QUESTIONS FOR PROFESSOR MUHAMMAD YUNUS: The socialisation of business

from the Jamaica Gleaner

Founder of Grameen Bank and Nobel laureate, Prof Muhammad Yunus of Bangladesh, was in Jamaica as a guest of Scotia Group Jamaica to deliver the fifth Annual Scotiabank Lecture. Chairman and managing director of the The Gleaner Company, Oliver Clarke, interviewed the 2006 Nobel peace prize winner on Wednesday.

Q: What do you define as micro lending, and how extensive is it now?

Micro lending is lending money to the poor, particularly women, without collateral, guarantee, lawyers; trust-based lending for income generating activity, at reasonable interest rates.

Since you started, is the concept now extensively practised throughout the world?

Yes, it started 27 years ago in a small village and we lent a total of $27 to two people, and it worked. Gradually, we extended it and today it works all over the world to places like Jamaica, the Caribbean, the USA and Canada.

How effective is it in fighting poverty?

People try to overcome poverty but do not have the financial or institutional support. When you are poor and need money, the only place you will find it is with loan sharks, and they do it to squeeze everything out of you. In our way, you bring the money in at a reasonable market price so the people can retain their own. They can start achieving, planning for the future, and pull themselves out of poverty.

Now we have seven and a half million borrowers, in a bank that is owned by them and which works for them.

It changed their lives, they move continuously out of poverty. Sixty-four per cent of the families of Grameen Bank have moved out of poverty.

Ninety per cent of the loans go to women?

In our case, it's 97 per cent.

Why are women more reliable?

In the beginning we focused on them because conventional banks skipped women. My concern was that not even one per cent of their borrowers were women. Something was wrong, so when I began, I wanted to make sure half the borrowers were women. It was not easy because the women themselves did not believe they should take loans, they were always pointing to their husbands. So we tried to encourage them to take the money and do something. Finally, it worked. Once one woman did it and succeed, others followed.

Are women more reliable borrowers than men?

Yes, children become the first beneficiaries if women start making money. They are very cautious with money; they want to get maximum mileage out of it.

We see many positive features among women. They want to build a future as quickly as they can. Men are more relaxed, they want to enjoy now, they are more focused on themselves.

Seeing these differences with women, we thought that if our objective is to have the family get out of poverty quickly, we better enter the family through women, so we switched our policy to focus on women and gradually we came close to 100 per cent female borrowers.

We could have 100 per cent women but we still kept some men participating.

Tell us why Grameen Bank uses the group approach, and how it works.

The social impact on the family is better if it is organised in groups, look at social issues such as schooling and other things we take pride in - there is positive competition in that approach. Several groups get together for meetings and take pride in their performance.

Do members of a group guarantee each other's loans?

No, they don't do that, they are on their own. The group may help each other in difficulty, though. Alone you are weak, in a group you are strong.

In what other countries does Grameen Bank operate?

We recently started in New York City but micro business was introduced in 1987 when Governor Bill Clinton invited me to help him address the poverty issue in the United States, and ever since then they have been doing it. But they were not self-reliant or free from raising money all the time. We decided to do it in a financially viable way, and that's how we began there.

How is it operating now?

It operates very well, in the same way it does in Bangladesh, with women. They have weekly meetings, they get loans for income-generating activities, and today there are 225 borrowers in Jackson Heights, New York.

All are women who take loans ranging from $500-$2,500. Repay-ment is 100 per cent and not a single instalment has been missed so far. It works well and many are waiting in line to join in. So despite the talk about people's reluctance to form groups and pay back loans, the reality is quite different.

Where does Grameen raise its money to lend? Is it grant money?

The Grameen Bank in Bangladesh is entirely financed through its own resources. We do not go to donors, banks or government. We have lots of money for ourselves. What we do is raise money by taking deposits and lending to poor people, and there is plenty to go around.

How should a micro lending organisation measure its effectiveness?

First, it should be self-reliant, cover all its costs; it should have impact on the family by seeing that the family's income level is moving up.

Children, the next generation, are getting better prepared and educated than the last. These are the basic features to strive for. Micro credit is to help people get out of poverty. It's not something to make money out of poor people.

What interest rate charges does Grameen make to its borrowers?

In Bangladesh our interest rates are very close to commercial bank rates. They charge about 16 per cent quarterly compounded rate. Grameen Bank charges 20 per cent in a declining rate on the simple interest. The second rate is on housing loans at eight per cent, and the third interest rate is on education loans for those going to higher education; they get loans at five per cent. We also lend money to beggars at zero per cent, so when taken all together, it comes close to the commercial rates.

What do you see as other major strategies besides micro lending to alleviate poverty?

Poverty is not created by poor people, it's artificially imposed on them by the external forces created by the systems built around us.

The institutions, the policies, etc, they create the poverty, not the people.

People have all the energy, creativity and potential in them but they cannot unwrap them without resources. To adjust the issue, you must go back to the institutions, such as banks, and redesign them. Banking never went to the poor, they stayed on top, so poor people became victims of loan sharks.

Take businesses, there is nothing that says a business has to be for profit only. Today, business exists to make money and that assumes that human beings are one-dimensional - money-making machines.

A human being is a much bigger entity than a money-making machine. The other dimensions are not taken into consideration within economic theory.

In order to recognise the multi-dimensionality of human beings, I am suggesting there should be another type of business included in the theoretical structure, and that is 'social business' - businesses that exist to do good to others rather than for personal gain.

The choice should be there but it's missing now, so everyone is putting on profit-maximising glasses, so they see everything in terms of making a profit. I am suggesting that we take off those glasses and put on the social business glasses and see the world completely differently.

Decide how many things you can do to change the world. All the problems we see, we can solve them. We do not have to wait for government or the international community to come in. We have the ability and creativity to go ahead and do it ourselves.

You said once that one day our grandchildren would have to go to a museum to see what poverty looked like. How are we doing?

We are doing pretty good. One of the things that came out of that was the millennium summit, where decisions were made about the millennium development goals, was to reduce poverty by half by 2015, and the whole world is moving in that direction. Many countries will achieve this.