Muhammad Yunus, the Father of Microcredit

Centre-stage of Khazanah Global Series at Hilton KL


My usual mundane daily routine was spiced up a lot late last month.

After all, it is not an everyday thing to be able to dress smartly in business suit and disguise myself as some young corporate executive, attend a gala dinner at the finest ballroom in Hilton KL with the former Prime Minister and Central Bank governor, among other big shots, just across the hall, and of course, meeting a Nobel laureate for the first time in my life and gaining lots of words of wisdom.

Hilton KL Ballroom

Professor Muhammad Yusuf won the Nobel Peace Prize in 2006 for his effort in alleviating poverty through micro-loans to the poor in this home in Bangladesh. “Micro-loans” imply loans that are not significant in amount. Loans are usually given in significant amount in most, if not all commercial banks. For instance, there is no way you can borrow RM10 from HSBC or Citibank, not even RM100 (I think). Professor Yusof founded Grameen Bank, a bank that loans any amount to the poor. Dubbed the father of micro-credit, the noble Nobel laureate was in KL on invitation by Khazanah Nasional Berhad (the national investment corporation) to give a talk on his journey.

The day of getting the invitation filled my day with excitement. I immediately registered myself the day I found out about this, for it was stated that there will be free spaces for the public. I was, however sceptical about my chances to attend such “high-society” function. I mean, how many people are there in the “public”? Millions. Plus, priority will probably be given to corporate managers and city professionals who, most people think will make good use of the opportunity and his advice to do something good for the country. That is not entirely true. *Ahem* A student, given the right opportunity and advice, can make changes too.

So imagine the thrill of getting a call from the organizers. I was so excited that I agreed immediately without checking if I have other obligations on the date and time of the event. And, the rest is history.

The event, originally scheduled to begin at 8pm, commenced at 8.30pm. What a reminder that this is Malaysia!

Red carpet for VIP guests

Malaysia’s Second Finance Minister Nor Mohamed bin Yakcop gave a welcoming speech. Whatever he said might sound trite, but the novelty exists on my part because it is the first time I witness a formal speech, live, rather than watching it on television. Surprisingly, the finance minister was a rather articulate person, capable of generating interactions with the audiences. When I view it on TV, it feels like no one is listening to him (I digressed)

He spoke of Dr. Yunus’ profile and commitment to development and reducing poverty, describing Dr. Yunus as one noble person who believe “one man can make a difference”. A native of Bangladesh, Dr. Yunus is the founder and managing director of Grameen Bank, offering credit to the poorest of the poor, especially women. Today, it runs 2,283 branches, granting credit to 6.83 million poor people residing in 73,609 villages in Bangladesh.

He received his Ph.D. in Economics from Vanderbilt University in the United States in 1970. After teaching for a few years in Middle Tennessee University, he returned to his home country where he joined the University of Chittagong as Head of Economics Department. Grameen Bank Project was initiated in 1976 and its transformation into a formal bank was in the year 1983.

Dr. Yunus took the center stage. “The aim of micro credit is to give the poor a chance”, he said. Dr. Yunus does not believe the poor has less ability or skills than the rest of the people. Everyone was born equal. He wants females to be able to earn money, beggars to be entrepreneurs. Poverty, according to him, is not the fault of the of the poor people. The real culprit, is society, who judge people base on their social status and financial capability. This subsequently caused the denial of basic human rights. Access to schooling and health care facilities is made more onerous.

Dr. Yunus began his speech

Hence, Dr. Yunus set up a “social business”, operating on a long term and sustainable basis to not just give the poor a chance, but essentially, to “right” a “wrong”. I once saw a video on a speech given by celebrated author Guy Kawasaki at Stanford University on entrepreneurship. Mr. Kawasaki mused that an entrepreneur’s aim of starting a business ought to be to “make meaning”. And this can be done through 3 ways: 1. Increase the quality of life of the people, 2. Right a wrong, and 3. Prevent the end of something good. Grameen Bank was born. Dr. Yunus did all these. And you’ll see why later.

His social business took risk that no other conventional bankers would attempt to take on – giving credit to the poor. The risk, however, was worth it, as statistics from Grameen Bank shows that 99% of the loans that he reached out to the poor people, was repaid. I am not sure if conventional banks have such high loan repaying rate.

Dr. Yunus talked about Corporate Social Responsibility programmes initiated by Grameen Bank under his leadership. No other conventional business entities can rival the CSR programmes by Grameen Bank. Bangladesh is a country often bogged down by natural disaster like massive floods. When this occurred, Grameen Bank suspend all its banking activities. In other words, it shuts down its business temporarily, a bold move that I think no business establishment would attempt if their businesses itself were not affected by natural disaster, pardon my cynicism.

Following the suspension of all its banking activities, its staffs volunteered to go village to village, offering micro loans to the needy. Being “people centred” and a socially responsible business, Grameen Bank adopted an operating philosophy that, “if people lose, you lose too”, a saying that was meant to inculcate in every employees the notion that the operation of Grameen Bank is very much dependent on the well being and circumstances of the normal people on the street. So when disaster strikes, the bank goes to the people, offering micro loans. Interestingly, no collateral is required for the poor people to be eligible to borrow money from Grameen Bank, which makes his willingness to take the risk commendable.

The enlightening forum session

Forum and Q&A session. Left is blogger and social activist Marina Mahathir, the moderator for the session

As an Asian, modesty is always a virtue. Dr. Yunus humbly claimed that he knew nothing about banking. What he did, was not to “start a bank”, but merely to react to a situation or social condition which he felt strongly for – poverty. It was understood that he was the Head of Economics Department at the University of Chittagong in Bangladesh. Adjacent to the university, about 1000 villages sprouted, where extreme poverty manifest itself. A university, regarded as a source of knowledge and subsequently a way out of poverty, should have a spill-over effect on its surrounding areas, helping these poor people to dissociate from the poverty cycle. Alas and alack, as he taught Economics in University of Chittagong everyday, he saw people dying of hunger on the streets. Being part of the faculty of the university, the conundrum faced by the extreme poor generated a sense of guilt in Dr. Yunus.

So one fine day, Dr. Yunus visited the villages and the homes of the poor. He compiled a list of 42 families, and found that these people are in dire need of money. Their attempt to obtain credit through other means proved futile. They tried to secure loans from banks, but suffered inhumane humiliation and torture. Society has been judgemental and was accustomed to believe that these poor people are incapable of repaying the loans.

Dr. Yunus lend an amount of $27 dollars to these people, advising them to use the money to create something to sell. After a certain period of time, the 42 families managed to make enough money to repay the loans. And he was treated as if he descended from heaven. He opined that the problems are terrible. The solution, however, was simple. He saw micro-credit as a key solution in alleviating poverty. He reckoned, if he can help alleviate poverty and aid in ending the poverty cycle with merely $27 (Aaron: hey, I have that amount of money too!), why not do more of it?

“The poor themselves can create a poverty-free world – all we have to do is to free them from the chains that we have put around them” – Dr. Yunus

Like every great man, success is not attained without failure. He endeavored to obtain loans on behalf of these poor people. He went to all existing banks but to no avail. No one is willing to give loans to the poor. So Dr. Yunus came up with an idea of borrowing money for the poor by signing up as a guarantor. He took the risk and was hopeful that it will eventually bear fruits. Back then, his friends were telling him, “Say goodbye to your money. It will never come back”.

The risk however helped established Grameen Bank. He tried and experimented with micro loans, and it worked.

Dr. Yunus from a big screen. “I went to the bank and proposed that they lend money to the poor people. The bankers almost fell over.”

Dr. Yunus is also a feminist who believe there should be no gender inequality. His bank distributes most of its loans to woman, about a whopping 97% today. A banker once asked him, “Why don’t you change your name to Grameen Women’s Bank?’, to which he wittily replied to the person, “ then why don’t you change the name of your bank to XYZ Men’s Bank?”. Banks at that time do not lend to the poor and the weaker sex. Grameen Bank set a target to achieve a 50-50 ratio between men and women.

When Grameen Bank first gave loans to women, the women were afraid of keeping the money. They simply do not know how to spend it. As a result, much of the money was given to their husbands. Dr. Yunus knew that too well and went on to meet these women, encouraging them to think for themselves of what they could do with the money. After plenty of encouragement, these women finally felt secure to take up the loans. Six years later, Grameen Bank achieved the 50-50 target.

Granting credit to more women, according to Dr. Yunus, has a much more profound social-economic benefit. When money goes to the family via women, they are typically more careful with their money. Plus, they pay more attention to the well-being of their children, like ensuring their children have access to education. Also, they spend thriftily on improvement of the facilities of the home. Generally, women are more likely to make use of the scarce resources for investment purposes, for a better tomorrow. On the other hand, men are less careful with managing scarce resources. We all know that men are prone to spending money in a spendthrift manner, much to my detestation I shall add. Gambling, smoking, and ?prostitution? are all avenues to waste money.

So it is not hard to comprehend why giving loans to households through women has a greater social economic impact and improve the economic well being of the poor people. The money recycles in the family, and in some households the investment yields returns and help alleviate poverty. Putting the children to school and saving hard to do so is arguably the most important process in getting out of the poverty cycle.

So Dr. Yunus said one day to the staffs of Grameen Bank, “Let’s focus on women!” And they did just that. The rest is history. Today, nearly 100% of the Grameen’s children (a term use to describe children of micro credit borrowers of Grameen Bank) attend school and STAY in school. Those who are ranked 1st, 2nd or 3rd in class were given scholarship. About 18000 students went on to university and higher education. 2 Grameen Children obtained a Ph.D. recently. It is amazing to see Ph.D. holders in one generation just after their illiterate parents. This is no doubt a social engineering programme that works.

In what I regarded as his most memorable quotation of all time, he famously said, “Charity is not the solution to poverty”. Charity is the short term solution. A beggar can receive money from charity, and when the money is all gone, he goes and begs again. At the end, the entire life of this person is all about begging.

Dr. Yunus: “Charity is not the solution to poverty.”

To this point, one could clearly see that the premise of Dr. Yunus’ work is based on his belief that everyone is equal. Poverty cannot be obsolete if we keep giving money to the poor. He believed that money should be spent on unleashing the capacity of the poor people. Poor people have unlimited potential hidden in them, just like everyone else, just that society did not give them a chance. Some people die without knowing about his/her own talent. He believed beggars have entrepreneurial skills that are highly valuable, and he then set up at programme to give them loans to start small businesses while they are begging. So it is a concept that works as such: Beggars in Bangladesh goes from house to house, but instead of merely begging, they obtain loans from Grameen Bank and started producing candies, sweets, drinks, etc and sell them while begging. Originally 100,000 people beggars participated. Today, 10,000 beggars no longer beg.

Dr. Yunus has his fair views on the cynicism of conventional businesses. He lamented the fact that most businesses exist to make money and to maximize profit. Social business is what he claimed Grameen Bank is. Social businesses are powerful in recycling the profits back in the society. They invest for various social causes, and utilize profit to expand their initiatives or geographic coverage.

“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.” -Dr. Yunus

To encourage those who wish to fight for various social causes, he urged them to spend a weekend to make a wish list on what kind of world they want, hang it on the wall, read it everyday, and work for it. Do it. And when they retire, review the wish list to see what is accomplished.

Well, I have developed my wish list long time ago. In my lifetime, I want:

1. to stop the physical and verbal abuse (and hence the inflow) of foreign maids in Malaysia.

2. all schools in the world to adopt an education system which shapes everyone into:

- progressive thinking, liberal and open minded people who are capable of arguments and debates based on hard facts and wisdom

- people who have a high level of self awareness and know very well of their purpose of existence and true vocation

- people who are willing to contribute and make a mark for the benefit of mankind

- people who are capable of identifying and developing their own learning techniques and can therefore learn anything they want and are therefore extremely versatile and resilient to massive changes in future societies

- people who are capable of coming up with ideas, creative and innovative solutions to existing problems

- people who would learn for the pure sake of learning, not to pass exams or other purposes which doesn’t add up to the true learning

3. a place where media regains its status as the crusader for good governance and public accountability. I want media organizations to investigate corruption, public funds wastage, and tackle sensitive issues instead of sweeping everything under the carpet. I want all media organizations to be of “centre wing”, not left nor right, and report things as it is. I want these organizations to get voices from all parties concerned. There are at least two sides to everything. I want all voices to be heard so that the general public would be able to make informed political judgements and decisions based on facts and opinions from all parties concerned.

4. democracy to be non-party based. This is something that I’ve ponder for a long time. Why should people from a same ruling party hold decision making positions? How sure are we that we have the best people in the country holding these positions? What can’t we get the best people to hold the job, regardless of their political affiliations and inclinations? And if making decisions will be an issue when the best people regardless of their political inclinations, hold the job, why can’t they negotiate, sit down behind close doors, resolve, talk and let reason and wisdom be the main decision making tools? Why can’t government run like corporate entities where the best people hold the job?

5. a world without disable people. I was nearly “disabled” when I twisted my one of my fingers when I was younger. I want a state-of-the-art research facility to provide solutions, whether “mechanical” or medical solutions, to ALL disable person, at no cost at all.

6. people to care. To come together and protest and fight for what is right, not follow the establishment like how we were all brought up to be. I want people to come together in huge numbers and stop paying taxes when government mismanage public funds, I want people to protest when government officials made sexist or racist remark, I want people to get angry when a building collapsed and kill innocent lives due to corruption practices and poor planning, I want people to voice their displeasure when election promises are not fulfilled. I want people to care, take awareness, and stay together. Unity is strength.

Only 6, but that’s a lot to do, plus there are more to come. Hopefully when I get these done I’ll win a Nobel Peace Prize. ( :-) Just fantasizing…)

The Nobel Peace Prize – my WILDEST fantasy…

Dr. Yunus is a successful social entrepreneur, something that I would like to become some day. Dr. Yunus’ words certainly made me ponder and reflect on my life thus far. I now have a better understanding of Corporate Social Responsibility. Listening to him further refines my definition of an entrepreneur. Entrepreneurship is NOT about maximizing profit for personal gain, but to “create meaning”, as Guy Kawasaki put it. Dr. Yunus did just that, by raising the quality of life of the poor people, righting a wrong by dispelling stereotypes and the negative perception of the society on poor people, and preventing the end of something good – the inherent ability of every human being to be useful contributor to the society.

“This is not charity. This is business: business with a social objective, which is to help people get out of poverty” – Dr. Yunus

Dr. Yunus is no doubt a true entrepreneur, someone I wish to emulate. Someday, I will give the same advise about entrepreneurship to my younger generations too.

Someday.

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6 Comments on “Muhammad Yunus, the Father of Microcredit”

  1. Sabine says:

    What a wonder-ful account of how hearing Dr. Yunus affected your thinking, blogging and hopefully life! Sharing somewhat your wishlist, I can only hope that, together, we will make it!

    With best wishes for more and more power to your elbows,
    Sabine
    http://www.yunusphere.net

  2. Anusha says:

    I am trully inspired by him too…I hope someday I could make my dreams and the dreams of others into a reality and understand that when the poor loose i loose too…

  3. shah says:

    i think you are doing a big mistake with Dr yousuf name. ITS NOT YOUNUS ITS MUHAMMAD YOUFUS

  4. yildiz sethi says:

    I am intersted in micro financing. Please send me some information or links.

  5. MOHAMMAD AYUB PERACHA says:

    Sir, you are a great person in banking and planing. I am a pakistani and need some start work. can you give my some advice as a brother.
    Thanks & regards.

  6. Never ever heard of a steam shower enclosure until I stumbled upon this site,
    so pleased I did would like one right away and money letting will
    likely be getting one soon enough


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