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:: Toward a Poverty-Free World

Muhammad Yunus, winner—along with the Grameen Bank he founded in Bangladesh—of the2006 Nobel Peace Prize, has pioneered microcredit loans for the poor, empowered millions of women, and laid the foundations for a new business model devoted to producing social results - by Arshad Mahmud.
In 1974, just three years after Bangladesh was born in the bloody aftermath of the partitioning of Pakistan, young economist Muhammad Yunus became involved in the poverty issue as if by accident when he ventured from the grounds of his university in the southeastern part of the country to the nearby impoverished village of Zobra. There he felt the weight of the contradiction between the elegant economic theories he was teaching and the emptiness of those theories in the face of crushing hunger and poverty. He felt an immediate urge to help those around him get through another day with a little more ease.

That determination brought Yunus face to face with poor people’s struggle to eke out a living. In the process, he was shocked to discover Sufia Khatun, a poor, illiterate woman in Zobra, borrowing less than a dollar to make bamboo stools from the local moneylender, on the condition that he would have the exclusive right to buy all she produced at the price of his choosing. To Yunus, this was a way of procuring slave labor.

He decided to make a list of the victims of the moneylending “business” in the village and found that 42 people had borrowed a total of $27. Instantly, he paid the whole amount from his own pocket and got the victims out of the moneylenders’clutches.

“The excitement that was generated among the people by this small action got me further involved in it,” he said. “If I could make so many people so happy with such a tiny contribution, I thought, why not do more of it?”

That is exactly what he has been trying to do ever since. His first step was approaching the bank located on the campus about to lending money to the poor. It pooh-poohed the idea, saying that, illiterate people were not creditworthy. After all his efforts failed over several months, Yunus told the bank he would guarantee the loans to the poor. He was stunned by the result. The poor paid back their loans, on time, every time! But as he confronted difficulties in expanding the program through the existing intitutions, he decided to create a separate bank for the poor. In 1976, he succeeded in doing so. He named it the Grameen Bank, or village bank.

Today, the Grameen Bank gives loans to nearly 7 million poor people, 97 percent of whom are women, in 73,000 villages across Bangladesh. The bank’s focus has always been the women, because Yunus found that loans to women brought more benefits to families.

Since 1983, when it was officially recognized, the bank has distributed loans totaling $6 billion. The repayment rate is 99 percent and, to the surprise of critics, Grameen routinely makes a profit through the interest charged on its loans. In this way, it has become financially self-reliant, and it has not taken any donor money since 1995. In addition to the small loans, the bank provides other types of self-advancement loans, such as for housing and sanitary latrines. Deposits and its fully owned resources amount to 143 percent of all outstanding loans.

According to the bank’s internal survey, 58 percent of the borrowers, more than 3 million Grameen members, have raised their living conditions above the poverty line. This means that each family lives in a house with a tin roof, has access to safe drinking water, can send all children six years and above to school, maintains an average balance of taka 5,000 ($70) in a savings account, and provides every family member with three adequate meals every day. The average loan amounts to a little over a hundred dollars and is given for such things as buying a cow, a sewing machine, or tools to husk rice—all of which have made a big difference to the poor people’s lives.

From poverty eradication to peace
When the 2006 Nobel Peace Prize was announced on October 13, it focused on the Grameen Bank, Yunus, and microcredit, the name now applied to Yunus’ unique yet simple method of poverty alleviation through carefully managed small loans to the poor.

The announcement was well received internationally, but that response was tepid in comparison with the explosion of joy that continued for days in Bangladesh nearly shutting down this country of 147 million. Long mired in the familiar Third World problems of deepening poverty, endemic corruption, and exploding population, many Bangladeshis asserted that this award was the greatest happening for the country since its tumultuous birth.

The announcement, however, was not without controversy. Some well-known figures, including a leading contender for the prize—Martti Ahtisaari, former president of Finland—raised questions about the validity of the prizewinner. What has microcredit got to do with world peace, they asked, arguing that it would have been more appropriate for Grameen Bank to have been chosen for the economics category.

Ole Danbolt Mjoes, the Nobel Committee chairman, responded: “The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006, divided into equal parts, to Muhammad Yunus and Grameen Bank for their efforts to create economic and social development from below. Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty.
Microcredit is one such means. Development from below also serves to advance democracy and human rights.” In addition, the committee said, by awarding the prize it wished to focus attention on dialogue with the Muslim world, the women’s perspective, and the fight against poverty.

At the award ceremony on December 10, Mjoes emphasized these points: “We hope that this Peace Prize will represent a possible approach to the Muslim part of the world. Since September 11, 2001, we have seen a widespread tendency to demonize Islam. It is an important task for the Nobel Committee to try to narrow the gap between the West and Islam. The Peace Prize to Yunus and Grameen Bank is also support for the predominantly Muslim Bangladesh and for the Muslim environments in the world that are working for dialogue and collaboration. All too often we speak one-sidedly about how much the Muslim part of the world has to learn from the West. Where microcredit is concerned, the opposite is true: The West has learned from Yunus, from Bangladesh, and from the Muslim part of the world.”

The prize “places women center stage.” Over 95 percent of the Grameen borrowers are women, and the emphasis on them may have been the most important factor in the success of their work. In Yunus’ words, “Granting the loan to women has a definite effect on the family. There is no need to do more research on that today.
Children benefit automatically, with food and better clothes. We can see the situation changing. Men often spend the money on themselves; women spend it on the family. The bank’s practice has meant a social revolution in Bangladesh. One of the beneficiaries, Mazeda Begum, put it this way: ‘My parents gave me birth, but Grameen Bank gave me a life.’ In today’s terminology, microcredit is indeed female empowerment.”

Most important, the chairman said, is the need to fight poverty and pursue social and economic development. Yunus has shown himself to be a leader by turning visions into practical action for the benefit of millions of people, not only in Bangladesh but all over the world.

The basic concept, loans to poor people, mostly women, without any collateral, initially appeared to be an impossible idea and wishful thinking. Yunus has, first and foremost through Grameen Bank, developed microcredit into an ever more important instrument in the struggle against poverty. Ever since the bank’s inception thirty years ago, its success has been a source of inspiration for many institutions involved in poverty alleviation. Its model is being replicated in over 100 countries around the world, including rich nations like the United States, Norway, and France.  

In his acceptance speech, Yunus, 66, thanked the Nobel Committee profusely for choosing Grameen Bank for the prize. The most significant thing to recognize, he said, was that poverty is a threat to peace and that unless and until we can end poverty, there’ll be no lasting peace in the world.

He also said that people are poor not because it’s their fault but because of the flawed system that has spawned poverty. To underline his point, Yunus explained that 94 percent of the world’s income goes to 40 percent of the population, while 60 percent of people live on only 6 percent of world income. Half of the world lives on two dollars a day. Over one billion people subsist on less than a dollar a day. 
“This is no formula for peace,” Yunus declared amid thunderous applause at the Nobel Prize ceremony.

He then lamented the golden opportunity the world has lost to vanquish poverty. The new millennium began with a great global dream. World leaders gathered at the United Nations in 2000 and adopted, among other things, a historic goal to cut poverty in half by 2015. Never in human history had a bold goal been adopted by the entire world in one voice, one that specified time and size. But then came September 11 and the Iraq war, and suddenly the world was derailed from the pursuit of that dream, with the attention of world leaders shifting from the war on poverty to war on terrorism. Since then, over $350 billion has been spent on the war in Iraq by the United States alone.

“Guns and bombs cannot defeat terrorism,” he said, adding, “I believe that putting resources into improving the lives of poor people is a better strategy than spending on guns.” Yunus said that poverty is the absence of all human rights. The frustrations, hostility, and anger generated by abject poverty cannot sustain peace in any society. To build stable peace, the world must find ways to provide opportunities for people to live decent lives.

Yunus was not waxing philosophical. His belief has come from the work to which he has dedicated his life. He could easily have chosen instead the path of comfort and a worry-free life in the United States, as many of his Western-educated compatriots have done.

A unique institution
The conventional banking system is, based on the principle that the more you have, the more you can get, but Grameen’s philosophy is almost the reverse. This is because conventional banking is based on collateral and the Grameen system is collateral free.

Grameen Bank starts with the belief that credit should be accepted as a human right and builds a system where one who possesses nothing has the highest priority in getting a loan. Its focus is not on assessing the material possession of a person but on the potential of a person that can be unleashed.

Contrary to conventional banks’ overarching objective of maximizing profit, Grameen strives to bring financial services to the poor, to help them fight poverty and stay profitable and financially sound. It is a composite objective, coming out of social and economic visions. In the upside-down world of Grameen, the borrowers, organized in groups of five, do not go to the bank; rather, the bank comes to them when three or four of their groups gather weekly at a center for a meeting with a Grameen field-worker. The social organization has been a key to Grameen Bank’s success, as the women in the groups learn and acquire the capacity for planning and implementing micro-level development decisions.

Every Grameen member is required by its charter to adhere to the bank’s “Sixteen Decisions,” encompassing a broad range of social, economic, and environmental needs [see “The Sixteen Decisions of Grameen Bank,” p xxx]. On several visits to Grameen projects over the years, this reporter has observed the Grameen members proudly following their “Sir’s” guidelines. The borrowers call Yunus sir, which in Bangladesh means a respected teacher.

The other thing that is truly striking is the way the women members greet a visitor.  They look straight into your eyes and with a crisp, military-style salute say Assalamualaikum (peace be upon you). In a conservative Muslim society, where women are discouraged from making direct contact with male strangers, the greeting is nothing short of a revolution. This perhaps explains why the Grameen branches all across Bangladesh have come under frequent attacks from the radical Islamists, who accuse the bank of indulging in anti-Islamic activities by bringing the women out of their homes.

“They’ve too long been locked up within the four walls,” said Yunus. No nation, he believes, can develop in the true sense unless the women, almost half the population, are taught to be productive members of the society.

Yunus understand that the only way to accomplish that is to make them self-reliant, confident, and proud. At the same time, the women must be taught the quintessential importance of education. The Grameen members pay topmost priority to educating their children. To provide further encouragement, the bank has introduced various incentives including scholarships, which now total 30,000 a year. In addition, over 13,000 students or their families receive loans.

The impact has been phenomenal.  Many of the borrowers’ children have made it to the top of their class and have gone on to higher education, becoming doctors, engineers, college teachers, and other professionals. Some of them have even earned Ph.Ds.

Information technology for the poor
Information and communication technology (ICT) is changing people’s lives, creating a distanceless, borderless world of instantaneous communications. It is also becoming less and less costly. Yunus saw a golden opportunity to help poor people change their lives through this technology.

In 1997, he created a mobile phone company, Grameen Phone, and began distributing loans to the women so they could buy the phones and then sell phone services to the villages. The venture became an instant success. Providing a bit of training to the “phone ladies,” as they came to be known all over Bangladesh, it not only gave them a quick route out of poverty but earned them social respectability. Today, there are nearly 300,000 phone ladies providing cellular phone service in all the villages of Bangladesh.

With over 10 million subscribers, Grameen Phone is the largest mobile company in the country. Although the phone ladies account for only a tiny fraction of the total subscribers, they generate 19 percent of the company’s revenue. The company is owned jointly by Telenor of Norway (62 percent) and Grameen Telecom of Bangladesh (38 percent).

Creating poverty museums
Yunus is convinced that we can create a world in which poverty will only exist in “poverty museums.” He says the time is not far away when schoolchildren will tour these museums and be horrified by the misery and indignity that some human beings had to endure. They will doubtless blame their forefathers for tolerating this inhuman condition, which existed for so long, for so many people.

“The sooner we take the right approaches, the faster we can banish poverty from the world,” he told a luncheon at the National Press Club in Washington recently. He said that poverty is created because “we built our theoretical framework on assumptions that underestimate human capacity; we developed concepts that are too narrow (such as the concepts of business, creditworthiness, entrepreneurship, and employment); and we developed institutions that remain half done (such as financial institutions that leave out the poor). Poverty is caused by the failure at the conceptual level, rather than by any lack of capability on the part of the people.”
Experiencing firsthand the spectacular success for the Grameen Bank has brought to the hapless, underprivileged segment of society has given Yunus an unshakable faith in human creativity. It has also led him to believe that human beings are not born to suffer the misery of hunger and poverty.

Called a modern-day Gandhi, Yunus roams around in his trademark pyjamas and kurta. A quotation from his book, Banker to the Poor, reveals his philosophy:
A human being is born into this world fully equipped not only to take care of him or herself, but also to contribute to enlarging the well being of the world as a whole. Some get the chance to explore their potential to some degree, but many never get any opportunity, during their lifetime, to unwrap the wonderful gift they were born with. They die unexplored and the world remains deprived of their creativity, and their contribution that could have made this world a beautiful, prosperous place to live in.

With its many problems today, the world needs all the creative investments its people can offer. Yunus has created his own sphere of investment to advance that cause. Starting with the mission that came upon him more than thirty years ago in the village of Zobra, he has learned his lessons by direct experiment and experience. He surely will be a beacon for many to follow as he carries on his expanded mission of releasing the creative potential of the world’s hundreds of millions of poverty-stricken people.


Arshad Mahmud is a writer and editor based in Washington, D.C. A native of Bangladesh, he has covered the Grameen Bank and Muhammad Yunus for almost twenty years.
WORLD & I 2007
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