[Microcredit] Can Technology Eliminate Poverty?

From Business Week

Grameen Bank Founder Muhammad Yunus thinks so. And he explains why changing the world is a lot more fun than just making money

As a leading microfinance pioneer and advocate for the world's poor, Muhammad Yunus has continued developing innovative approaches to alleviating poverty since granting his first loan in 1976. Since 1983, Grameen Bank, of which Yunus is founder and managing director, has lent $5.3 million to borrowers in Bangladesh, spawning replicated programs in more than 100 countries.

Even as his ideas spread around the world, Yunus has remained firmly dedicated to alleviating the burden of poverty in his home country through a growing variety of means. For example, in 1997, Yunus helped found two companies: GrameenPhone (for profit) and Grameen Telecom (nonprofit), which brought mobile-phone technology to the villages of Bangladesh. Out of those companies Yunus developed the Village Phone Project, where women borrowers would take a loan to buy a handset and solar-powered charger and function as their village pay phone, providing the women with substantially increased income.

Yunus recently spoke with BusinessWeek Online reporter Jeffrey Gangemi about his purpose in life, how technology can be used for ramping up microfinance, and his next challenge in helping the poor. Edited excerpts of their conversation follow:

How would you describe yourself?
Sometimes I describe myself as a stubborn guy. If I feel in my gut that something is the right thing to do, I do not give it up. Every time I try to do something, people say it can't work. People said GrameenPhone wouldn't work, that people in the villages have no money to pay for it, and that they will be scared to death if a voice speaks to them through that little gadget.

Grameen Bank was officially founded in 1983, though you started making loans in 1976. Why did you start?
My mission is to create a poverty-free world. I believe that human beings are created to contribute to all other life forms, including their own. But poor people too often spend their lifetime just taking care of themselves because the struggle has been so hard for them. I strongly believe in the unlimited potential of all human beings, not just a privileged few. All kids, when they're born, represent the same unlimited potential in any circumstance.

Poverty is absolutely meaningless and unnecessary in the world. It was just indifference to poverty that created and sustained it. It's not created by the poor. It's created by the system. Once we fix the system in the right way, poverty will disappear.

I'm encouraging young people to become social business entrepreneurs and contribute to the world, rather than just making money. Making money is no fun. Contributing to and changing the world is a lot more fun.

Why do you target the poorest of the poor?
I get very upset when people say [the poorest] people don't have the entrepreneurial ability, initiative, and skills to use loans, so they need some other kind of intervention like subsidy, handout, or charity.

To prove them wrong, I said "let's exclusively reach out to the poorest, and who could be poorer than the beggars?" So we started the beggars program, called the Struggling Members Program. When we started, we thought maybe we'd have 4,000 or 5,000 beggars in that program. Now we have 55,000 beggars in that program just in Bangladesh and just in Grameen Bank. Instead of begging door-to-door, the loan allows them to buy some ribbons or some candy and sell it door-to-door.

How far has the Village Phone Project spread?
Now, there are nearly 200,000 telephone ladies all over Bangladesh, and that number keeps increasing. So state-of-the-art mobile technology has reached the very poor people, and it's a very good source of income for them. If a poor woman gets hold of one mobile phone in the village, then this is a sure bet that her entire family can move out of poverty in two or three years.

Friends or enemies, critics and admirers across the board all admire Village Phone because it has brought telephone connectivity everywhere in Bangladesh, not just in the cities.

What other doors has the Village Phone Project opened?
We are moving toward widespread Internet connectivity and toward automatic remittances of money through telephones. Kiosks are being set up for Internet connectivity -- very few so far, but it is possible.

When we took the mobile phone to the villages, 70% of people didn't have electricity. To charge the phones, we decided to use solar energy, and it has now become very popular in Bangladesh. We created a whole separate company called Grameen Shakti [Energy] that sells solar panels and other renewable energy sources across the country. This is probably the largest commercial solar energy distribution company in the whole world, because it sells 1,500 solar-energy home systems per month on a commercial basis. It's a for-profit business, and it works very well without subsidies.

What's your motivation for continuous innovation?
I'm not a salesman of microcredit. My patient is poverty. If microcredit does not work for poverty, I have no business with it. I feel that it has an important contribution to make, but I'm not going to stop here. I've got to find every single piece that works for poverty alleviation. I'm not promising that every business will be as successful as everything else, but I'll keep trying.

Which technologies are most important for scaling up microfinance?
Everything -- it's a question of how you bring it into use with poor people. The technology is moving very fast, so the possibility of creating a poverty-free world is so much higher now than a few years ago. The smart card and the ATM can be very effective, but today the ATM is developed for city folks.

What's the newest Grameen company?
We just completed a deal with the French company Group Danone to set up a food company in Bangladesh. It will be called Grameen Danone Food Co. We have a need for healthy baby food, because children born to poor families often become sick as soon as they stop sucking their mothers milk. I talked to Group Danone, who were very interested and willing to work with us. We are making a good formula that is extremely cheap so that poor people can afford to buy it and feed their children. Together, we'll also process and market milk products and eventually fruit items.

What are your biggest successes?
At first, I didn't think that what I did had any significance in a broader context. I was just trying to solve a local problem. But…Grameen has been adopted in hundreds of countries all around the world -- rich and poor alike.

Today, there are many different variations of microcredit. But I'm glad that it's drawing attention. In Bangladesh, where nothing works and there's no electricity, microcredit works like clockwork. It's fantastic.

Where is microcredit most widespread?
The hub of microcredit is Bangladesh and Asia. Of the nearly 100 million families that have been served by microcredit, nearly 90 million are in Asia. When you look at Latin America, on the other hand, there might be 5 million families served.

In Latin America, most of the microcredit programs are donor-driven. USAID and other organizations fund them, and that's how they came into being. Asian microcredit banks were NGO-driven, which helped them become more sustainable.

What's your next big mission?
I'll address health care in a very comprehensive way. We're creating a series of hospitals for eye care, for the cataract operation. Along with hospitals, we'll establish safe delivery units to help mothers deliver their babies safely.

Also, telemedicine with videoconferencing has started. It's not very successful yet, because people don't know how to make use of it. Someone in a rural area can go to a kiosk and have a consultation with a doctor in Dhaka instead of coming all the way to Dhaka for the consultation.

These will all be for-profit enterprises, but in the social profit way. No one will be getting rich off of them. I call them non-loss companies.

Do you think you'll go into politics someday?
I don't know. I've thought about it because people keep asking me that question. In politics, everyone says they will support you, but you never know. I don't want to take that chance. I think what I'm doing is so much more effective, steady, and successful than being in politics.