Tuesday, August 18, 2009

Comment: the roots of microcredit

In his latest commentary, Sam Daley Harris touches on the Medal of Freedom that was awarded to Muhammad Yunus. Harris recounts the story of microcredit's beginnings, and how the same concept of non-profit/non-loss business is spreading into other ventures.

From The Daily Journal is this snippet of Harris' commentary. Harris is the founder of the Microcredit Summit and Results.

He was so shaken by the sight of people dying of starvation that when he set foot into Jobra, the village next to his campus, all he wanted to do was to see if he could be of use to one person for one day -- not 40 million -- just one.

It was in that village that he met a stool maker who horrified him when she explained she earned only 2 cents a day for her beautiful craftsmanship. With no money to buy the bamboo she needed, Sufia Khatun was forced to borrow from a moneylender who demanded that she sell her finished stools back to him at a price he set -- a price so low that she made only 2 cents a day profit.

When he asked whether she could earn more if she was freed from the moneylender, she told him, "Yes I can." Yunus had a student look for other villagers who were in the same dilemma. The student found 42 people who needed a grand total of $27 to pay off the moneylender, buy their raw materials and sell their wares to the highest bidder. That's right; all they needed was an average of 68 cents each. With her loan of less than $1 the stool-maker's profits soared from 2 cents a day to $1.25 a day.

Now, Yunus has set his sights on titans of business and industry with his social business concept, and the chairmen of Dannone, Intel and BASF are beating a "yes we can" path to his door to create new nonprofit/non-loss businesses that have as their sole goal improving people's lives. The corporations can recover their initial investments in the social businesses, but after that, all profits are plowed back into these new companies. They include a joint venture with Dannone producing nutritionally fortified yogurt for malnourished villagers, another with BASF producing chemically treated bed-nets to protect people from mosquitoes carrying malaria, and still another with Intel bringing information technology solutions to rural villages.

When the U.S. president shook the hand of the Bangladeshi micro-banker at the White House ceremony last week, Obama touched his own past and the microfinance work his mother did in Indonesia. And when Yunus opens the Microcredit Summit next April in Nairobi, Kenya, the micro-banker from Bangladesh will launch the next phase of microfinance in the birthplace of Obama's father and throughout the continent.

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