Warning of a crisis in microcredit

from the Financial Times

Muhammad Yunus warns of a crisis as big as the subprime credit crunch. He says that overseas investors should stop flooding money into microfinance. - Kale

By Tom Burgis in Johannesburg

“If you build it up that there’s a lot of money to make you can get a subprime kind of thing, but this time it’s the really poor people who will be in trouble,” Mr Yunus said in answer to a question from the Financial Times while speaking to reporters from a microfinance summit in Indonesia.

The gathering of microfinanciers announced a voluntary transparency drive under which willing institutions will submit details of the interest rates they charge on their loans. Mr Yunus’s Grameen Bank is the biggest of several lenders serving a total of 20m clients to commit to the scheme.

While comprehensive data are scarce, since its origins in Bangladesh 30 years ago, according to the most recent figures compiled by the Washington-based Microfinance Information Exchange (MIX) there were by 2006 at least 77m microfinance borrowers in 100 countries. JPMorgan calculated last year demand for financial services among poor people was worth as much as $300bn.

Loans are offered to groups who are unable to provide collateral, rendering them “unbankable” in the eyes of most traditional bankers.

Yet in recent years many of the world’s foremost financial institutions – among them Citigroup, Barclays, Morgan Stanley and BNP Paribas – have entered the fray, either by opening credit lines to microfinance institutions, taking equity stakes in them or creating funds that allow investors to gain exposure to the fast-growing field.

Outstanding wholesale loans from 17 leading international commercial lenders to microfinance institutions more than doubled to between $1.1bn and $1.4bn in the year to the end of 2007, according to a recent report commissioned by ING, the Dutch lender which itself has a microfinance presence.

That compares with MIX’s estimate of a gross loan portfolio held by some 1,100 major microfinanciers of $24bn.

Other commercial banks, including several in Africa, are moving downmarket to cater directly to clients once the sole preserve of microfinance.

The growing commercialisation of the sector was underscored last year when Compartamos of Mexico became the first microfinance lender to go to the market, with a $467m initial public offering – a move it defended as the only way to meet the huge demand that still goes untapped.

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Tracking loan costs for microcredit

from the Vancouver Sun

Don Cayo is a columnist in Vancouver who writes on poverty related issues. Here is a excerpt on the interest charges on micro credit loans. This is related to the story about Muhammad Yunus saying there is no place for profits in microcredit - Kale

by Don Cayo

Annual interest of 25, 50 or maybe 100-plus per cent: What's fair? Where, exactly, should the line be drawn between loan-sharks and worthy micro-credit programs? Between enterprises that exploit poor people who can't get conventional loans and those that help them?

There's no short answer.

Rates that sound to Westerners like gouging -- 25, 35 or even 45 per cent a year -- may, in fact, be the least a responsible lender can charge and stay afloat. Factor in the inflation that plagues many developing economies, plus the high cost (at least, high as a percentage of principle) of administering tiny loans, and you can see how what sounds like usury can be the bare-bones minimum.

But 100-plus per cent in an economy where inflation is reasonably under control? To most of us, that's over the line.

It gets trickier, of course, when the number is in between -- too high to be readily justified but too low to be clearly out of line, especially if the stated interest rate is in addition to confusing fees and caveats. The on-the-ground reality is so complex that even micro-finance professionals -- not to mention unlettered peasants -- find it hard to compare the costs of competing agencies.

The issue has been around for years, but it came to a head after Mexico's Banco Compartamos, which started life as a non-profit, became a profit-seeking enterprise. It went public early last year on the Mexican stock exchange, attracting money from Wall Street, among other places.

So far, the investments are paying handsomely, perhaps no surprise given that its loans can cost more than 100 per cent a year.

To defenders of the free market, outside investors provide much-needed capital. And only market mechanisms, which reflect the basic law of supply and demand, can establish a truly fair price for loans -- the point where lenders' willingness to put up the money converges with borrowers' willingness to pay.

Competition in the field may, indeed, work as it's supposed to in a country like Bangladesh, the home of Muhammad Yunus's famed Grameen Bank and of several other large, sophisticated micro-credit agencies. There, lending concepts have come to be understood by even the poorest clients, and many agencies compete with interest rates of about 25 per cent.

But, as Yunus underlined in a telephone news conference from a micro-finance summit in Bali on Monday, micro-credit was originally developed for people who were ill-served, or unserved, by the establishment market.

In many of the 100 or so countries where micro-credit is a key tool to combat mass poverty, that's still the case. Untold millions have no access to loans from a reputable agency. In such places, a new market-based player has no competition other than unabashed loan sharks -- local money-men who, typically, lend out five currency units at sunrise and collect six in repayment at sundown.

There's also a great danger of unfairness in what economists call "asymmetry of information." Well-heeled lending institutions can calculate costs and profits to the penny; unschooled borrowers often have no idea of what they're getting into or what a fair-priced alternative would be.

So I applaud Yunus and his colleagues from 44 other micro-finance stakeholders -- mostly those who fund micro-credit agencies, rather than those who actually make loans -- for an initiative launched Monday to expose lenders' actual prices to the light of day. A new NGO, MicroFinance Transparency, will collect and publish data on the cost of loans from lenders all over the developing world.

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Debating profit in microcredit

from the International Herald Tribune

A debate has begun in microcredit circles about how much should the lender profit. Muhammad Yunus gives his side in this story. - Kale

When Nobel Peace Prize winner Muhammad Yunus began making US$27 loans to women in Bangladesh three decades ago, he wasn't thinking of initial public offerings and return on equity.

Now that the field of microfinance is become increasingly commercialized, though, such terms weigh heavily on his mind.

"Poor people should not be considered an opportunity to make yourself rich," Yunus said by phone from Bali, Indonesia, where he is attending a meeting on microcredit that opened Monday.

This week at the Microcredit Summit Campaign conference, privatization advocates will be pitted against those who believe you can save the world or make a buck — but not do both at the same time. The gathering is drawing several heads and former heads of state, including Indonesian President Susilo Bambang Yudhoyono, and microfinance representatives from 60 countries.

Members of the pro-market faction argue that civic-mindedness alone will never draw enough capital to serve the billion people who want rudimentary banking services. Profitability is the key to sustainability, they say.

Those against commercialization fear the microcredit movement is losing its soul, prioritizing investors over the world's farmers, sheepherders and street vendors, many of whom struggle by on less than a dollar a day.

Microfinance, for profit or not, is booming. According to Deutsche Bank, the volume of microfinance loans hit US$25 billion in 2007, up from US$4 billion in 2001, and another US$250 billion is still needed. The bank expects that private investors will pour US$20 billion into microfinance institutions in 2015 — ten times more than they did in 2006.

Many groups that started as nonprofits have become for-profit, and a plethora of microfinance investment funds, targeted at institutions and individuals, have opened in the last few years.

Citigroup, Credit Suisse, Deutsche Bank, and Morgan Stanley have all entered the microfinance market, either providing direct funding, backing investment funds or securitizing debt, and private equity investors have also started to pile in, according to the World Bank's CGAP, a microfinance research group.

"You are seeing more and more financially driven investors going into this market," Eric Savage, managing director of Unitus Capital, a new for-profit firm that will help microfinance groups raise capital, said by phone from Bangalore, India.

Savage said the subprime crisis may give microfinance a further boost as investors seek diversification, and that tightening credit has so far had a "quite muted" effect on loans to microfinance institutions.

"The microfinance sector has been relatively isolated from the global credit crisis," he said.

At least two microfinance institutions are publicly traded: Mexico's Banco Compartamos, SA., and Kenya's rapidly expanding Equity Bank Ltd.

The Compartamos initial public offering, in April 2007, was a watershed event. The bank raised US$474.7 million — and the hackles of the field's civic-minded pioneers, who say the bank is making indecent profits by charging too much interest.

On Friday, Compartamos reported that net income for the first half was up 13.9 percent, to 500 million Mexican pesos (US$49.5 million), over the same period last year. Return on equity fell 11.3 percent, to 39.2 percent.

Compartamos founders Carlos Danel and Carlos Labarthe, argue that microfinance is, first of all, finance. In an 11-page "Letter to Our Peers," published this year, they argued that high interest rates are needed to cover the cost of administering small loans in difficult markets.

They defended above-average profits as necessary to attract investors to the still-nascent field. Competition, they wrote, is already helping the poor: In the past 7 years, Compartamos' interest rates have dropped from 115 percent to 79 percent, which they say is in line with the competition.

The combination of high costs and small loan size in Mexico means interest rates are higher than in many other countries, they said.

Globally, microfinance institutions charged an average of 28 percent a year in 2006, according to CGAP.

Many, however, remain galled by what Yunus, who won the 2006 Nobel Peace Prize, calls the "distortion" of the field he forged.

His pioneering bank, Grameen, is owned by the poor borrowers it serves, and sustains itself with local deposits. The bank reported a narrow profit of 106.9 million Bangladeshi takas (US$1.6 million) on revenues of 10.6 billion takas (US$155 million) in 2007.

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Big Calling: How mobile banking is eradicating poverty in emerging economies.

from Banking Wire

This explores the new concept thatMuhammad Ynuns has for giving cell phones to the poor. - Kale

by Karen Krebsbach,

Cellphone banking is emerging as an important link that could bring the most basic financial services to the globes billions of unbanked cellphone users. Bringing the unbanked into the formal economy is a key initiative of various playerspayments processors, financial-services firms, telecommunications firmsbut it, like the developing countries most affected, is a work in progress.

The obligation for financial institutions is to serve as the foundation on which such socio-economic progress can rest.

In battling poverty in the developing world with affordable financial services, there is nothing quite as democratizing as the ubiquitous cellphone. Few proponents of economic growth would quibble with the belief that banking integral to the foundation that society is built on, but a full one billion of the globes five billion cellphone owners have no access to financial services. That makes mobile banking the perfect way to bring the unbanked and underbanked into societys fold, according to the International Finance Corp., the World Banks private-sector investment arm that is investing in a dozen mobile-banking operations in poor regions of Asia, Africa and Latin America.

Embracing the financial services ecosystem gives poor people the ability to leverage their existing wealth, to plan for the future better, to save resources and to interact outside of their neighborhood, says Andi Dervishi, who leads investments in alternative-payments systems for the IFC. Unlike the developed world, where mobile banking is an organized, heavily regulated affair, the turf in most developing nations is awkwardly shared by a jostling array of banks, cellphone companies, telecommunications operators and payments firms. That leaves a yawning opportunity for financial-services firms to jump in to serve the unbanked and underbanked who show growing promise to move into the middle class. Mobile banking can now do it all: Send remittances 100 miles or 1,000 miles; pay salaries; reimburse suppliers; pay bills; and act like a debit card in buying groceries or clothes. What it doesnt do wellyetin the developing world is allow people to save in interest-bearing accounts, buy insurance, obtain business or personal loans, use it as a credit card, or buy stocks and other investment products. But all those services will soon be routine, say analysts, and with them, the kind of indelible lessons in financial literacy that raise people up from poverty. Indeed, GDP rises 0.5 percent for every 10 mobile phones per 100 people, according to a 2005 London Business School study, which concluded that cellphone access has a dramatic effect on earning potential.

But the belief that banks can do business while doing good seems lost on most financial institutions, which remain the smallest participants in most mobile-banking operations in the developing world. Banks remain conservative, observes Dervishi. They dont see this as a big opportunity. They are taking a more defensive position, rather than offensive, and not really going after the customer. Their business model needs to be changed. And if 86 percent of the globes population is expected to be living in emerging markets by 2050, as the World Resource Institute predicts, isnt that exactly where banks ought to be?

The transformative power of mobile banking, however, isnt lost on everyone. India, China, Brazil and Russia all now have more cellphones than ATMs, says Nick Holland, an analyst at Boston-based Aite Group. Banks that miss out on this do so at their own peril. And they shouldnt underestimate the technology savviness of this market. Developing does not necessarily mean technology illiterate. Adapted with smart cards, fingerprint scanners and photo-recognition software, cellphones are financial tools useful for even the illiterate among the planets four billion poor, many of whom still hoard their savings under their mattresses, borrow only from pricey black-market lenders and remain security risks for theft after payday check cashing.

Nor does poor mean unprofitable. Plenty of banks are making money doing mobile banking in the developing world, though the journey is not without pitfalls and roadblocks, experts say. Theres lots to win for banks and for the public good in mobile banking, observes Janey Place, CEO of consultant DigitalThinking and a former Wells Fargo executive. Economies become stronger when more people can participate... Heres where the do-good and profit motives overlap. Access to financial services is hugely empowering of the poor.

Citi learned that lesson decades ago, having grabbed a foothold in mobile banking in various developing economies by partnering with a variety of players, from telecommunications providers to cellphone operators, and by being open to adopting a variety of phone standards. Among its most successful launches has been India, where it began experimenting in 2000 with one-directional messaging that drew 100,000 users its first year. Today, the operation boasts two million users, which deliver 12 million to 13 million alerts monthly, offers banks statements and provides options for credit cards and loans. The program has been so successful that Citi has activated it in 26 other countries.

The bank expects to roll out Mobile Money Ventures, will allow stock trading, in Korea and China in the third quarter. The thinking has been to go beyond balances and payments to encompass a total [variety of] customer transactions, explains Satish Menon, the Singapore-based executive of growth ventures and innovation who runs Citis Asian operations. But we had to selectively choose those countries that were ready. In fact, Menon says Citi has learned to be technologically agnostic in most countries, focusing instead on whatever works for the customer.

Next on the horizon for Citi? Near-field-communication technology, or NFC, that works by embedded contactless chip in the cellphone. The chip allows owners to purchase items with a simple tap of the phone, and effortlessly send remittances. The mobile wallet is the future, Menon says, noting that Citis openness to experimentation has been the key element that has kept it nimble. A pilot project begins in India later this year.

Another bank that claims early-mover advantage is Istanbul-based $61 billion-asset GarantiBank, which has been marketing its Web-based cellphone-banking prowess through TV and billboard ads since the service was launched in February. In the first two months, Garantis Mobile Banking Portal signed up 50,000 customers who racked up more than one million page views and inquiries, more than 30,000 transactions and $24 million in transaction volume, according to evp Fuat Erbil. The bank had first launched the short-message service, or SMS, banking in 2003. Today, the country claims 1.3 million mobile-banking customers; thats not bad, given Garanti was first to market in a country where 50 percent of 75 million people remain unbanked, Erbil says. Even if we get only 10 million of that number, it would be a great success, he says. But you have to be patient. The customers resistance is not to the cost. The challenge is making them use it once, until they see how easy it is to use.

Since only 26 percent of Turkeys population has computer Internet access, beefing up the banks Web-based banking made little sense, says Erbil. But Web-based cellphone banking did, since 76 percent of the population own cellphones. Finding a protean technology in Volantis and Hewlett Packard, GarantiBank and the pair built a platform that works on more than 5,100 cellphone models, offering a wide variety of transactions from remittances to paybill services to foreign-exchange buys and stock purchasing. For these tens of millions, their mobile phone is the only point of access, he says, noting that Turkeys second-largest bank hopes to move into mobile banking in Russia and Romania in 2009.

It is the poorest reaches of the globe where the deepest resistance among banksand, therein, the greatest opportunity for deep, lasting alleviation of poverty to providing mobile banking lies. Most of the developing world uses the global system for mobile communications standard, or GSM; it now covers about 82 percent of the mobile market and is used by about three million people, according to the GSMA, a trade group for the mobile-communications industry. GSM makes it easy to switch to SMS text messaging, which is supported by more than 799 mobile operators in 218 countries. But just because financial-services firms have been slow to jump into the mobile-banking fray in the developing world, it doesnt mean other providers have been so timid. A smattering of initiatives, not all of which involve banks, include:

* In Latin America, Spanish telecommunications giant Telefonica is partnering with the Inter-American Development Bank on a mobile banking initiative launching this month and targeting 175 million unbanked across the 13 nations in South America. The Spanish telecommunications giant says about 65 percent of the population has no access to banking services, although mobile-phone penetration is about 70 percent of those unbanked, compared to only 45 percent in 2006. Officials of Telefonica Europe, which is spearheading the offering, say the provider already offers mobile communications to 86 percent of the regions population. This makes the next jumpmobile bankinga no-brainer.

* In Kenya, M-Pesa by Vodafone has been making waves with a mobile-banking initiative launched in February 2007 that is bypassing banks altogether. In its first month, it added 200,000 new customers, and today boasts 1.6 million subscribers. Since the formal banking sector reaches just 19 percent of Kenyas 36 million residents, locals have long been searching for a trustworthy financial-services option. This one, SMS messaging, seems to have struck a chord with its sheer simplicity, says Aites Holland. Whats interesting in Kenya is theres no bank involved at all yet, he says. But they are ignoring the sheer numbers of the unbanked. Theres a huge scale of opportunity. M-Pesa, which stands for mobile money in the local vernacular, lets customers add credit to their account at some 1,500 shops and kiosks, where customers can also pick up sent cash. Customers can send credit to other mobile phones via a code-bearing text message. By comparison, Kenya has about 580 bank branches, according to the countrys central bank. Vodafone, like other service providers, makes money by charging fees on transactions. Customers pay about 45 cents to transfer money to another registered M-Pesa customer. Transfers to people who havent registered with the M-Pesa service cost between $1 and $6 per transaction, depending on sum. Signing up and money depositing are free, as is transferring airtime credits from one M-Pesa customer to another.

* In the Philippines, GCash uses cellphones to store cash credits transferred from other phones or purchased at a post office, kiosk operator or the office of a licensed operator. With their phones, customers make purchases and payments or withdraw cash as needed.

* In Nigeria, MoneyBoxAfrica, an initiative promoted by Nigerias Integrated Capital Service, is partnering with German vendor Paybox to roll out a mobile banking and payments system this summer. Some 80 percent of the nations population is unbanked. The partners hope the offering will expand across the continent to create the first truly pan-African mobile banking and payments system in 2009. The Mobiliser platform allows customers to remotely save money in accounts, add funds to their phones like a debit card, pay utility bills and tithes, buy insurance, send remittances to friends and relatives, withdraw cash at agents locations or ATMs, and obtain access to credit and investments.

* In Latin America and the Caribbean, remittance giant Western Union Corp. of Englewood, CO, is rolling out a cellphone service this quarter to enable workers in the U.S. to send money to relatives in Latin America. Fort Worth-based RadioShack Corp. and Dallas-based Affinity Mobile are part of the deal, which will allow customers to buy a prepaid Affinity mobile phone at any of RadioShacks 4,300 stores in the U.S., at a cost ranging from $19.99 to $79.99 each; the phone includes a stored-value card, which can be loaded with up to $2,500 and function as a debit card. The network in the U.S. includes RadioShack, 47,000 Western Union outlets and 65,000 convenience stores and pharmacies. Sending money is done through a cellphone transaction for a set fee, currently $9.99 to send up to $1,000, though officials say growing competition in the remittance field will force that fee to drop. Cash pickup is done at any Western Union office in Latin America or the Caribbean. This is a major, high-margin business: In 2004, workers in the U.S. sent a whopping $34 million to Latin America and the Caribbean, according to the Pew Hispanic Center. Some 43 percent of those Latino workers in the U.S. lack a bank account, the Pew Center says.

Strife-torn South Africa is becoming the petri dish of mobile-banking experimentation, with the three largest banks competing for 47 million South Africans, 25 million of whom are poor and live in rural areas with no bank branches. Though the nation boasts only 13 million bank accounts, with an estimated 48 percent of adults unbankedan astounding 30 million residents own cellphones. It is a strange case of a previously white-dominated society...that now has to embrace 25 million poor people who have been outside of financial services forever, explains the IFCs Dervishi. But the banks were pressured to do something and they realized it was something they should have been doing all along. So that initial resistance has disappeared. One bank has partnered with a mobile operator; another has teamed up with a telecommunications firm. First National Bank is joining forces with Clickatell to expand its Contact SMS alert services.

But the most innovative experiment, say observers, is Wizzit, an upstart launched in 2004 by South African banking consultant Brian Richardson that is rapidly gaining market share; Wizzit is a unit of South African Bank of Athens Ltd. and has attracted a 10 percent stake from IFC. Though only 200,000 South Africans have signed up for the service, Richardson is confident he will make a dent among the 48 percent of the adults who remain unbanked. The model allows customers to pay bills, store cash like a debit card, transfer funds and send remittances, although loan applications and payments are not yet an option.

Accounts can be opened in 30 seconds via a call center, and sold via Wizzkids, part-time workers who are spreading though the countryside like a swarm of locusts. Opening an account costs $5.50; buying groceries costs 25 cents; withdrawing cash at another banks ATM costs up to $2, depending upon the bank. Richardson expects the service to be profitable by the end of 2009, but that hasnt stopped it from expanding into Zambia and Eastern Europe.

The services uses a technology called unstructured supplementary-services data, or USSD, which acts much like SMS with a fundamental difference: Its an interactive technology that offers a constant link between user and network, so users can be confident a transaction has occurred in real time. Although the Wizzit markets itself as a true virtual bank with no branches of its own, it has a partnership with Absa Bank and Postbank for depositing cash and checks. Wizzit claims to be 30 percent cheaper or $2.80 lessthan an account at any of the four major brick-and-mortar South African banks; that tiny sum makes a difference when the average Wizzit user earns the equivalent of $257 a month. South Africa is a good laboratory for a bank to say, Im going to go after this and not just leave it up to the other players, says consultant Place.

Its an irony that undeveloped markets have leapfrogged past the technologies of mature markets, reversing the traditional flow of technology innovation. Until recently, developing world consumers tolerated third-rate technology and their role as the dumping ground for antiquated products and hand-me-down services.

But cellphone capitalism is changing all that. Encouraging economic growth through mobile commerce, a term in the development world that is known as inclusive capitalism, appears much more effective in poor nations than pumping in international aid money. In fact, several sources mention the success of Bangladeshi Nobel Peace Prize winner Muhammad Yunus, founder of Grameen Bank, whose microfinance movement has provided tiny loans to more than 90 million business people in the developing world, helping them dig themselves out of poverty.

Others point out that the potential to do the same is much greater with mobile banking, which is expected to add one billion more customers by 2013. That vision was not lost on Iqbal Quadir, a Bangladeshi expatriate now living in the U.S. who helped found in 1996 Grameen Phone Ltd., which has since started the careers of more than 250,000 phone ladies in Bangladesh, one of the planets poorest countries. Women use microcredit to buy $150 cellphone kits, each equipped with a long-lasting battery. The women become their villages phone operator, charging small commissions for villagers to make and receive calls. Soon, the entrepreneurs are expected to add cellphone bankingparticularly remittance servicesto their repertoire. Grammen Phone, which has morphed into Bangladeshs largest telecom provider, claims annual revenues of about $1 billion. The idea is being duplicated in Rwanda, Uganda, Cameroon and Indonesia.

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Micro Loans Foster Entrepreurship in Poor Countries

This is part of a Voice of America series on entrepreneurs throught the world. Micro credit and how it helps women is explored in the segment of the series. You can get to the other stories by clicking on the link at the bottom of this post. - Kale

By Barry Wood

The Grameen Bank in Bangladesh is a ground breaker. It lends almost exclusively to women. And its small business loans are almost always paid back.

Nobel Prize-winning Standard

Muhammad Yunus is the bank's founder and a hero in his country. Grameen was the first to lend on a grand scale to poor, aspiring entrepreneurs in the developing world. The venture into microcredit won Yunus and his bank the Nobel Peace Prize in 2006.

"It's fantastic news. We are all very excited about the good news. It excites everybody in Bangladesh and also the people who are involved in micro-credit around the world," Yunus said.

Melissa Carrier, at the University of Maryland, says Grameen's micro-financing has expanded the concept of entrepreneurship.

"Certainly Grameen Bank has given legitimacy to those kinds of micro-loans to local villagers," she noted. "And so the idea of entrepreneurship now is about doing for yourself. It's about raising chickens, and having cows, and knitting scarves and being able to feed your family."

Microlending in Kenya

Margaret Okoth runs a market stall in Nairobi, Kenya. She is benefiting from low-interest micro-loans from her village cooperative.

"(The cooperative) has recently increased its limit so that you can borrow 80,000 (shillings)," she said. "And if you take out that big a loan you'll really see your business grow."

In Kenya's post election violence, Okoth's stall was destroyed. But coop loans allowed her to rebuild - and also balance her business with her other job, as a wife and mother of 12.

Now, the Grameen model is being promoted by big lenders like the World Bank, in its discussions with developing countries.

African Issues

Dahlia Khalifa is a business specialist at the World Bank's International Finance Corporation. She says women in African countries face special issues.

"Often times we've seen, and there has been some research done especially in African countries, that women are not given the same consideration as men when they apply for a loan," she said.

That was the case in Egypt. Hoda Galal Yassa is one of Cairo's leading female entrepreneurs. She says women in the Arab world face a formidable barrier.

"Everybody looks at a woman...as a good secretary, a good assistant, maybe she can cook very well and make something from that," she said. "But to be a business woman, particularly in the industrial field, it wasn't easy or accepted easily by men."

Yassa started her detergent and other factories with funds from family members.

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Climate change to spoil poverty feat

from the Daily Star, Bangladesh

CA hopes Nobel Committee to raise the issue in world forums
Unb, Dhaka

Chief Adviser (CA) Fakhruddin Ahmed yesterday said poverty alleviation is a must for lasting peace and sustainable development, but climate change is a major factor in Bangladesh that casts adverse impacts on poverty.

The head of the caretaker government made the remark when visiting Chairman of the Norwegian Nobel Committee Ole Danbolt Mjos made a courtesy call on him at his office in the afternoon.

The CA said developing countries, particularly Bangladesh, are least responsible for climate change but worst sufferers from adversities stemming from climate change. He mentioned the back- to-back floods and cyclone 'Sidr' that wrought havoc on the country last year.

He cited a prediction that a third of the landmass of Bangladesh might go under water following sea- level rise due to global warming, blamed on greenhouse gas emission from the developed hemisphere of the world.

He said the government wants to advance by working with all, including private sector and non-governmental organisations, with the common objective of poverty alleviation and lasting peace.

The CA said adaptation and mitigation are being incorporated in the country's development strategy, which needs a lot of funds and resources. So, the world community, particularly rich countries, historically emitters of greenhouse gases, should come forward with contribution to the countries vulnerable to climate change.

He hoped that the noble committee would make aware the world forums of contributing to vulnerable countries to minimise the adversities.

The Nobel Committee chairman said bad climate newly added to poverty, which makes peace and poverty alleviation process risky.

“If you cannot fight poverty, you cannot win peace,” he was quoted as saying.

Thanking the Nobel Committee chairman for visiting Bangladesh, the CA said he can see for himself the activities of Grameen Bank, micro-credit and socioeconomic development.

Mjos said Nobel laureate Prof Muhammad Yunus and Grameen Bank are good ingredients for good things for Bangladesh that works for peace and fights against poverty.

The chairman said Grameen bank's role in women empowerment is remarkable.

Referring to the day of announcement of winning Nobel Prize by Prof Yunus, the CA said it was the great moment in the history of Bangladesh when people of the country burst into joy. Achieving the prestigious prize is a pride for the nation.

Nobel laureate Prof Yunus, who was present at the meeting, said it is the time now, not tomorrow, world community, particularly developed countries, should come forward in reducing the adversities of climate change, coming up with specific modalities as the year 2050 is far long.

Nobel Committee Chairman Mjos said Nobel prize enhances prestige, visibility and credibility of Nobel winner as well as encourages further carrying out his or her work for making contribution to people and the world.

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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.

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Brazil seeks help from Prof Yunus to develop microcredit programme

from the Daily Star

Brazilian President Lula da Silva has sought assistance from Nobel laureate Prof Muhammad Yunus to develop microcredit programme for the poor in Brazil, particularly for the poorest regions of the country.

He also focused on the poverty alleviation programmes of the Brazilian government when Prof Yunus met him at Alvorada Palace in Brasilia on Thursday, says a press release.

During the meeting, Prof Yunus briefed the president on the Grameen Bank programmes.

Prof Yunus, who visited Brazil from June 11 to 14 at the invitation of the Brazilian Senate, also addressed the plenary session of the Senate where he spoke of the activities of the Grameen Bank.

The speech was telecast live throughout the country on the Senate TV Channel.

Following the address at the Senate, Prof Yunus was received at Alvorada Palace by President Lula.

During the two-hour meeting attended by cabinet ministers and senators, they discussed development issues ranging from poverty alleviation, healthcare, food crisis, ways of increasing agricultural productivity, climate change and the environment and other common issues facing both Bangladesh and Brazil.

Prof Yunus briefed President Lula on healthcare intiatives of Grameen and sought his advice and assistance based on Brazilian experience to bring healthcare to the poor in Bangladesh.

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[Comment] From microcredit to social entrepreneurship

from the Toronto Star

Haroon Siddiqui

Call him the Gandhi of our times.

The Mahatma ended colonialism using non-violence. Nobel Laureate Muhammad Yunus is lifting millions out of poverty with microcredit (lending small amounts to the neediest). Now he's onto another revolutionary idea, "social entrepreneurship" (you invest not to make a profit but to do good, while still recouping your principal).

Yunus, like Gandhi, is humble in manner as well as dress: a simple long cotton kurta, shirt and vest. And wise, witty and patient.

When colleagues at his Garmeen (Village) Bank in Bangladesh grumbled that only 12,000 of the 100,000 beggars it lent money to had given up panhandling, Yunus responded: "Give them time; they are restructuring their business. They know which houses are good for begging and which ones are good for selling. They are into market segmentation."

The American-trained economics professor came to his calling by accident. In the 1970s, he loaned $27 to some destitute craftspeople, and witnessed two miracles: All used it well and none defaulted.

Garmeen Bank was born. Today, it lends about $1 billion a year (average loan: $160), to 7.5 million borrowers (97 per cent women), without collateral, and boasts a 99 per cent repayment record.

Garmeen inspired a worldwide microcredit movement. Toronto philanthropist Martin Connell was an early convert, establishing Calmeadow Foundation (I was once a director). On Monday, Connell had Yunus speak to Canadian philanthropists and bankers. There Yunus outlined his vision of a world without poverty.

"It's not utopian. The United Nations Millennium Goal is to reduce poverty by half by 2015. If the world believes that we can do that, it's just another step to eliminate poverty altogether."

When he called for more entrepreneurs to invest in socially responsible businesses, "people told me, `You are crazy. Why would anyone invest in a company that won't make money?' I said, `People are even crazier. They just give away their money.' Charity has only one life, whereas social entrepreneurship creates a cycle."

He got French food company Danone to make nutritional yogurt for Bangladesh kids. Garmeen gave local milk suppliers credit. The supply chain is working and Danone has recovered its investment.

Similar projects are underway with German, British and American companies.

Garmeen has 26 such enterprises. Among them: a mobile phone company (the largest in Bangladesh); a solar energy company (installing 7,500 home panels a month); and a clean water company.

He envisages a universe parallel to the capitalist free market: a new stock market for social businesses; a Social Wall Street Journal; business schools producing social MBAs.

Last year, he was urged to be a candidate for prime minister. The last two elected Bangladesh leaders, Sheikh Hasina and Begum Zia, both women but both facing corruption charges, had left a vacuum for the military to fill.

Yunus agreed but then withdrew. Why?

"I thought I'd form a corruption-free political party. I tried all my friends – professors, journalists, and business people. They all said, `No, it's a corrupt world.' And the ones who did want to join me were corrupt. So I gave up."

His fame has not saved him from being harassed at times at American airports.

As a Muslim, "you don't have an easy path. You are looked at differently. My name, Muhammad, doesn't make it easy ... But there are also lots of people of goodwill who are friends."

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Toronto hears 'banker to poor'

from the Toronto Star

Need can happen here, Nobel Prize-winning microcredit messiah tells business people

by Rita Trichur

Muhammad Yunus doesn't talk like a typical banker. He believes that access to credit is a fundamental human right.

Nicknamed Bangladesh's "banker to the poor" for motivating a global microfinance movement, the Nobel Prize-winning economist told a Toronto business audience yesterday the financial system shuts out nearly two-thirds of the world's population, denying the poor both opportunity and dignity.

Poverty is often perceived as a dilemma of the developing world, Yunus said, but the problem is alive and well in North America.

"You'll be surprised how many people in Toronto do not qualify to do business with the banks," he said in a keynote address at the 2008 Top Employer Summit. "In the United States, a neighbouring country, there are millions of people who cannot open a bank account."

He told conference delegates "poverty is not created by poor people. It is created by the system." He challenged his audience to inspire "institutional change."

A bank for the poor is a hard sell in Canada's financial capital, especially at a time when big banks are bracing for more credit losses. Still, Yunus makes a strong business case for allowing people to borrow with dignity

He established the Grameen Bank, or village bank, about 25 years ago in Bangladesh with a mission to eradicate poverty through microlending to destitute craftspeople.

Grameen Bank now has 7.5 million borrowers, about 97 per cent of them impoverished women. The bank lends out about $1 billion each year in small loans to help stimulate the most basic entrepreneurial activities, such as processing rice, raising chickens or selling eggs. And even with no required collateral or default penalties, Grameen Bank boasts a repayment rate of more than 98 per cent.

"Conventional banks' principle is, the more you have, the more you can get," Yunus said.

"We reversed it. We said, the less you have, the more attractive you become. If you have absolutely nothing, you get the highest attention."

The Grameen Bank model has been successfully replicated in more than 100 countries.

In late April, Yunus officiated at the opening of the first branch of Grameen America in New York City.

Grameen America, which already has 225 borrowers, makes loans ranging between $500 (U.S.) and $3,500.

"We follow exactly the same thing we do in the village in Bangladesh," Yunus said. "In all these months, not a single weekly instalment has been missed."

He is now receiving inquiries from around the country, including from cities such as New Orleans, Baltimore, Los Angeles and Newark. He believes this proves the need for microcredit is great, even in the world's largest capitalist economy.

Nevertheless, Yunus continues to encounter skeptics.

"People said that maybe microcredit is good for Bangladesh, but in a rich country, another context, it will be difficult. We always say, 'It is not difficult. People are people. People need money.' "

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'Unlimited potential'

from MIT

Nobel laureate Yunus tells MIT class of '08 they can 'change the world'

David Chandler, MIT News Office
June 6, 2008

2006 Nobel Peace Prize laureate Mohammad Yunus told graduating students at MIT's 142nd Commencement exercises on Friday that they "represent the future of the world," and urged them to spend at least part of their time in coming years creating a whole new kind of businesses to help make the world a better place.

Nature cooperated with MIT's Commencement, but only after threatening to put a serious damper on the ceremony: The opening processional was delayed a few minutes by rain that had been pouring down through the early morning, but the skies cleared just in time for the ceremonies to proceed and for 2,335 graduates to receive their degrees.

Citing his own in experiences in going against all conventional wisdom in the pioneering creation of Grameen Bank in his native Bangladesh--the forerunner of what is now a multibillion-dollar worldwide trend in microlending--Yunus said such businesses have a fundamentally different philosophy than conventional companies that see their prime obligation as the maximization of profit.

What's needed, Yunus said, is to "reformulate the concept of a businessman"--not to replace the present model, but to offer another alternative that people can choose to follow. Such new-style businesspeople, he said, would have as their goal not maximum profit but "achieving some predefined social objective."

Creating such alternative socially conscious businesses, he said, "will bring a big change in the world." And for Yunus, this is not just talk, but a history of real action: In addition to his now-famous bank, he has already created partnerships to start a variety of such socially conscious businesses. For example, he created Grameen Phone to bring cell-phone service to Bangladesh and other developing countries, where most homes have no electricity, plumbing or telephone service.

Yunus has also helped to start "social businesses" including one to make yogurt that has added nutrients to help the millions of malnourished children in Bangladesh, another to provide a low-cost health-insurance program, a company to provide safe drinking water "in a sustainable way to all the people who are faced with a water crisis," an eye-care hospital, a shoe company and one to produce insecticide-treated mosquito nets to combat malaria.
'A wonderful gift inside'

He has even teamed with the giant microchip manufacturer Intel to create a company that will bring information technology to third-world countries, for health care and education.

Every graduate of MIT, he said, has the potential to "design social businesses to overcome poverty, diseases, environmental degradation, food crisis, depletion of nonrenewable resources, etc." The problems facing the world may seem daunting, he said--as they did when he started his first business more than 30 years ago--but "big problems are often just an aggregation of little problems." And these little problems can often be tackled modestly, by setting up a "cute little business."

Such a business may seem like a small contribution, but "if it works out, the whole world can be changed by replicating it in thousands of locations." All people, he said, "are packed with unlimited potential" and carry "a wonderful gift inside them … Our challenge is to help the poor unwrap their gift."

MIT President Susan Hockfield reinforced the challenge to the 983 undergraduates receiving their bachelor's degrees and the 1,352 graduate students receiving master's and doctorate degrees. She described Yunus's message as "do-something optimism," which makes it possible to tackle a big, ancient problem such as poverty and also "allows you to look at a problem as big and new and tangled as energy and climate change, and react not with fear, nor paralysis, but with the analytical curiosity and rigorous creativity of a community of disciplined minds."

While MIT will miss these graduates, she said, "the world right now needs you."

Picking up on that challenge, Phi Ho, president of the Class of 2008, who has already spent time working with underprivileged children in southeast Asia, said that among the lessons he and his classmates have learned from the "unique experience" of MIT is to "find unconventional answers to the problems the world faces today." He and his classmates, he said, "are agents of change for the future."

Graduate council president Leeland Ekstrom added that the typical MIT attitude is to "refuse to accept a 'no,'" and always to want to "make it better, even if it's good enough."
'Sun or rain, it's still joyous'

When parents and friends first arrived at Killian Court on Friday morning and saw a downpour, some decided to stay indoors and watch the proceedings on closed-circuit television. But others were undeterred: "We started to watch indoors but we decided it wouldn't be as much fun as being out here," said Carol Loehmann, whose son, Greg, received his MBA.

Loehmann, who left Cheshire, Conn., at 6 a.m. with her family to make it to MIT in time, said that even with less-than-perfect weather, "It's a joyous occasion. Whether there's sun or rain, it's still joyous."

And many graduates found the Commencement address inspiring. "It was very idealistic, and I wish more people thought like that," said Timothy Mwangi, who received his bachelor's degree in electrical engineering and computer science. "He did make me think about trying to think a little bit more in a socially conscious way."

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Intel, Nobel Laureate to Bridge Tech, Finance Divides

from E Commerce Times

By Andrew K. Burger

Combining the technological prowess of a company such as Intel with the microfinance know-how of Nobel Laureate Muhammad Yunus, a joint venture between Intel and Yunus' Grameen Trust will begin making loans and sharing expertise with people in poor countries to help bridge the digital divide.

Intel Latest News about Intel and Grameen Trust are joining forces in an effort to bridge the financial and digital divides separating many of the world's most wanting from basic services and economic opportunities.

Joined via video link by Grameen Trust founder and 2006 Nobel Peace Prize winner Muhammad Yunus, Intel Chairman Craig Barrett announced that Intel Capital and Grameen Trust are forming a joint venture that aims to bring information and communications technology (ICT) and microcredit facilities to poor communities throughout the developing world.

"It turns out that information technology can follow on the work that Dr. Yunus did in Bangladesh. And in fact if you look, whether you're in Bangladesh or Bolivia or the remote areas of China or India, or even Malaysia, bringing technology in and allowing local rural residents to compete on an equal basis with those in urban areas is very, very important. If you've seen Dr. Yunus's book, Creating a World Without Poverty, he talks about this social concept," Barrett said.
Technology Providing Opportunities

Using the social business Over 800,000 High Quality Domains Available For Your Business. Click Here. model created and employed by Yunus in building Grameen Bank, the Intel-Grameen partnership aims to draw on Intel's expertise developing innovative information technology, as well as its financial resources, with that of Grameen in microfinance and community-economic development.

Grameen's microcredit and community development programs have reached some 7 1/2 million people in 73,000 villages throughout Bangladesh. The partners foresee a number of ICT-based services and entrepreneurship opportunities growing out of their nascent social business venture, according to Intel.

"Examples include remote villagers receiving medical attention through Internet connectivity, rural communities being able to order medicine locally instead of having to walk 10 miles to a hospital, and families being notified of monies received from relatives abroad," the company said.

"Both Intel and Grameen will invest funds and expertise into this joint venture. Intel will be investing through its venture capital group -- Intel Capital. Intel will also contribute with its technology expertise, and Grameen will bring in its extensive experience in creating economic development and income-generation opportunities at the village level to the joint venture," Kazi Huque, the joint venture's managing director, told the E-Commerce Times.

"The goal is to set up a nimble organization that can understand the social requirements and effectively deploy solutions locally. We will not be able to provide the exact amount of funding both parties invested into the joint venture."
Win-Win Proposition

The idea for the joint venture was conceived last September when Barrett met with Yunus in Bangladesh, Huque recounted. "At different times, we had talked internally within Intel on the use of microfinancing to make technology more affordable in the emerging countries. Separate from that discussion, Craig Barrett was in Bangladesh to launch the Intel World Ahead Program.

"During a meeting Dr. Yunus and Craig started a discussion on the concept of social business and how that could potentially apply for IT solutions targeted at the poor segment of the population. After a series of follow-[up] management meetings between Grameen and Intel, we agreed to form a venture where we would bring the expertise of both the companies for a common cause."

Coming together in common cause is a win-win situation for Intel, Grameen and the communities in developing countries it plans to work in. "Grameen's vision is to alleviate poverty. According to Dr. Yunus, this joint venture will create opportunities for poor people to rise above social and economic barriers. Technology-based services will provide the 'hand up' that people need to discover their full potential."

The joint venture aligns with the goals of Intel's World Ahead program, Huque noted, to use technology to improve education and healthcare Latest News about healthcare and spur economic development.

"It's a unique opportunity to be the first technology company in the world to test the variability of the social business model, injecting the discipline of capitalism and do good. Ultimately, this is about helping connect the next billion people, which is a key part of Intel's growth strategy," Huque said.
Testing the Social Business Model

The joint venture will be set up as a separate entity with the aim of implementing ICT solutions that address very specific social problems, Huque explained.

"The goal is to use ICT to provide specific services that target the poor population segment and would provide social benefits. We also believe that to sustain such solution, there needs to be a local entrepreneur earning a livelihood from such services and therefore has a vested interest. Project selection would therefore need to meet such guidelines, but at the end of the day, it's the technology, financials, individual incentives and social benefit that must align," Huque continued.

As altruistic as the venture's aims are, the intricacies and challenges associated with carrying out ambitious social and economic development projects have proven substantial, and have created backlash against organizations.

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Interview with Muhammad Yunus

from Middle East online

We started the Millennium with the war on terror, and all our resources, all our attention, all our discussions are concentrating on terrorism. Billions of dollars went into a war, which we have not achieved anything, notes Muhammad Yunus.


[The following is a transcript of an interview with Muhammad Yunus by Amy Goodman from Democracy Now!]

AMY GOODMAN: “Banker to the poor,” Muhammad Yunus is the Bangladeshi economist who was awarded the 2006 Nobel Peace Prize. Yunus shared the Nobel with the Grameen Bank, which he founded three decades ago. The microcredit program he pioneered has helped hundreds of thousands of impoverished Bangladeshis, mainly women, by providing small unsecured loans, which are then repaid. Yunus accepted the Nobel award in Oslo a little over a year ago. Muhammad Yunus is the first Nobel Peace Prize winner from Bangladesh. He has just come out with a new book called Creating a World Without Poverty: Social Business and the Future of Capitalism. Muhammad Yunus joins us for the rest of the hour in our firehouse studio.

Welcome to Democracy Now!

MUHAMMAD YUNUS: Thank you.

AMY GOODMAN: Before we talk about microloans, I wanted to deal with this terrible issue that has just arisen in East Timor. A fellow Nobel Peace Prize laureate, Jose Ramos-Horta, now in the hospital in Australia, he has survived an assassination attempt, two bullets to his chest and his stomach, though he’s in very serious condition. You know Jose Ramos-Horta.

MUHAMMAD YUNUS: I know him very well. He’s a very good friend. I have known him long before he received the Nobel Peace Prize. He was a very enthusiastic supporter of microcredit. He has been pleading with me to come to East Timor to start a program, and I did when he was the prime minister. And then, this is still running. I was shocked to hear this news, and I sent him a message, and we are all praying for his life so that he comes back to full health.

AMY GOODMAN: For those of you who may have missed it, the president of East Timor, Jose Ramos-Horta, as well as the prime minister, both, there were assassination attempts on their life. Xanana Gusmao was not hit. Jose Ramos-Horta was.

Well, Muhammad Yunus, explain microcredit. Explain the whole idea behind the Grameen Bank.

MUHAMMAD YUNUS: The idea is, an overflowing majority of the people in the world don’t have access to financial services from the conventional financial institutions, the banks, so they’re left to the loan sharks, moneylenders. So we know about moneylenders, loan sharks, all the time. We read about them, we hear about them, but don’t do anything about them. So it continues, it flourishes.

So in one of my experiences in Bangladesh, I saw an extreme situation in a village, where money lending was still going on and people are becoming victims, so I wanted to address that issue in that village level. So I made a list of people who were borrowing from loan sharks. When my list was complete, there were forty-two names on my list, and the total money they borrowed was $27. This is back in 1970s, early ’70s. And I was shocked that for such a small amount of money, people have to go through such a horrible experience. So I thought I can solve the problem. It’s very easy. If I give this $27, they can return the money to the loan sharks, and they’ll be free. And that’s what exactly I did. And it created such a sensation among them.

I thought if you can make so many people so happy, such a small amount of money, why shouldn’t you do more of it. So I wanted to do more of it by linking them with the bank. Bank said, no, bank cannot lend money to the poor people. So I’m with this issue: why can’t the bank lend money to the poor people? So for months I was struggle. Finally, I persuaded them by offering myself as a guarantor. I said, “I’ll sign all your papers. I’ll take the risk. And you give the money.” That was the beginning in 1976. And it worked.

So gradually expanded the program, but banks were not very enthusiastic about it. So I thought, why don’t I create a separate bank for them? So I created a separate bank, Grameen Bank, or Village Bank, and then expanded and expanded. It doesn’t need any collateral, first thing, no guarantee, no lawyers, no legal papers between the lender and the borrower. It’s a trust-based banking. People, particularly women, take small loans, who never did before had any experience of handling money. But for the first time, she takes a little amount of money that she has a—she can organize her courage to do that, and then go into earning money by investing this money, raising chicken, doing some handicrafts and so on, and pay back the bank in weekly installments. That’s what the microcredit is all about.

AMY GOODMAN: Why women?

MUHAMMAD YUNUS: I was complaining against the conventional banks. I said, “Why men?” 100 percent, nearly 100 percent of the borrowers of conventional banks in Bangladesh are men. So I raised the issue. They are not only wrong by rejecting poor people; they are also wrong by rejecting women of all class. So when I began, I wanted to make sure half the borrowers in my program are women. So this is how I started.

And it took a long time, because women themselves said, “No, don’t give the money to me. I don’t know anything about money. Give it to my husband.” I said, “No, that’s not what we want. We want you to look at that.” And we worked very hard to break the fear, because it’s a fear that she was supposed to—I mean, she was hiding behind, because she didn’t want to touch money, this is trouble. So, gradually we peel off the fear and build a confidence in her to try out with small money, $20, $30 of loans. And it worked. She got very excited. She wanted more and continued in it.

Once we achieved that goal of fifty-fifty, then we saw money going to the family through women brought so much more benefit to the family compared to the benefit when you lend the money through men. Women took good care of the money. Women transferred the benefit to the children immediately, improved the household and going towards a better life for themselves in a long-term vision. Men were mostly to enjoy right now, not in a long-term way, in a kind of a readymade way, so that sort of thing. So we changed our policy: we started focusing on women. Today, we have seven-and-a-half million borrowers in Grameen Bank in Bangladesh. 97 percent are women.

AMY GOODMAN: And who runs the bank? The bank is a for-profit?

MUHAMMAD YUNUS: Bank is a for-profit. It’s owned by the borrowers, so the profit goes back to the borrowers again, so that way it’s a full circle. It’s a corporate body. It has a management team, and I head the management team. There’s 27,000-plus employees, the staff of the bank, which go around around the country to serve these seven-and-a-half million borrowers and meet them physically within a week, because we do the business at the doorstep of the borrowers, so they don’t have to come to our office. Office, for us, to keep the records, not for our business. So we do the business at the doorsteps, so women feel very comfortable. She doesn’t have to go any place. She do the business at her place, and so on.

AMY GOODMAN: You have an interesting comparison in your book, Creating a World Without Poverty, to get a sense of the population density of Bangladesh. You squeeze all the people of the United States into Wisconsin, and it’s still not as dense as Bangladesh.

MUHAMMAD YUNUS: That’s fact, yes. It’s amazing how density of population can happen in Bangladesh. Another way I explain, if you take the whole world population, bring it to the United States, the density that you will create by putting six billion people in the United States, today density in Bangladesh is slightly higher than that. So you can imagine how much the density is.

AMY GOODMAN: And yet, since the Grameen Bank has been established, has the level of poverty changed in Bangladesh?

MUHAMMAD YUNUS: It has. It has. Poverty has been declining in Bangladesh very steadily. During the ’90s, poverty has declined on an average of one percent per year.

AMY GOODMAN: About half the people are poor?

MUHAMMAD YUNUS: Used to be more than that, 80 percent poor, and gradually it’s declining. We are one of those countries, I would say lucky countries in the world, which will be meeting the Millennium Development Goal number one, to reduce poverty by half by 2015. So between 2000 and 2015, the poverty level in Bangladesh will be reduced to half. And if we can continue with our progress, most likely that we’ll achieve that goal before 2015. So that’s a tremendous kind of excitement for us.

AMY GOODMAN: Muhammad Yunus, what was the effect of winning the Nobel Peace Prize, you and the Grameen Bank, on the work that you do?

MUHAMMAD YUNUS: It’s a wonderful thing. Of all the prizes in the world, Nobel Prize is unique in its position, the tremendous amount of excitement it generates in the whole world about the prize. The moment the prize is announced, every single newspaper in the world makes it a front-page news. Every television station, it’s a main news item. And people get interested to know what you do, how you got it, what is it that you have done over years. So it creates a lot of attention and awareness.

We have been trying to explain why microcredit is so important for poor people to change their life, improve their income, but not too many people paid any attention to it. The moment the Nobel Peace Prize was announced, everybody wants to hear you, what you did, how you did it. And everybody asks, how can we do more? Can we do something about it? So all the doors which you tried to knock and never opened suddenly open, and people are willing to talk and go from there. So I’m taking, too, advantage of that, and now that I have the opportunity to discuss and explain this so important piece in reduction of poverty, so I’m doing that, and I’m getting good response from people.

AMY GOODMAN: Well, while everyone praises the cause of helping poor women in Bangladesh, some critics say microcredit is being misconstrued as a way of ending poverty. After you received the Nobel Peace Prize last year, we spoke with Vandana Shiva, the world-renowned environmental leader, physicist, ecologist. I wanted to play just an excerpt of what she had to say and then get your response. This is Vandana Shiva.

VANDANA SHIVA: I’m very happy that the Grameen Bank and Yunus got the Nobel Peace Prize. I would only say, let us not think this is a solution to every situation that creates poverty. It’s a solution in a particular context. But it cannot be the solution when land is being grabbed from the peasants and leaving them in poverty. For example, in this whole land grab under the special economic zones that’s taking place in India right now—and foreign direct investment in real estate is part of the driving force for this—that cannot be solved by microcredit. It needs a solution in terms of respecting the land rights of the peasants and not treating land of the poor as something that can be grabbed by the rich.

The recent report of Helsinki actually gives worse figures than Muhammad Yunus gave: one percent of the world’s wealthy are owning 80 percent of the world’s wealth. And I would say, they are then turning that wealth into owning 80 percent of the world’s resources, real material natural resources, the land, the water, the biodiversity, the forests, the minerals.

I think there’s a second context in which microcredit could actually create a problem, and it’s the kind of context in which we have been forced to work. As credit for unaffordable seeds moves nonrenewable seeds, genetically engineered seeds, hybrid seeds into rural areas in India, we are seeing a new kind of debt trap created.

Farmer suicides, of which there have been 150,000 in the last decade of market opening made possible because of credit, micro and macro. 150,000 is a large number of peasants being wiped out. I have called this a genocide. And it’s being made possible by putting money available, credit available, so that they could get seeds of Monsanto. In fact, it’s a debate, old debate, I’ve had with Yunus, because there was a time he was going to use microcredit to move GM seeds and Monsanto seeds to the Bangladeshi women. And we had to have a debate, and thank goodness he backed out of that agreement. […]

Credit, loans, money circulation cannot solve the problems of alienation of participating in earth democracy. Privatization of water leading to a high cost of water could be financed by flows of credit, but the solution to access to water is rights to water. Rights cannot be substituted by credit. Rights need to be recognized as rights and collective rights to the common wealth of this planet—the atmosphere, the water, the seeds, the biodiversity. That needs a rights solution. Credit can come after that rights solution has been offered.

AMY GOODMAN: That is Vandana Shiva. Muhammad Yunus, your response?

MUHAMMAD YUNUS: Well, there are several things, and that one is—it’s a misinterpretation of microcredit. We are not saying that this is the solution for all poverty. We are saying this is an important item in solving poverty. Poverty is multidimensional thing; it’s not a single thing. So microcredit is a fundamental issue in bringing financial services to the poor people. What about the education? What about the health? What about the political rights? What about the human rights, and so on? So all these things have to be brought in. We deal with only one aspect: microcredit. And we are saying microcredit should be accepted as a human right. It’s so fundamental, so basic thing to it.

About GMO, about the—we never did that. This is—

AMY GOODMAN: The genetically modified seeds.

MUHAMMAD YUNUS: Genetically modified seed. This was also a misinterpretation. We were accused that we are giving microcredit to buy the genetically modified seeds. Garmeen Bank works with women, with the landless families, extremely poor. They are not farmers. We deal only with women, 97 percent women, only with landless people, extremely poor people. They are not anywhere near farm owners, the farming. They don’t buy seeds in the market. So we have no reason why we should give microcredit to them to buy the seeds, when they don’t have own land at all. So this is an extension to accuse Grameen Bank that they are doing the wrong thing.

AMY GOODMAN: But the idea that others would embrace it as a way to say this is bringing justice to very poor people, when she says it’s about access to water, not credit, that counts.

MUHAMMAD YUNUS: I was saying that everything is important. Access to credit is important. Access to water is important. Access to health is important. Access to education is important. Nothing is unimportant. I’m saying we do everything we can. Don’t ignore the others. Just because you do one thing, it’s not because the others are not important. Everything is important. So let’s do it all together. That’s what my new book, Creating a World Free from Poverty, is talking about. It’s creating a different kind of system.

Poverty is not a created by the poor people. Poverty is created by the system. The system includes everything, the institution, the concept, the policies and everything. So we are saying we have to address those things. We are—in our work, in Grameen Bank, we are addressing the financial system. But there are many other systems which needs to be addressed.

AMY GOODMAN: Explain your idea of social business.

MUHAMMAD YUNUS: Yes, and I am saying that the conceptual framework of capitalism itself is at fault. That’s what created all the problems. So we have to address that also. And the concept of business, for example, only way the concept of business is defined in a capitalist theory is a business to make money. Profit maximization is the sole mission of business.

And I’m saying this is a misinterpretation of a human being. Human being is not a machine. Human being is not a robot. It’s not a money-making machine. A human being is much bigger than making money. Money-making is an important part of a human being, but certainly it’s not the totality of human being. Human being is much bigger than that. It’s also caring being. It’s a sharing being, wants to make a difference in the world. That part is not included in the business world, in the economic world.

AMY GOODMAN: Explain the example you begin Creating a World Without Poverty with, and that is the Grameen-Dannon relationship.

MUHAMMAD YUNUS: Sure.

AMY GOODMAN: That’s Dannon yogurt.

MUHAMMAD YUNUS: That’s right. So I’m saying there should be at least one more type of business in order to justify the totality of human being. This is a business dedicated to others, not to yourself. The current business is all dedicated to “myself,” everything. I am the center of my business. I gain. So I’m reversing that, creating another business calling, social business, that’s dedicated to others completely and nothing for me. So it’s kind of coming together. We can create those kind of businesses, where it’s a non-loss, non-dividend company with a social objective.

We created several companies, one of them that you mentioned, Grameen Dannon Company. Dannon is a big yogurt company and big water company and so on. But we created a small company in Bangladesh in collaboration with Grameen. This is designed as a social business. The company produces yogurt, but for a specific purpose, to bring nutrition to the malnourished children of Bangladesh. All the micronutrients which are missing in those millions of children in Bangladesh are put into this yogurt, the vitamin, iron, zinc, whatever is missing, into the yogurt—and it’s a fortified yogurt—and make it very cheap so that the poorest children can afford it. And once they eat this as a snack, because it’s a delicious snack that they eat—they love it—so, gradually they will regain their health. The company promised that they will not take any dividend. Grameen will not take any dividend out of it, and Dannon will not take any dividend out of it. Entire thing is dedicated to the social objective. So this becomes an example of social business.

We can create healthcare programs. For example, in the United States, 47 million people don’t have health insurance. We can create a social business to bring social—health insurance to those people, because money profit-maximizing companies don’t want to get there, because they have better alternative to make money, rather than giving health insurance to the people who cannot afford it. So we said this is a case for a social business.

Many people don’t receive healthcare programs in many, many countries around the world. We can create social businesses. There are many diseases in the world, very tough diseases like cholera, typhoid, where the vaccines are available in designs. The whole invention has been made. But it’s not produced because it doesn’t make money. So with a social business, we can create the cholera vaccines, we can create the typhoid vaccine. There are six such what they call orphan diseases, where the vaccines are available in designs, but nobody produces it, because it doesn’t serve the poor people—I mean, it doesn’t serve the interest of the businesses.

AMY GOODMAN: And those diseases are?

MUHAMMAD YUNUS: I cannot give you the whole list. I can mention two: one is typhoid, another is cholera.

AMY GOODMAN: In this country, are there social businesses that you’ve been involved with?

MUHAMMAD YUNUS: Not yet. Just beginning. One, we created, Grameen America, it’s a social business, because we want to bring the financial services to people who go to the check-cashing companies. Millions of people in this country cannot open a bank account, because banks will not consider them worthwhile to open a bank account for them. They are too small for them, so they cannot open a bank account. When they receive a check from their employer or from the government, they have to go to the check-cashing companies and pay very dearly to get their check cashed. Their thousand-dollar check should have generated $1,000. That doesn’t do it now, because they cannot have a bank account. So we want to open that.

And there are many, many payday loans. You see the advertisements and the commercials in the newspapers and televisions. Payday loans don’t have to be. And you pay high interest rate on payday loans. This is another way of ripping you off, so—because financial institutions, formal financial institutions don’t come into it. There are lots of pawnshops around. So we said we’re going to address that by designing a financial system and social businesses, and address that. So we created this Grameen America and started in Queens, in Jackson Heights in New York.

Once we developed a prototype, we can take it everywhere. That’s what we’re looking for. And there are many more social business funds. We are creating a social business fund. Those who would like to invest in social businesses in the United States, elsewhere, in terms of health insurance, in terms of microcredit, in terms of financial services, in terms of housing, this is the fund, will be available, whoever can come up with the brilliant idea, because it’s a question of designing an innovative idea in a social business, to address all the problems we see around us.

AMY GOODMAN: Muhammad Yunus, I wanted to switch gears a bit. In your acceptance speech for the Nobel in Oslo in 2006, you said poverty is a threat to peace. You also criticized the Bush administration’s so-called war on terror.

’Til now, over $530 billion has been spent on the war in Iraq by the USA alone. I believe terrorism cannot be won by the military action. Terrorism must be condemned in the strongest possible language. We must stand solidly against it and find all the means to end it. We must address the root cause of terrorism to end terrorism for all time to come. I believe that putting resources into improving the lives of the poor is a better strategy than spending it on guns. - Muhammad Yunus in Oslo, receiving the 2006 Nobel Peace Prize.

AMY GOODMAN: The effect of the war in Iraq?

MUHAMMAD YUNUS: Yeah, it’s—my first comment would be, we started this millennium, 2000, with a tremendous amount of euphoria, tremendous amount of excitement. Cold War is out, and things are taking to shape. Now we can put our resources, our attention, our policies to solve the problems of poverty, diseases and all those things. And we adopted in the Millennium Summit in New York City the Millennium Development Goals, beautiful goals. For the first time in human history, all the nations of the world got together and decided that we want to reduce poverty by half by 2015, in fifteen years’ time. It’s a tremendous amount of exciting decision. And that was a starting point.

And a few years later, couple of years later, we start with war, war on terror, and all our resources, all our attention, all our discussions are concentrating on terrorism. Forget about what it’s all about. So we derailed ourselves completely about creating a new millennium, creating a new society, changing the world with the technology coming in, with all kinds of brilliant things on the table. We could have done that, but we completely removed ourselves. Billions of dollars went into a war, which we have not achieved anything. Terrorism didn’t disappear.

I said terrorism—we have to address the basic issues of terrorism. If there’s a frustrations among people for something—either it’s an economic frustrations or it’s a political frustrations or some sense of deprivation that we are not being listened to, terrorism—it will be good breeding ground for terrorism. So why don’t we address those issues, political issues, economic issues, rather than bring the gun? Gun cannot stop terrorism. It only put the terrorism underground for awhile. It will come back in a more frightening way. So instead of trying to conquer it by guns, why don’t we go as a human problem, solve it in a human way, address those issues and solve them one by one, piece by piece? It could be done. With all the good will in the world, we could do that. So this is what I would say the most damaging thing that we have done so far.

AMY GOODMAN: What is your assessment of President Bush’s effect on the world?

MUHAMMAD YUNUS: Well, he has created a very negative image of the United States. People have not much respect in the rest of the world about the leadership, because you—like it or not, United States is the leader of the whole world, because of your technology, because of your financial power, your leadership and innovations and so on. And people look forward to you to lead them, lead the whole world.

Now, people don’t look forward to look at you, because you led them into wrong things. So people are kind of looking at United States in a very suspicious way. Is it good for us, or they are leading us to more difficult things? So that’s how I think the Bush administration will be remembered, that it has created a lot of question marks in people’s minds around the world about the leadership of the United States.

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Concept for world's poor aids richest nation on earth

from CNN

NEW YORK A bank operating on a concept that has lifted thousands of people out of grinding poverty in the developing world has set its sights on helping the poverty-stricken in America.

The Grameen Bank rose from humble origins in the impoverished South Asian country of Bangladesh to win the 2006 Nobel Peace Prize. It offers small loans to let poor people start their own businesses, a concept known as microlending.

With the threat of a looming recession, the subprime mortgage meltdown and tougher standards by lenders, poor Americans deemed unworthy of credit by commercial banks now have somewhere to turn.

The bank's concept is simple. Credit is a basic human right, says founder Muhammad Yunus. Offer even a small credit and a person will work out how to best use it to break free of poverty.

Last month, Grameen Bank opened a branch in New York City's Jackson Heights, an immigrant enclave just miles from the global center of finance, Wall Street.

It hopes to expand it to other parts of the country soon.

"People will say this can work any place -- in any city in the United States -- if it worked right here in New York City," Yunus said.

It certainly helped Elizabeth Tordoya, a Bolivian immigrant, who opened a store last year but needed an additional $3,000 to add to her inventory.

Because of her weak credit score and limited English skills, she had trouble securing a traditional bank loan.

"Our customers are really people who are the unbanked in the United States," said Ritu Chattree, vice president of Grameen America. "There are about 25 million people in the U.S. with no relationship with a conventional bank. And so the only access they can get to credit are predatory loans at rate