Getting There: A Book of Mentors (2015)

MUHAMMAD YUNUS

NOBEL PEACE PRIZE RECIPIENT

I was born in Chittagong, a port city in Bangladesh, in 1940. We were a very modest, low-income family and lived on a busy street in the heart of town above my father’s jewelry shop. My parents were devout Muslims and hard workers, but they were largely uneducated. My father went to school through eighth grade and my mother only through fourth. They had fourteen children, five of whom died very young.

My father could have used some of us to help with his business, but his priority was to make sure we all went to college. He was strict about our need to study. My parents certainly believed in me, but I don’t think either of them could have imagined that I would grow up to start a bank—especially one that revolutionized lending in the developing world.

I did well in school and went on to study economics at a Bangladeshi university. In 1965 I received a Fulbright Scholarship to study in the United States, where I obtained a PhD in economic development from Vanderbilt University. In 1971 I returned to Bangladesh where I became a professor and head of the department of economics at the University of Chittagong.

At the time, Bangladesh was in a terrible state. It had been through a war and had just become an independent country (prior to 1971, Bangladesh was part of Pakistan). The economy was shattered and sliding downhill fast. On top of that, there was a great famine in 1974. Thousands of people were roaming the streets hungry, dying of starvation.

I used to get a thrill from standing in a classroom and teaching elegant economic theories, but I started to dread my own lectures. Nothing I taught accurately reflected the horrors around me. What good was I doing for the people suffering on my doorstep? In great agony, I resolved to find a way to help.

I decided to start going to Jobra, the village next to the university’s campus, every day to see if I could make myself useful to the people living there. I brought my students with me. We got to know the residents and came face-to-face with their struggle to eke out a living. In many cases, they needed only the tiniest amount of money to support their efforts, but their only option was to borrow from ruthless loan sharks whose usurious terms transformed them into virtual slaves. We found forty-two people trapped in a cycle of poverty by these moneylenders. Shockingly enough, the total amount of money needed to release all forty-two of them from their servitude was the equivalent of twenty-seven U.S. dollars.

We learned that for people living on pennies a day just a few dollars could transform their lives. I reached into my own pocket and lent them the money. The excitement and gratitude they showed in response to this gesture touched me deeply. I thought, If this small action makes so many people so happy, I should do more of it. But rather than lend money on an ad hoc basis, I wanted to create an institutional answer these people could rely on.

I visited the local bank and tried hard to persuade them to start making loans to the villagers, but they refused, stating that the poor were not creditworthy. For several months I met with increasingly senior bank officials, but I couldn’t change their minds. Finally, I proposed personally guaranteeing loans to the poor. It was my only option, but I also believed that my borrowers would repay the loans. After much deliberation and hesitation, the bank agreed—although they called me idealistic and told me to say good-bye to my money.

By the middle of 1976 I was acting as an informal banker, lending money to the poor for the specific purpose of allowing them to create entrepreneurial income-generating opportunities, such as farming and manufacturing goods to sell. The recipients knew that this was their only opportunity to break out of poverty and they paid every one of the loans back on time.

The bank officials felt it was just luck and warned me that I would never be able to succeed on a larger scale—but I expanded to two villages, then three, and the program continued to grow. It started to become apparent that serving the poor’s financial needs could be a sustainable business. I kept trying to persuade the bank to lend to them without me as the guarantor, but I couldn’t change their minds. Instead, the bank officials warned me that my structure would eventually collapse. I responded, “Until it does, I am going to keep doing it.”

I finally decided to create a separate bank to serve the needs of the poor. It was a long, arduous process but I was able to get it done in 1983. We named it Grameen Bank, which is Bengali for “Village Bank.” The kind of banking we did became known as “microcredit” or “microfinance” because our loans were so small. Our plan was to charge interest on the loans and have all profits go to the borrowers, who would be the owners of the bank.

Knowing very little about running a bank, I had to start from scratch. Using mostly common sense and my intuition, I made up most of the rules as I went along, but I also decided to study the existing banking system to see which of its methods we could use. Because Grameen was pursuing a different kind of borrower than the traditional banks were, we ended up with a fundamentally different approach. The banks demanded lump-sum repayments. We instituted a weekly repayment program (parting with a large sum of cash could be psychologically trying for borrowers and often caused them to default—with our weekly method, the loan payments were so small that the borrowers barely missed the money). Banks conducted their business primarily in city centers. We went to the small villages where our borrowers lived. Banks did not lend to women. We set an initial goal of having half our borrowers be women. Banks required collateral for their loans and wanted to know as much as they could about a person’s past before lending. We didn’t require collateral and were more interested in the future prospects of our borrowers.

I believe that poverty is created by society and is not a reflection on the poor themselves. There is nothing wrong with them. They are not destitute and illiterate because they are stupid or lazy—they were just born into a life where there was no formal financial structure available to help them succeed. Grameen was founded to give these people the break they needed to start fresh and unleash their potential.

Surprisingly enough, it was difficult to convince people to borrow from us at first. What we were doing was so unconventional that we were met with a lot of skepticism and fear. In Islam, the primary religion in Bangladesh, charging interest is not acceptable and neither is lending money to women who, according to rural clerics’ views, are not supposed to be involved in any business. People started saying that Grameen was un-Islamic. Contradicting a religion provokes a lot of very emotional, aggressive responses. In addition, the existing moneylenders saw us as a danger to their business.

Rumors circulated that we were, among other things, communists trying to organize the poor, “blood suckers” exploiting the poor, and missionaries in disguise whose real purpose was to convert the poor to Christianity. Men were especially against us because our efforts tended to empower women. Feeling threatened and insulted, they tried to frighten off women by saying that if they took a loan from us they would be banished from society, attacked, or even thrown into the deep sea. Women not only worried about creating problems for their families but were also insecure about handling money. Most of them had never touched it before and had been told their whole lives that they were good for nothing.

It required a lot of patience and determination, but we didn’t give up. We continued to calmly explain ourselves and attempted to build the confidence of our borrowers—especially the women. We had to convince them to see value in themselves and that they didn’t need rank or status to advance their stations in life. It took six years before we reached our initial goal of women making up fifty percent of our borrowers, but along the way something interesting happened. We observed that when money entered a family through women it went toward purchases that benefited children and the household in general, while most men tended to focus on their own personal needs. We concluded that females had more drive to overcome poverty and lending to them brought about the most rapid change for the entire society. As a result, we began to concentrate on lending to women. Today, ninety-seven percent of Grameen borrowers are women.

I believe that all human beings are capable of being entrepreneurs. In order to demonstrate this, Grameen began lending money to beggars. We said, “As you go from house to house begging, would you like to carry some merchandise with you to sell? This will not require doing extra work; you’ll just be giving people more options.” We reasoned that if the beggars succeeded in paying us back from the business they did it would show that even the poorest people on earth could be entrepreneurs. We predicted that there would be one or two thousand beggars in the program, but we ended up with more than one hundred thousand. Within five years, more than twenty-two thousand people stopped begging and became, among other things, successful door-to-door salespeople and personal shoppers for housewives.

We opened Grameen branches throughout the country, and today the bank has more than 8.5 million borrowers and makes more than $1.5 billion of new loans each year. In addition, the concept of microfinance has spread around the world, including industrialized countries, and has helped millions more. Creating Grameen and the microfinance movement has been immensely fulfilling and gave me the confidence that I could accomplish many more things.

Working so closely with the poor gave me an inside view of the various issues, beyond a lack of credit, that they struggle with. Whenever I see a problem, my instinct is to create a business to fix it. As a result, I’ve created about fifty companies over the years. Almost all, like Grameen Bank, exist for the sole purpose of helping others. Some got off the ground with little effort, while others were far more difficult to create. For example, because many of my borrowers didn’t have access to electricity, I created a home solar-energy-system company. A lot of people didn’t think this business would work in Bangladesh, but I had to try. In the beginning it was a huge struggle to sell even five solar home systems per month, but after fifteen years, we were selling more than a thousand per day! We’ll soon have 1.5 million homes in Bangladesh enjoying solar home systems.

We later began partnering with multinational companies to create businesses. In 2007, for example, we partnered with Groupe Danone to produce yogurt fortified with micronutrients for malnourished children. We then collaborated with Veolia Environment to bring affordable clean water to the villages, Adidas to make affordable shoes, and BASF to create chemically treated nets that protect people from insect-born diseases such as malaria.

I began to call these types of ventures “social businesses.” The money used to create them is paid back to the investor, but all profit after that is put back into the company. Instead of measuring success by how much money is made, the success of social businesses is measured by how much of a positive social impact is made.

In March 2011 the government of Bangladesh forced me to resign from Grameen Bank, their reason being that I was more than sixty years old. It was politically motivated and very upsetting, but it didn’t deter me from continuing along my path. That same year, I co-founded Yunus Social Business, an organization dedicated to empowering and promoting social businesses in many countries on all continents.

Human creativity is limitless. If we channel it toward addressing the problems we have created over the years, we can redesign anything and construct the kind of world in which we want to live. And you don’t have to start big. If what you do improves the lives of only five people, it’s worth it. I always remember that I started my own journey by making personal loans of only twenty-seven dollars to a small group of villagers.

MUHAMMAD’S PEARLS

If you observe something that bothers you, make your own action plan to fix it. There are many things that have been designed in the wrong way. Don’t take existing theories for granted. Don’t think that other people know more than you or that everything has been done. Your theory may be right and you can become the new expert. I made up my own rules of banking and they worked.

People often respond to something new and unusual in a negative way. Be prepared for this. As long as you are convinced that what you are doing is right, go ahead and do it!