The poet Rumi said, Passion makes the old medicine new. Passion lops off the bough of weariness. Passion is the elixir that renews. How can there be weariness when passion is present? Dr. Muhammad Yunus has followed his passions to transform the world. He has transformed millions of lives through the creation of a new form of lending called microfinance, which allows the poor to lift themselves out of poverty.
Professor Yunus was awarded the Nobel Peace Prize in 2006, along with the bank he founded, Grameen Bank. He established the Grameen Bank in Bangladesh in 1983, fueled by the belief that credit is a fundamental human right.
Since that time, Grameen Bank has opened more than 2,468 branches in rural areas where nine out of 10 Bangladeshis live, and it currently serves 80,000 Bangladeshi villages. The bank is 94% member-owned. Virtually all of its members are landless or own less than an acre of land. It has granted $6.55 billion in loans, the payment rate for which is almost 99% that of commercial banks.
About 96% of the bank loans are made to women, who traditionally oversee food distribution to ensure that this basic resource receives top priority in households, in organizations’ management decisions. Replicas of the Grameen Bank model operate in more than 100 countries worldwide. In addition to its lending activities, the bank has given over six million packets of vegetable seeds and almost three million saplings to encourage home gardening and conservation. It has made over two million loans of poultry, livestock, and fish production.
Professor Yunus received his PhD in economics from Vanderbilt in 1969 and the following year became an assistant professor of economics at Middle Tennessee State University. Returning to Bangladesh, Dr. Yunus headed the economics department at Chittagong University. From 1993 to 1995, Professor Yunus was a member of the International Advisory Group for the Fourth World Conference on Women, a post to which he was appointed by the UN Secretary-General.
He has served on the Global Commission on Women’s Health, the Advisory Council for Sustainable Economic Development, and the UN Expert Group on Women and Finance. Professor Yunus is a recipient of more than a dozen major international awards for his ideas and endeavors, and he is a member of the board of the United Nations Foundation.
Robert G. Allen was the conductor of Professor Yunus’ interview. Bob Allen is a number one New York Times bestselling author of Nothing Down and Creating Wealth. He has probably helped more people become millionaires through their own efforts and businesses than any other single individual.
Bob’s Enlightened Wealth Institute members have reported over $1.1 billion in financial gains and over $30 million in charitable contributions. Bob and his partner, Tom Painter, have been major supporters of microfinancing, so it was appropriate that Bob conduct this interview.
ROBERT G. ALLEN: Thank you very much, Janet. It’s such an honor for me to be on this call tonight and to realize the power of technology. Professor Yunus is with us on the call tonight from Bangladesh, all the way around the world. I’m in California, and wherever you are listening to us, we’re all hooked together in this one spot in this very special moment with a man who has literally changed the world.
There are very few who have had the kind of impact that Professor Yunus has had, so we’re all honored to ask you a few questions tonight, Professor. Thank you for being on this call with us tonight.
MUHAMMAD YUNUS: Thank you, Bob, for conducting the interview. You mentioned that you are on Sunday. I’m on Monday here.
ROBERT G. ALLEN: That’s correct. It’s Sunday night here, and it’s 10:00 Monday morning there. When I told my wife that I was going to do this interview tonight, I told her that you had crossed an amazing goal of having helped over 100 million women with loans over the last 30 years. I think you just crossed that figure in 2006.
MUHAMMAD YUNUS: Yes, we crossed it in 2006. That’s the goal we set for ourselves in 1997 at the Microcredit Summit, which was held in Washington, DC. Our goal was to reach 100 million poorest families with microcredit, preferably to the women in those families, by the year 2005. We achieved it by 2006, in six years.
ROBERT G. ALLEN: Amazing. Your goal now is to extend that. By the year 2015, you’re going to extend it to 500 million women. Is that correct?
MUHAMMAD YUNUS: Yes, indeed. That’s it, yes, to 500 million people.
ROBERT G. ALLEN: Just think about that, those of you who are listening tonight. That’s more people than are in the United States and Canada; that’s what his ultimate goal is. You’re listening to a big thinker. Professor Yunus, every great, massive goal starts with a simple story. I think every one of us needs to hear that story again, the day you decided to lend money to a small group of women in Bangladesh, one of the poorest countries on the face of the earth. I think it was in 1974. Would you tell us that story again? It’s changed the world. We want to hear it.
MUHAMMAD YUNUS: Yes. In 1974 we had a terrible famine in Bangladesh. People were dying of hunger everywhere. I was teaching economics in a classroom. You feel frustrated because you teach elegant theories of economics that have no meaning in the face of the calamity that we have around us. What I wanted to do was to go out of the classroom, be with the people in the village next door, and see as a person if I can be of some help to even one person, even for a day.
I did a lot of little things, doing that every day. I saw how villages were being ruthlessly tortured by the loan sharks. I made a list of the people who were borrowing from the loan sharks and how much money they borrowed from them. I wrote it down and there were 42 names on my list. The total money they borrowed was $27. I was shocked. The people had to suffer so much for so little.
What I did was I gave this $27 to 42 people to return the money, to repay the money to the loan sharks and be free. I did that and people were happy, so I wanted to continue with it. I went to the local bank branch to see the bank manager about lending money to the people in the village instead of the loan sharks. The bank manager said, No, the bank cannot lend money to the poor people.
I became very agitated, and I wanted to make sure it was done. I started a big campaign against the banks to persuade them to give loans to the poor people. After months of running around, finally I could do that by offering myself as guarantor. I signed all the papers, took the money from the bank, gave it to people, and it worked. That was the beginning of microcredit.
ROBERT G. ALLEN: Microcredit is a word that many of us are beginning to hear now. It’s gone all around the world. I think every country in the world now has a microcredit organization that’s using your principles, which you discovered. It took you probably 10 years to round out all the principles of how the Grameen Bank works. It was a slow process. What’s it like to be a person whose name is known in every country in the world from something you created 30 years ago?
MUHAMMAD YUNUS: It’s more than that. It’s not my personal name; it’s the idea that the poor are bankable no matter where they are. There is no reason banks should shy away from them. [Indiscernible10:35] in every single country; that’s true. You can lend money without collateral, without any lawyers. Still, it works out. Repayment is near 100%; it’s 98% or 99%.
I think that’s a very important message for the whole world. Otherwise, banks remain limited with their services to only the privileged people. They never give out to poor people. Now we have established through our examples all over the world that banks can extend their financial services to everybody.
ROBERT G. ALLEN: I thought it was humorous. I’ve heard you speak, and you talk about how you really turned the banking model upside down. They want collateral; you take no collateral. Can you talk about how you’ve reversed everything on the banking system?
MUHAMMAD YUNUS: Yes. People ask me, How did you make these rules and procedures that you follow in what’s now called the Grameen Bank system? To give them an idea, I say that it’s all very simple for us. All we need to do, whenever we need to do something, is just look at the conventional banks and how they do it. Once we learn how they do it, we just do the opposite; we became Grameen Bank.
Everything we do is just the opposite of what the conventional banks do. They go to the rich; we go to the poor. They go to men; we go to women. They go to the urban area; we go the rural area. They ask the borrowers to come to their office, and we say the people should not come to the bank; the bank should go to the people. They want collateral; we don’t want any collateral.
They need lawyers; we don’t need any lawyers. You can go on and on, and you’ll see everything we do is just the opposite of the way it is done in a conventional bank. The funny thing is that it works! They worry that the thing they know, that’s the only way it can work; that’s how it’s possible. We have demonstrated that it works for many, many countries. Even the reverse is something that works equally well.
Today, with the subprime crisis, it became all the more attractive because we don’t do collateral or the lawyers. There’s now almost a trillion-dollar write-off. With microcredit, with all the natural disasters-the floods, all the cyclones-still it has continued to remain a high repayment rate near 100%.
ROBERT G. ALLEN: That’s just amazing. There are two books that I have read, and I know you’ve published more than that. There are two that I love. The first one I read about a year ago was called Banker to the Poor, and it talks about your story and the systems, how you set it up with the Grameen Bank, et cetera. I know a book is good because I underline a book that’s good, and I’ve underlined about half of your book.
It’s excellent. The second book that just came out last year was called Creating a World without Poverty. It’s remarkable. It’s wonderful. You talk about changing the way capitalism is done. Capitalism is only half right. Would you explain the new concept you’re creating, which is a concept of a social business, and the future of capitalism?
MUHAMMAD YUNUS: Yes, I was pointing out that as we work with microcredit, we give loans to the poor people. We have done all the things like Grameen Phone, which is a cell phone company, to bring cell phones into villages. We give loans to women to buy cell phones and start a cell phone business. We have a solar energy company to bring solar systems in the homes of the villages, so we did all those things.
At the same time, we never expected to make money out of it personally. We always did it because we felt people were benefiting from it. When you look at the world of business, all businesses are set up to make money for somebody. That’s how the whole concept of business was formulated, this economic theory of capitalism. I said that that kind of formulation of business, being a vehicle to maximize profit-and the mission of this always has to be maximization of profit-is a very narrow interpretation of human beings.
It assumes, really, a one-dimensional human being, all to do with making money. I wanted to point out that a human being is not a money-making machine. That’s not how it works. Human beings are multidimensional. They do all kinds of things. They make money at the same time they want to make a difference; they want to be helpful to other people. They want to solve the problems of the world.
This is all about human beings, but somehow the business world forgets every aspect of the human beings. It picked up only aspect and created an entire system on the basis of that. That’s where it went wrong. I’m saying there is a multidimensionality of human beings. We need to create at least one more kind of business; it’s to do good, and I’m calling it social business.
It’s a non-loss, non-dividend company with a social objective. Here in the regular, already-known business, it’s all about me. Everything has to come to me, and I’m the beneficiary of everything I do. In the social business, I’m saying it’s everything about others, not for me. That’s another kind of business. Really, if people like it they will go for it. Some people want to have a choice; they want to have options about how they might want to spend, how they might want to invest in the profit-maximizing business and how much they want to invest in the social business.
There are both in the hearts of the people. There are people going to profit-maximizing business and people learning the social business. I don’t think so. How will people get to going both ways? We have created examples of social businesses in Bangladesh, and one became very well known. That’s a joint venture with Danone, a French company who produces cakes and cookies and all kinds of things. They’re a food company.
At the Grameen-Danone company, we produce yogurt for a special social purpose. There are millions of children in Bangladesh who are malnourished, so we take those nutrients, which are missing in the children of Bangladesh, put it in this yogurt and it becomes a fortified yogurt. We make it very cheaply and sell it to the poorest children so that they can eat it and regain their health.
The objective of the company is to bring nutrition to the children of Bangladesh. We have no intention of making money for the Danone company. We have no intention of making money for Grameen company. If the company makes profit, the profit stays with the company. Investors usually can get back their investment money. That’s an example of social business.
There are many, many kinds of social businesses that can be created in heath care, in the environment, in solar energy, in eye-care hospitals, which we have done already, and in drinking water, which we’ve already done. There are many things. This is a case where if you put in the structural capitalism, then it becomes a balanced capitalism. I’m saying today capitalism is only a half-developed structure. The outer, essential part is missing; that’s the social part.
ROBERT G. ALLEN: I agree with you. Mark Victor Hansen, the author of Chicken Soup for the Soul-and I think you’ve met him-and I are authors of a book called Cracking the Millionaire Code: Your Key to Enlightened Wealth. We say in there that capitalism is about to be transcended. It’s going to be transcended to become more enlightened. I call it the enlightened enterprise.
MUHAMMAD YUNUS: Excellent, because it cannot go on like the way it is now.
ROBERT G. ALLEN: Exactly. Capitalism worked nicely for 200 years. It helped bring freedom to a lot of the world, but now it has to take on a new, enlightened approach.
MUHAMMAD YUNUS: Sure. It has many, many features. Absolutely! We are not talking about closing down capitalism; we are trying to improve capitalism by bringing in the things that were not included before. We’re not forcing anybody. We’re saying that this is an option.
ROBERT G. ALLEN: You’ll continue to have companies that earn profits; if that’s all you want to create is profits, fine, as long as you don’t do bad for the world. The social capitalistic companies that you’re talking about are formed for the sole purpose to create products to make the world a better place. Profit is not the primary motive. I think that’s one of the reasons you got the Nobel Peace Prize.
MUHAMMAD YUNUS: Thank you. One reason is that there are many essential things that profit-maximizing companies miss out on because their mission doesn’t include those kinds of activities. That is an area where social business has an appropriate place. We’re not saying in every place social capitalism has to take over everything. That’s not the idea. The idea is that profit-maximizing businesses cannot handle the kinds of things you would expect to happen, like getting health care to the poor people.
They don’t find what’s in it for them to bring health care to the poor people because they cannot maximize profits. Their profits maximize somewhere else, at the top level of the society, so they can concentrate on the top level. Who’s looking for the health care for the poor people? They’re the ones who need the health care very much. That’s an essential element of human beings, to have strong health so that they can fight for their existence and get out of poverty.
The thing is we could bring social business into an area, and people ask where the money is coming from. I say there are two particular areas that don’t come in to complete [indiscernible 21:00]. One is the philanthropic money, the foundation money, billions of dollars, which are locked up in foundations for going to charities. I say that charities are good, but at the same time, if you can convert some of the charity money into social business money, then social businesses become a strong, active player in the field and they can be sustained.
Philanthropic dollars have only one life. It can work only once; but if you can convert the whole idea into social business, then it becomes an endless thing. It recycles. The dollar recycles, and you can improve it and reach out to more and more lives. It is very sustainable. You can add on one after another. In charity, you do the same thing over and over again with more and more money.
In social business, every time you put in new money it adds; you don’t have to go back to the previous one to run it again, because [indiscernible 22:00]. That is the power of social business, one coming from the foundation side and then corporate social-responsibility money from all the big companies. There’s an enormous amount of money sitting there. That money can also be used for creating social businesses for the people who they cannot reach.
The companies can reach from their profit-maximizing window. They can move the social-business window from the corporate social-responsibility funds to reach out to those people in a way that works as a business; it helps the people, but with the good intention of the company making [indiscernible 22:32] out of that.
ROBERT G. ALLEN: What I think is revolutionary, Professor, about the way you think is that you actually have some strong feelings about charity. What you’ve done with the Grameen Bank is you’ve lent money to women to start their own businesses so they can grow their way out of poverty. Rather than just giving them the money to feed them for a day, you’ve taught them how to fish for their lifetime. What are your feelings about some charities and some world organizations that try to stop poverty by giving to them?
MUHAMMAD YUNUS: I always argue that charities have a time and place when it is appropriate; it’s not in every case. If there is a charity, it could help people, but sometimes charities are counter-productive because they take away initiative from people. This is because you are saying that you’ll take care of it, You don’t have to worry, so people don’t have to use their own creativity and their energy to fight for their benefit.
You are kind of [indiscernible 23:40] their ability. Why can’t they use this ability to change their own life? You can help them to do that in a business way. It’s even like welfare systems where governments provide welfare money to the people who are not able to make a living for themselves. I say that’s a fine idea. I support it 100%, but everyone’s direction should be grounded with the philosophy that, I’m helping you so that you can get out of the situation of welfare now.
You’re no longer in welfare. That is the charity part of it, the handout part of it. I do it so you can come out of it, not to make you stay there for lifetime. That’s not the intention of charity. If we can create institutions where people can discover their own abilities and discover their energy, that would be the best system to do. We’ve given loans of $7.5 million in Bangladesh to 97% women, and they have found that.
They take the money and start tiny, little businesses with $30, $40. They’re so small people feel reluctant to call them businesses. I say that’s a business no matter how you look at it. Just because the size is small doesn’t make it less of a business in her opinion. She moves from one level of business to the next level of business to the next level of business, and you are out of poverty.
That is happening. Now their children are in school, and we are giving student loans to the children so that they can become engineers and doctors. There are many, many students now-1,000 students-on education loans. They’re coming out and we are giving them loans so that they can start their lives as entrepreneurs, establish their own businesses and so on.
We are trying to create entrepreneurs out of people. If everybody’s looking for jobs, who is giving them the jobs? Somebody has to be giving the jobs. Why don’t you be the one who is giving the job? Your mission is to create jobs; that’s what we should be thinking all along, not just look at it as a problem.
ROBERT G. ALLEN: Absolutely. They become the engines, the machines that create jobs rather than hoping that someone will give them a job.
MUHAMMAD YUNUS: We even give loans to beggars.
ROBERT G. ALLEN: That’s true. Interest-free loans, right?
MUHAMMAD YUNUS: Yes, interest-free loans and no time limits, so that they don’t feel in any way compelled to perform in a certain way. All we say is if you pay back your first loan, you’re in for the second loan; and if you pay back the second loan, you get a third loan and so on. We have now more than 100,000 beggars in the program, more than 11,000 beggars stopped begging completely. They began to develop into a salesperson. More and more people are coming out of begging to discover their own creativity by becoming a businessperson.
ROBERT G. ALLEN: I was really shocked as I was reading your book, this last one, Creating a World without Poverty. You have created one of the largest businesses in Bangladesh. It’s in the mobile phone business. Is that right?
MUHAMMAD YUNUS: That’s right.
ROBERT G. ALLEN: How did you do that?
MUHAMMAD YUNUS: Grameen Phone is the largest cell phone company in the country. We started small, and our intention is to bring the cell phone into the villages, because villages never had phones. All Bangladesh had very few phones when we started the business. There are five cell phone companies in their country, and we started them off at the same time. Today, Grameen Phone, our company, is the largest phone company in the country.
It’s the largest business in the country; we have 18 million subscribers bringing cell phones everywhere into Bangladesh. We have given loans to poor women to become the phone lady of the village. Anybody who needs a phone can come to her, use her phone, and give her money. She earns a lot of money by selling her phone service. The way we have extended it, today telephones are everywhere in Bangladesh.
ROBERT G. ALLEN: Just as a result of that one idea. Here’s another question I’d like to ask you. Do you know what else I found shocking as I was reading your book? I would assume that a poor person would need some training; they would need to go to school. They’d need to learn techniques and strategies of becoming an entrepreneur. When I was reading in your first book, Banker to the Poor, you say there that you do not teach them, you do not train them. You basically set them up in groups of five. Can you tell us what the magic is, what the wonderful system is, that you create for these women so they can be successful?
MUHAMMAD YUNUS: Magic is very simple. People learn from each other, number one, and much more easily and more comfortably. When you see your friend is doing something, you put all your energy to make sure you’re bigger than your friend; you do the job much better than he can do or she can do. You enjoy yourself. You’re not a [indiscernible 29:03] person anymore.
A poor person has lots of capacity, skill, which is unused; they’ve never been able to use it. Circumstances never gave them the opportunity to use that. There were other [indiscernible 29:23] didn’t get a chance to use their skills that they have in making baskets, raising poultry, raising any other animal, or whatever thing they do in a family way. Once you give a chance, whatever their favorite thing is they can transform it into a business.
This is what they enjoy; at the same time they earn money by doing this. Women make baskets. Women do the sewing and make beautiful dresses; they love making dresses. They love when the dress they made is bought by somebody who’s living in the village. She can say that this is her dress she made. She can prove to other families that she can do better than her friend in designing and coming up with new ideas in fashion and things.
These are the kinds of things that happen naturally. You don’t have to set up training schools for everything. Attending a school is good, but it’s only needed after you’ve exhausted your first level of skill, what you have after you have used up all your existing skill. Then probably, the next skill is available. Their basic skill is so much, you really don’t need to go to follow-up schooling or anything in the training part of it.
Even look at the beggars. We don’t train the beggars. We simply say this is a way to not be always begging. With a loan you can get some merchandise: cookies, candy, toys for the kids. Give people options, whether that will be something as a strategy or that they would like to buy something from you. It’s up to them. All you’re doing is giving options, and if they buy it then you can sell, and you make money.
They fix it up. We never had any schooling for them how to sell things, how to make profit. These things are so embedded in human minds, doing these simple kinds of things. We relied on them because sometimes training becomes a kind of a detriment. People get scared, I’m so stupid; I don’t know anything. They start feeling that way. The more you encourage them the better, You know everything. Come on. You can do it. Go ahead. Do it.
She can get it set up, and she can [indiscernible 31:32]. She feels very confident, I have done something; I have that ability. I never knew about it. Each human being has tremendous potential locked inside. We never know; we never give them any chance to find out what they know, what they have inside of them. Microcredit allows them to reveal themselves, reveal themselves to themselves.
ROBERT G. ALLEN: What you say in the book that I thought was fascinating is, Formal learning is a threatening experience to our borrowers. Just going to classes and learning makes us feel stupid, so you set them up into groups of five. I want to have you tell us today, Professor Yunus, how did you discover that in this group of five women, that five was the right number for them to form a group so they could support each other? Why five? Why not six? Why not 10? Why not 20?
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