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.