An Alternate World View-The Grameen Bank and Beyond

“I spent a lot of years studying economics, but at the end of it all I felt utterly useless.” Professor, founder of the Grameen Bank (‘village’ bank) and now an active social entrepreneur, Muhammad Yunus is all set to captivate the 400-strong audience at IIMB. “In those days, I was teaching at the Chittagong University. Ayub Khan, the Pakistani general-ruler had purposefully located all universities in the heart of Bangladeshi villages, to keep away potentially rebellious students from the cities. This turned out to be a blessing for me. I felt that I must walk out to the villages and try being helpful to at least one person! I was pained to see that the lush green fields were left fallow and that my country had to depend on food imports. I knew immediately that the farmers were in most dire need of affordable capital. When I went to speak to the bank managers in these villages, they looked at me incredulously and remarked, “the poor can’t be banked! They’ll eat the money. We can’t lend them money until they have enough money!” I simply couldn’t accept this logic. I became the guarantor for all the loans made to the farmers and after 3 months, the banks finally accepted my proposal, mostly because I was becoming too much of a nuisance for them!”

In 1983, we formed our own bank, the Grameen Bank. Our guiding philosophy was that banks existed only for the rich in urban areas but people lived in rural areas! Today, we have over 9 million borrowers, 97% of whom are women.

Our journey has not only been about putting simple economics to everyday use; our battle lines were drawn out in the social sphere as well. In the traditional male-dominated Bangladeshi society, when a woman would come with a proposal for a loan, the bank manager would ask her, “have you discussed this with your husband? Why don’t you bring him along next Monday?” We wanted to challenge this notion, and I set about sending my army of girl students to educate the rural women. The women they encountered protested, “but we’ve never handled money.” This, to me, seemed like the voice of history rather than the voice of the mother, who’s contribution to the family always fell in the shadows. In time, our plan worked. If one woman took the money and became successful, the other women would soon get jealous and want to know exactly how she did it! Soon, our women did some wonderful work, by translating the benefits they received to better outcomes for their whole family. These women might have been illiterate, but they certainly weren’t stupid. Seeing this, we decided to shift our focus from a 50-50 split of men and women to solely focusing on women as borrowers.

But our social-driven organisation made us very unpopular amongst men, because husbands believed that they should be the only ones handling the money. If the wife was seen as too brazen, he would beat her, take the money and worst of all, waste it away. We certainly didn’t want to destroy families! So we taught the women how to take the money and protect it. We discovered that women are indeed extremely efficient diplomats! We also exploited the fact that husbands are very submissive in groups and are dominant only as individuals. The husbands claimed that women had never handled money and giving them loans would mean that the husband would be pursued to pay back. We brought the husband and wife together to meetings to talk about previous success stories and ended up strengthening the bond within the family. Our women would often lovingly introduce their husbands by calling them the manager of the enterprise while the husband would break into an innocent smile!

We did also have our fair share of controversy. People told us that poor women were not entrepreneurial and thus lending to them was a mistake. This was a paradigm I intended to break. My logic ran counter to all convention. While traditional banks went to the rich, to men in city centres with collateral and lawyers, we went to the poor, to women and to the villages. We believes that people shouldn’t come to our bank, our bank should go to the people!

Another interesting experiment we ran was lending to beggars. We gave them small items to sell-cookies, toys and other seasonal material. The loan amount was about $10-$15 per person. Now, the beggars had two business divisions- begging and sales! Soon 200,000 beggars enrolled for our programme. It was heartening for us to see, that without a fancy MBA degree, these entrepreneurs knew exactly which houses were meant for begging and which ones were meant for making sales! Perfect market segmentation, I tell you. In 2 years, more than 25% of them quit begging completely. Clearly, even a beggar can be a businessman, if given the right resources.

“All human beings are entrepreneurs. We are just not meant to be job seekers or to work for somebody else! Each human being is whole and complete in themselves. We are problem solvers, not order takers.”

As we saw Grameen Bank grow, we had an ambitious mission for the second generation of families- 100% literacy. We extended education loans and got the kids a decent education. Soon, however, I was attacked, “we have no jobs. Why did you even send us to school?” My simple reply to them was, “jobs are obsolete. You must repeat to yourself everyday that your education must make you a job creator, not merely a job seeker. If you think you can’t start a business, shame on you! 25 years ago, your mother took a $25 loan from us. Inspite of the fact that she couldn’t believe anybody had trusted her with so much money, she diligently repaid the loan and all the interest and brought you up too! Shame on your education. Go and re-learn from your ‘illiterate’ mother how to start a business!

Tying all this together, we realised that our movement sought to do away with the dependence on charity or CSR alone to change the rural landscape. We started a social business fund- a business to solve problems rather than to make money. Our business model was based on selflessness. Our investors wouldn’t get a dividend but would certainly own their concomitant part of the business. We were like a VC minus the money-making motive. In 2.5 years, we got over 12,000 people to start running their businesses, by initiating over 1,000 projects per month. We worked with entrepreneurs and wanted them to succeed, thus enabling them to pay back our investment.

Another flagship social business idea was generated when 2 young German women approached me to incorporate their enterprise. Yunus Social Business operates out of several developing countries including Brazil, Albania, Haiti and India and is headquartered in Frankfurt, Germany. An interesting project they are undertaking is in Haiti, widely considered to being a dysfunctional country. The forest cover has reduced from 25% in 1985 to less than 2% currently, owing to people chopping trees to make firewood. We are working on reforesting entire patches of the country as it is also an important source of income for the people.

We have also tied up with McCain, which owns 60% of the French fries industry. We are working with them in a joint venture, Campo Vivo, in Colombia. The collaboration took birth as a result of this shocking statistic- 26% of the potato grown in France is thrown away because they are not the ‘right shape’ for French fries or potato chips. We created a company to make potato soup and now a chef has even made a special recipe and is hiring young unemployed people to use ‘food as food’.

I have a simple dream. Zero unemployment, as I believe only flawed economics has led to perfectly capable human beings sitting idle. It almost feels like somebody has put a spell on you to ‘freeze’, making you incapable of working solely because of social stigma and emotional humiliation. Another dream of mine is to work towards zero inequality. I came across this recent article that claimed that the richest 8 people in the world owned more wealth than the remaining 90% of the world’s population. This makes me believe that we are merely mercenaries working to pass on wealth to the top 1%.

I am working to make economic wealth that can be shared by everybody. Why don’t we work together to move from a civilisation of greed to one in which the human capabilities of sharing and caring for each other becomes the norm?

Post-script: I felt a special connect with him especially because my grandfather had a similar upbringing in rural Bangladesh (in Jatrapur, a hamlet near Dhaka). I’ve been following the micro-credit story through Poor Economics (Abhijeet Banerjee and Esther Duflo) and feel that the rupee value of the loans might not be sufficient to drastically change the economic position of the poor it aims to alleviate. The small shopkeeper might infuse the borrowed capital into increasing the variety of biscuits he stocks or the size of his Kirana store, but unless there is a comprehensive intervention by the government to raise overall rural personal disposable income, demand for the products would not rise. So, essentially, you now just have a shopkeeper with more inventory trying to desperately repay an amount that led to no significant change in his
But given the alternatives, where in India only 6% borrowed from a formal lender and 14% went to loan sharks (World Bank, 2014), I believe there is a dire need for alternate sources of financing. Micro-credit organisations might need to work on increasing scale and the value of loans to ensure that they are truly able to make a significant impact. One solution could be to bring in technology to keep operating costs low. Until the loan amounts are increased and repayment schedules are made easier, entrepreneurs would not be encouraged to take the risks that would concomitantly lead to higher rewards.

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