to be a mega visionary. “Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries,” the committee’s statement continued. “Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit
into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.”

Everyone has the potential, and has the right, to live a decent life. Across cultures and civilizations, Professor Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development.

That $27 Mr Yunus lent, turned out to be the first of many loans that would become known as micro-credit. It has since proven to be a liberating force in societies where women in particular have to struggle against repressive social and economic conditions. Economic growth and political democracy can not achieve their full potential unless women participate on an equal footing with men.

“Yunus’s long-term vision is to eliminate poverty in the world. That vision cannot be realised by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part,” the Committee statement said.

No One Better

Dr Yunus has not only been affecting the lives of the extremely poor; he has also influenced the extremely powerful. “Hillary and I first met Muhammad Yunus when I was Governor,” said former US President Bill Clinton, “and he inspired us to create a micro-finance programme in Arkansas, based on his model. Muhammad proved that the poor are creditworthy and that a micro-finance effort can be self-sustainable, create growth and spread peace. Because of his efforts, millions of people, most of them women, have had the chance to improve their lives, and we are all better off as a result. I have thought for years that he deserved the Nobel Peace Prize. The committee could not have selected anyone better.”

Dr Yunus melded capitalism with social responsibility to create the Grameen Bank, a micro-credit institution committed to providing small amounts of working capital to the poor for self-employment. Grameen Bank has grown to provide collateral-free loans to five million clients in Bangladesh, 96% of whom are women, and has loaned out over $5 billion to the poorest of the poor, while maintaining a repayment rate
consistently above 98%.

This innovative approach to poverty alleviation has inspired a global micro-credit movement reaching out to millions of poor women from rural South Africa to inner-city Chicago.

Bank Doors Closed to the Poor

“It feels very strange to realise that until then, we lived with a banking methodology which kept the doors of the banks closed to the two-thirds of world population,” says Dr Yunus. “Grameen freed banking from the limitations of collateral.”

Alex Counts, President of Grameen Foundation who spent six years in Bangladesh, initially as a Fulbright Scholar with the Grameen Bank, and trained under Professor Yunus, says, “Professor Yunus is an extraordinary visionary whose unshakeable belief in the power of people to help themselves escape poverty has become a rallying call across the globe. Today, the experiment he launched in 1976 with a mere $27 has swelled into a movement that has reached millions of poor people with financial services. The staff and
borrowers of Grameen Bank have responded to his leadership and bold model, and created a tremendous success story that is now spreading throughout the world.”

A Person Committed

Alex feels that even though the microfinance movement reaches over 90 million families, it is still just scratching the surface of the need, and the opportunity. “More than one billion people are condemned to live on less than US$1 per day,” he continued. “Such a crisis demands tangible solutions, put into practice on a wide scale. It requires leadership from civil society and governments. Microfinance is one of the most powerful solutions to poverty in existence today, and Dr. Yunus is the leader most responsible for developing and implementing it in Bangladesh and globally.”
“As we have come to know,” Nelson Mandela and his wife Graça Machel said in a letter to Dr Yunus, following the announcement he had won the Nobel Peace Prize, “you are a person wholly committed to making a difference in the lives of the poor, and someone who feels deeply about working for peace and justice around the world.”

Neatly Packaged Within

Why did Dr Yunus have confidence that loans not based on collateral could be economically feasible? In his acceptance speech, he states, “My experience showed me that all the ingredients for ending poverty for an individual comes neatly packaged within the person himself. A human being is born in this world fully equipped not only to take care of himself, but also to contribute in enlarging the well-being of the world as a whole. Then why should one billion-plus people on the planet suffer through a lifetime of misery and indignity and spend every moment of their lives looking for food for physical survival alone?”

Hillary Clinton, who several times nominated Professor Yunus for the Nobel Peace Prize, said she has had the opportunity to meet many of those who are participants in Grameen’s programmes and hear how these loans have transformed their lives. “With just a small amount of money, those trapped by poverty have a chance
to invest in items, such as livestock or materials for handicrafts, which can lead to economic selfsufficiency.
Through micro-credit programs, the world’s poorest people are leading their families, their communities and their countries to a better future — a future that Dr. Yunus has been instrumental in creating.”

Elegant Theories

How did it all begin? Dr Yunus, the first Nobel winner from Bangladesh, explains, “I became involved because poverty was all around me, and I could not turn away from it. In 1974, I found it difficult to teach elegant theories of economics in the university classroom, in the backdrop of a terrible famine in Bangladesh. Suddenly, I felt the emptiness of those theories in the face of crushing hunger and poverty. I wanted to do something immediate to help people around me, even if it was just one human being, to get through another day with a little more ease. That brought me face to face with poor people’s struggle to find the tiniest amounts of money to support their efforts to eke out a living. I was shocked to discover a woman in the village, borrowing less than a dollar from the money-lender, on the condition that he would have the exclusive right to buy all she produces at the price he decides. This, to me, was a way of recruiting slave labour.

“I decided to make a list of the victims of this money-lending ‘business’ in the village next door to our campus,” he continues. “When my list was done, it had the names of 42 victims who borrowed a total amount of US $27. I offered US $27 from my own pocket to get these victims out of the clutches of those money-lenders. The excitement that was created among the people by this small action got me further involved in it. If I could make so many people so happy with such a tiny amount of money, why not do more of it?”

Poverty is not Created by Poor People

From there Dr Yunus expanded his vision. “First we must understand that poverty is not created by the poor people. It has been created and perpetuated by the economic and social system we have designed for the world. The institutions and the concepts we developed have created poverty. Our policies, borne out of faulty reasoning and theoretical framework, have caused this problem for so many human beings. We have to see that it is the failure at the top — rather than lack of capability at the bottom — which is the root
cause of poverty.

Dr Yunus discovered this when he first went to a bank to get help for the poor who needed loans. “The first thing I did was to try to persuade the bank located in the campus to lend money to the poor. But that did not work. The bank said that the poor were not creditworthy. After all my efforts over several months failed, I offered to become a guarantor for the loans to the poor. I was stunned by the result. The poor paid back their loans, on time, every time! But still I kept confronting difficulties in expanding the programme through
the existing banks. That was when I decided to create a separate bank for the poor — and in 1983, I finally succeeded in doing that. I named it Grameen Bank or Village Bank.”

The Village Bank

Today, the ‘Village Bank’ provides loans to nearly seven million poor people, 97 percent of whom are women, in 73,000 villages in Bangladesh. Grameen Bank gives collateral-free income-generating housing loans, student and micro-enterprise loans to the poor families, and offers a host of attractive savings, pension funds and insurance products for its members. “Since it introduced them in 1984, housing loans have been used to construct 640,000 houses. The legal ownership of these houses belongs to the women themselves.
We focussed on women because we found giving loans to women always brought more benefits to the family,” Dr Yunus reveals.

In a cumulative way, the bank has given out loans totalling about US $ 6.0 billion. The repayment rate is 99%. Grameen Bank routinely makes a profit. Financially, it is self-reliant and has not taken donor money since 1995. Deposits and the own resources of Grameen Bank today amount to 143 percent of all outstanding loans. According to Grameen Bank’s internal survey, 58 percent of its borrowers have crossed the poverty line. The Nobel Peace Prize is not the only honour that the Bangladeshi banker has been given. Amongst a slew of awards in 2006, he was also named winner of the eighth Seoul Peace Prize. The biennial prize of $200,000 dollars, awarded to Dr Yunus honours peace efforts by politicians, academics, activists
and international organizations.

Yunus, dubbed ‘Banker to the Poor’ was presented with the award for “his tireless endeavour to root out poverty and create a new model of giving credit to the poor. It will bear fruit in terms of greater peace in the world,” the Seoul Prize Cultural Foundation said.

Dr Yunus was the eighth winner of the prize, whose other recipients include UN Secretary General Kofi Annan, the Czech Republic’s former president Vaclav Havel, and international relief organisations such as Doctors Without Borders and Oxfam.

Information Technology For The Poor

In information and communication technology (ICT), Dr Yunus saw an opportunity for poor people to change their lives if this technology could be brought to them to meet their needs.

The first step was to create a mobile phone company, Grameen Phone, and then provide loans from Grameen Bank to poor women to buy mobile phones and sell phone services in the villages. The phone business was a success and became a coveted enterprise for Grameen borrowers.

Telephone-ladies quickly innovated and learned the ropes of the telephone business, and it has become the quickest way to get out of poverty and to earn social respectability. Today, there are nearly 300,000 telephone ladies providing telephone service in all the villages of Bangladesh. Grameen Phone has more than 10 million subscribers, and is the largest mobile phone company in the country. Although the number of telephone-ladies is only a small fraction of the total number of subscribers, they generate 19 percent of the revenue of the company.

Loan for Baggers

In Bangladesh 80 percent of the poor families have already been reached with microcredit, and the Bank is hoping that by 2010, 100 per cent of the poor families will be reached.

Three years ago the bank started an exclusive programme focussing on beggars. None of Grameen Bank’s rules apply to them. Loans are interest-free; they can pay whatever amount they wish, whenever they wish. The Bank gave them the idea to carry small merchandise such as snacks, toys or household items, when they go from house to house for begging. The idea worked. There are now 85,000 beggars in the programme. About 5,000 of them have already stopped begging completely. A typical loan to a beggar is $12.

Photos courtesy of Official Site of Hillary Clinton, Grameen Communications Photos and Linda Naesfeldt

---

VOLUME 3 ISSUE 06 2007

Vol 3 Issue 6 2007 Dr Mohammed Yunus, known as the ‘Banker to the Poor,’ became the first Nobel Peace Prize winner from Bangladesh. When banks there refused to lend money to the poor, “I decided to create a separate bank,” Dr Yunus explains, “naming it the Grameen Bank or Village Bank.” The Nobel Prize went equally to Dr Yunus and Grameen Bank - and micro-credit now serves millions of the poor, from South Africa to inner-city Chicago. Next meet Australian Samantha Backman, survivor of an unhappy childhood, but now a self-made millionaire, teaching people to live healthier lives. Charlie Gay is the man behind Mineseekers, detecting land mines in Africa; and Floyd Cowan goes to Miri, East Malaysia to groove to jazz from around the world.