Mohammed Yunus Speaks at Fletcher on His Mission to Create a Poverty-free World through Grameen Bank
“The only place where poverty should be is in museums”, according to Mohammed Yunus, founder of Grameen Bank, as he spoke before a packed ASEAN auditorium on March 9 as part of the Charles Francis Adams lecture series.
On a mission to reduce poverty, Yunus has been acclaimed internationally as a visionary who turned dreams into reality for millions of the impoverished in Bangladesh. He said that his dream is to create a whole new world, free from poverty. Trained as an economist, Yunus came to the United States as a Fulbright PhD scholar at Vanderbilt University. After completing his PhD in 1970, Yunus returned to Bangladesh as Professor of Economics at Chittagong University.
In 1976, Yunus founded Grameen Bank, a profit-making bank with a social mission to reduce poverty. The success of the bank since then has defied all conventional wisdom that lending to the poor is a risky business doomed to end in failure.
At its inception, Grameen's target clients were the rural women of Bangladesh, a demography that had been ignored by traditional banks. “I wanted to design a banking system that was all-inclusive”, Yunus says. “So we provide micro-credit – small loans targeted toward poor women, with no collateral, but based on mutual trust”.
Access to micro-credit combined with training for income-generating activities changed the lives of many of these women. Today, Grameen has a client base of 6 million, 96 per cent of whom are women. Fifty six per cent of the clients of Grameen have crossed the poverty line since its inception.
Yunus credits the success of Grameen to its unique “doorstep banking” method. Grameen has a staff of 17000 employees, who literally go to the doorsteps of borrowers to carry out transactions. “This is not faceless banking”, Yunus says. Upon the opening of a new rural branch, the bank manager is given a year to break-even with the costs of opening the branch. According to Yunus, 80 per cent of the banks are able to do so.
The uniqueness of Grameen as a bank does not end there. Yunus says that conventional banks that are located in rural areas siphon off liquidity from these areas and pass it on to the central branch. On the other hand, “money in Grameen Bank gets invested back into the local area. Local money goes to the local poor to build up the local economy”, he says.
Among the savings and loan programs being offered by Grameen, the one that stands out is the “Beggar Program”. Yunus says that Grameen conceived of the idea of loaning to beggars to respond to criticism that micro-credit does not help the poorest of the poor, since they lack the necessary entrepreneurial abilities or skills to start their own enterprise. Yunus and his colleagues decided to address this issue by lending exclusively to beggars because “(O)ne cannot be poorer than beggars. If beggars can take money, make use of it and pay it back, then you can make the case that even beggars have entrepreneurial and risk-taking ability”.
Grameen staff began to observe beggars in their daily lives and found that they go from house to house in villages begging for rice. Grameen came up with the proposition of having these beggars peddle merchandise for sale at these houses. This scheme met with unprecedented success. Not only were the beggars able to successfully market and sell their wares, they also found themselves acting as shoppers for households, as they were frequently asked to run shopping errands. . Although the initial target was to enlist 3000 beggars, the program became so popular that 70,000 beggars are now enlisted.
Education for the new generation is also one of the biggest benefits that Grameen Bank has brought to Bangladesh. . According to Yunus, most borrowers are illiterate, and illiteracy is often inter-generational. “One thing we must ensure is that we must break the history,” he says.
Grameen offers education loans at low interest rates to all the borrower’s families. Yunus says that “(O)ur initial goal was to ensure that 100 per cent of these children are at school. Our goal was that these children should stay in school and not drop out, and to complete primary education.” They were pleasantly surprised when they found that some of these children were not only finishing school but were continuing on to college, university, as well as medical and engineering schools. Right now there are 10000 students in higher education who have received loans from Grameen Bank.
One hundred million households in South Asia receive micro-credit today. The challenge is to bring the same phenomenon into Africa and Latin America, Yunus feels. However, he said that in order to facilitate the process, governments should ensure that proper legislation is in place for NGOs to be able to lend money. Yunus also feels that it is important to create a micro-credit regulatory authority since much of the lending is not monitored or regulated.
“Our hope for the future is to be able to bring all of our borrowers out of poverty”, Yunus concludes. “Society has been too stingy to allow the poor the space to grow. They have all the creativity and energy – we just haven’t allowed them to unleash it.” He looks forward to the day when the bank known as the “Bank of the Poor” will be known as the “Bank of the Former Poor”. The new emerging and educated generation gives him hope that Grameen Bank will one day meet its target.