Muhammad Yunus, Banker to the World's Poorest Citizens, Makes His Case
...
NBR: You have been credited with inventing the microcredit movement more than 30 years ago. Why did you go in that direction?
Yunus: I had no idea that I would ever get involved with something like lending money to poor people, given the circumstances in which I was working in Bangladesh. I was teaching in one of the universities while the country was suffering from a severe famine. People were dying of hunger, and I felt very helpless. As an economist, I had no tool in my tool box to fix that kind of situation.
NBR: So what gave you the idea to give people tools?
Yunus: While I traveled around the country, I told myself, 'As a person, forget about the tool box. As a human being, I can go out and be available to help another person.' So that's what I started doing. This was back in 1974. I saw how people suffered for a tiny amount of money. They had to borrow from the moneylender, and the moneylender took advantage of them, squeezed them in a way that all the benefits passed on to the moneylender and none remained for the borrowers. So I made a list of people who needed just a little bit of money. And when the list was complete, there were 42 names. The total amount of money they needed was $27. I was shocked. Here we were talking about economic development, about investing billions of dollars in various programs, and I could see it wasn't billions of dollars people needed right away. They needed a tiny amount of money. This was in 1976.
NBR: I understand some of the money was for a bamboo furniture maker?
Yunus: That's right. She was making bamboo stools and earning only two pennies a day. I couldn't believe that someone could make only two pennies for crafting such beautiful stools. After a discussion with her I found out she had to borrow money to buy the bamboo, which cost only 25 cents. But she didn't have the 25 cents. So she had to borrow it from the trader, who agreed to lend it to her on the condition that she sell the bamboo stool to him when it was finished at a price that he decided.
NBR: So how was your plan different?
Yunus: I wanted to give money to people like this woman so that they would be free from the moneylenders to sell their product at the price which the markets gave them -- which was much higher than what the trader was giving them.
NBR: But even then you charged interest.
Yunus: Oh yes ... Definitely, yes.
NBR: And why is that? What was the thinking?
Yunus: I thought if you do things in a businesslike way, then the project can become as big as you want it to because you are earning enough money to cover all your costs. You are not dependent on anybody. You are not dependent on a limited supply of capital. This is business money. Business money is limitless. And then, you can reach out to many more people than you would otherwise do.
NBR: So this is not charity?
Yunus: This is not charity. This is business: business with a social objective, which is to help people get out of poverty. Other banks were not giving loans to these people.
NBR: So how did you get from that first $27 to working with Grameen Bank and expanding this around the globe?
Yunus: The villagers got very excited that I gave them the money. To them, it was like a miracle. Seeing this, a question came to my mind. If you can make so many people so happy with such a small amount of money, why shouldn't you do more of it? Why shouldn't you reach out to many more people? I could do this by linking these people with a bank that could lend them the money. So I went to the bank and proposed that they lend money to the poor people. The bankers almost fell over. They couldn't believe what had been proposed to them. They explained to me that the bank cannot lend money to poor people because these people are not creditworthy. So a long series of debates began with me and the banking system. Finally, I resolved it after about six months by offering myself as a guarantor. I said, 'I will sign the loan papers. I will take the risk, and you give the money.' I got the money and gave it to the people. And luckily for me, all the people paid it back. The banks had been saying that I would never get the money back and would ultimately have to pay it back myself. I said, 'I don't know anything. Let me try it out.' And I tried it, and it worked...
knowledge.wharton.upenn.edu |
