CREDIT SUISSE SALON Microfinance—04 Photo: Hans Schürmann Hans Photo: Muhammad Yunus travels the world to speak about microfinance and social enterprise. This interview with Professor Yunus took place at the Liechtenstein Dialogue at the University of Applied Sciences Liechtenstein in Vaduz. CREDIT SUISSE SALON Microfinance—05

Consigning Poverty to the Museums In the mid-1970s, economics professor Muhammad Yunus realized that microfinance could be an effective tool in the fight against poverty. He and his Grameen Bank went on to receive the Nobel Peace Prize in 2006. Yunus has expanded his cause and is now making a case for social business enterprises.

Andreas Schiendorfer: On 1 October 1983, this sense it can be considered a destroyer the poverty line. Where Bangladesh is con- you founded the Grameen Bank in of human rights. But when you get to cerned, I am confident that we will meet Bangladesh. How did you celebrate your the point where poverty has deprived half the millennium target of the United Nations, 25th anniversary? the world’s population of their fundamental namely to reduce the number of people Professor Muhammad Yunus: To be human rights, this represents a major living in poverty by half by 2015. honest, we didn’t. The principle of Grameen threat to world peace. Poverty leads to the Although you have no doubt explained Bank, namely the granting of microcredits loss of hope, something that often drives this on many occasions, could you to poor rural communities not previously people to acts of despair. To my mind, it is briefly describe how your work on behalf considered creditworthy, actually goes back a more dangerous threat than either ter- of the world’s poor began? to 1976. So really we have been around rorism or religious fundamentalism. Muhammad Yunus: When I was studying for 32 years. But our main celebration came Where are you today in your fight in the US in 1971, the struggle for inde- on 10 December 2006, when we were against poverty? pendence in Bangladesh – which had been awarded the Nobel Peace Prize. Public rec- Muhammad Yunus: The Grameen Bank part of the newly founded country of ognition of our system was a source of great currently has more than 2,300 branches, Pakistan since 1947 on account of the pop- delight and satisfaction for us. For many approximately 25,000 staff, and almost 7 mil- ulation’s Muslim majority – had just begun. years, financial experts had been opining lion borrowers. The repayment rate stands When I was born, the “Land of the Bengalis” that it simply could not function, as it at 98%. Our philosophy is now applied in was still part of British India. I returned was based on trust alone rather than the most countries around the world – by home to do my bit toward building up our provision of collateral. the end of 2006, microfinance had helped very poor country as a Professor of Eco- The Grameen Bank and you personally 100 million families around the world – even nomics at the University of Chittagong. received the Nobel Prize not for in the United States, where this cause I tackled the question of poverty not as a economics, but rather for peace. Does has been espoused by Hillary and Bill Clinton, politician, teacher, or researcher, but be- your bank contribute toward peace? among others. Our internal surveys have cause I was surrounded by poverty every- Muhammad Yunus: I am absolutely shown that 64% of female borrowers who where I looked, and could not close my certain that it does. Poverty deprives the have been supported by us for at least five eyes to it: In 1974 and 1975 our country individual of any control over his fate. In years have pulled themselves above was ravaged by a catastrophic famine. CREDIT SUISSE SALON Microfinance—06

something that those who live below the “Every person has their poverty line are unable to provide. None- theless, at some point the Agriculture Bank expressed its willingness to set up its own skills. All that is own branch in Dobra – the Experimental Grameen Branch of the Agriculture Bank – needed is to ensure that for this purpose. Although we achieved close to a 100 % repayment rate, there was still resistance to the idea of extending the skills that already this activity to other regions. Ultimately, the only way we could proceed was to set exist find their expression.” up our own bank, the Grameen Bank. What makes us stand out as a bank is that we don’t wait for customers to come to us, but instead we approach them. Grameen means “village,” and that means we are closely involved and that we show the necessary patience. Why is it almost exclusively women who benefit from your loans? Muhammad Yunus: The motivation to repay a loan is particularly strong with women. In addition, women are determined to invest the profit they earn in the education of children and the improvement of their living situation (the Grameen Bank also When I saw how an incalculable number of wonderful bamboo chairs. However, she grants construction loans), while men are people were starving to death on the streets, had no way of escaping her poverty. The more liable to use profits for their own I realized how far removed our economic moneylender provided her with the neces- ends. At the same time, this also enabled theories were from the reality of the impov- sary finance to obtain her raw materials, us to improve the social situation of women. erished population. I decided to undertake but only on the condition that she sold her For example, we will only grant a loan a case study of poverty in the neighboring chairs to him, and at a price determined if a woman belongs to a group of five mem- village of Jobra with my students, with a by him. This unfair arrangement and the bers. This produces a positive kind of group view to finding a practical way of improving extortionate interest involved ensured that pressure, but also a feeling of solidarity. the local situation. her income remained at a derisory two Women who had previously barely been This catastrophic famine is still fresh in the pennies per day. We found 42 victims of able to leave their house ended their minds of many people. this kind of money-lending practice in the isolation and found friends. Several of Was it the aid provided by the industrial- same village. The overall sum required these groups then formed themselves into ized nations that was insufficient? to extract them from this vicious circle was a center. Women learned to organize Muhammad Yunus: Bangladesh was 856 teka – less than $ 27. I paid this paltry themselves, demonstrating great aptitude and remains grateful for any help provided sum myself. This enabled the women to for this task. “16 principles” were jointly to it. But philanthropy is not the right way sell their products freely, to set their prices established that members of the bank would to solve the problem of poverty sustainably. according to demand, and thereby gen- have to adhere to. For example, this Similarly, the development programs that erate significantly higher revenues. means that not only do we work to abolish aim to improve education and infrastructure It seems breathtakingly simple. But you the “curse of dowry” and child marriage, do not reach those most in need. The still had to convert these findings into a we also promote family planning. greatest misunderstanding of all is the gen- credit-lending system … Have there been adjustments to your eral assumption that we need to help Muhammad Yunus: Indeed. And this conceptual model with the passage poor people to develop new skills. All that was much more difficult than I ever thought of time? is needed is to ensure that the skills it would be. We couldn’t find a single bank Muhammad Yunus: Little has changed that already exist find their expression. prepared to grant loans to poor people, in principle, but the bigger the Grameen Every person has their own skills. even though we were only talking of Bank became, the more it became clear What specifically did you find out in Jobra? amounts of up to $ 30. They said they that we would have to adapt better to the Muhammad Yunus: We encountered a couldn’t do such a thing without the cor- prevailing local parameters. For this reason woman named Sufiya Begum who weaved responding security – and obviously that is we introduced a more flexible system in CREDIT SUISSE SALON Microfinance—07

2001/2002 to enable us to react faster. Muhammad Yunus: Social businesses For example, we now support borrowers in are still run according to commercial criteria – providing for their old age, and have set up in other words they have to be self-supporting a special savings fund to protect the and have a corresponding degree of Schürmann Hans Photo: family from the negative consequences of efficiency and cost awareness – but inves- someone dying. Whereas earlier we re- tors receive no profit, only their investment quired a fixed interest rate of 20% for a back. The goal of all these companies is company loan, to be repaid in weekly the maximization of social benefit. Specifi- installments, and 8% for a construction cally, the joint venture with a large French loan, we can now tailor rates more flexibly foods manufacturer, Grameen Danone, to the situation of the individual provides the rural population with yoghurts borrower. In 2004 we launched a program that are enriched with vitamins and other for the poorest of the poor – the beggars – nutrients. It not only creates new jobs, but to whom we lent $ 15 on an interest-free simultaneously improves the quality of chil- basis, leaving it up to them when and how dren’s health. Grameen Health Care Serv- much they would repay. The success of this ices is setting up eye clinics throughout the From 1976, Muhammad Yunus scheme has been sensational: country in which the treatment tariffs are (born 1940) began building up the We now have more than 100,000 so-called structured according to the financial cir- Grameen Bank in his homeland “stumbling members,” of whom a tenth cumstances of the patient. of Bangladesh, granting microloans have given up begging and are working A pioneering experiment in your view? to the country’s poorest citizens full-time as traders. Muhammad Yunus: I have great faith in and thereby enabling them to live a Meanwhile, the Grameen Bank has grown social companies, not least because I see human existence. An economic into a group of considerable size … a fundamental willingness everywhere scientist by training, Yunus has Muhammad Yunus: The battle against to support them. One day they will end up received countless awards for his poverty has actually led to the founding of being listed on a special social stock ex- work, including 26 honorary 25 Grameen companies, solely on the change, making a significant contribution to doctorates and the Nobel Peace basis of practical requirements. For ex- eliminating poverty alongside mankind’s Prize in 2006. His latest book, ample, Grameen Shakti provides our bor- existing instruments. “Creating a World without Poverty,” rowers who live a long way away from a You are now 68 years old. Have you turned in which he explains the system public power supply with solar power de- your thoughts toward the future of the of social businesses, received the vices. Grameen Uddog has dedicated itself Grameen companies when you yourself are Corine Future Award in 2008. to the export of handwoven Grameen no longer actively driving them forward? Check textiles since 1994, while Grameen Muhammad Yunus: Microfinance institu- Shamogree, founded just two years later, tions generally, and the Grameen Bank in sells these on the domestic market. Par- particular, are now so well established that ticularly noteworthy is Grameen Phone. they function without input from me. There This joint venture with a Norwegian com- is still a way to go where social companies pany is a leading player in the supply of are concerned, but I’m a long way from mobile telephones in Bangladesh, and has being too tired to continue… now become the largest private company in What other goals do you personally want the country. Around 300,000 “telephone to achieve? ladies” have made their mobile telephones Muhammad Yunus: I am working to available to other members of the village, achieve a world in which there will be thereby making a very good living for a a poverty museum in every country, so that number of years. The level of telephone people will be able to remember the time ownership has now become so great that when poverty was a widespread affliction. the telephone ladies have had to move into And everyone will wonder why it took so other areas, such as the Internet. It has long for this bane of mankind to be finally been demonstrated clearly that poor people banished forever.  are perfectly capable of using the latest technology. By establishing Grameen Danone and Grameen Health Care Services you have now taken things a step further. What are these “social business enterprises?”