Friday, January 18, 2008
Muhammad Yunus @ Commonwealth Club Writeup
I had the good fortune to see Muhammad Yunus speak yesterday at the Commonwealth Club, and he was very inspiring. He spoke a bit about his overall philosophy of poverty reduction, some about Grameen's new corporate joint ventures (such as with Danone), and about Grameen Bank's new program for beggars. My favorite moments were his repeated entreaties to study poverty now so that we would have materials for the Poverty Museum in the future, when poverty has been completely eliminated from day-to-day existence and is only a relic of the past.
He started with some history of himself and Grameen Bank, which in itself is a fascinating story. In 1976, after degrees from Dhaka University and Vanderbilt University, he encountered many poor women in the village near where he worked. So he started lending them very small amounts of money. Seven years later, in 1983, Grameen Bank (aka Village Bank) was launched as an actual bank, designed to serve the poorest of the poor.
Dr. Yunus framed his talk with an amusing anecdote. A friend said, "All you're doing is giving away small amounts of money? And for this, you get a Nobel prize? That's too easy!" Dr. Yunus went on to say that it was simple -- just take everything you know about banking, reverse it, and collect your prize! And that was the basic idea of Grameen Bank.
Banks say: the more you have, the more you can get
So Grameen said: the less you have, the more attractive you are
Banks want a lot of collateral, but the poor have none. No collateral, no guarantors.
Conventional banks are owned by rich men, but Grameen was owned by poor women. One of the things that led to its increased education program was that some of the women that Grameen talked to in local communities said, "No, no. Don't give me a loan. I don't know what to do with money." In fact, some of them had never even touched money in their entire lives. So the staff is trained to recognize that kind of woman as the ideal client. That is the person for whom a small loan will make a huge difference.
Building on that, Grameen added an education program. So children of clients are encouraged to go to school. And when these children did attend, they excelled. Some of them were at the very top of their class. And for those who were eligible for college or higher education, a student loan program was instituted. Last year, Grameen gave 51,000 scholarships, and now has 21,000 student loans available; the only qualification is enrollment in college or university.
The next part of his talk dealt with Grameen's program toward beggars. The prevailing theory about microcredit is that it is only for "entrepreneurs". Dr. Yunus contended that all people are entrepreneurs; hard work and creativity are basic human traits.
After examining their local community, the Grameen team realized, by talking to many beggars, that in each of their lives there was a "tipping point" that forced them into a life of begging rather than formal work. So they started a program of very small loans and education for the beggars. They would give beggars small items to sell -- food, matches, household items. With a twinkle in his eye, Dr. Yunus asked, "Since they were going house to house anyway, why not take a few things to sell? "
This program quickly grew to serve 100,000 beggars; and now 10,000 of them have completely stopped begging and earn their livelihood through selling these small items, or becoming personal shoppers for the households they previously begged from.
The bigger picture in all of this was examining the fundamental nature of business. Is it just to maximize profit? From an economics perspective, this is an incomplete model; it's a one-dimensional view of human nature. To augment this model, Dr. Yunus suggests we also need "social businesses" measured by the degree to which they help, just as for-profit businesses are measured by profit.
(Personally, I am also in favor of a hybrid approach; I think for-profit businesses are realizing they can create premium products and have happy employees by adding social change into their product mix. But this is my personal sidebar. Back to the talk...)
One of the social businesses started was Grameen Danone, a joint venture between Grameen Bank and Groupe Danone, on of the largest food companies in the world. Grameen Danone's sole mission was to feed the hungry by selling yogurt fortified with vitamins and nutrients as cheaply as possible. If they had a penny of product, they didn't need 99 cents of marketing and sales - they could just sell it for a penny. This business was solely measured by how many people would be prevented from going hungry and malnourished. In fact, the mission was so focused that Dr. Yunus insisted they go one step further than biodegradable containers. The containers needed to be edible! If the poor were paying, they should get something from it.
At a higher level, these social changes need to be measured, and a clear and agreed upon metric is the set of UN Millenium Development Goals. One of these goals is reducing poverty in half by 2015. In the new beggars program, these loans are not handouts, they are real loans. They must be paid back, but the beggars can pay back a penny at a time, even once per year. No interest, no time limits. And this program has had 60% repayment so far!
So if 2015 is the date at which poverty will be reduced by half, Dr. Yunus is already talking about plans to open a Poverty Museum soon after 2030. The grin and twinkle in his eye re-appear frequently, particularly with this pronouncement.
The final questioner from the audience said that Muhammad Yunus was a great inspiration to so many people. So who was his inspiration? He simply replied that the borrowers were his inspiration. Talking to the people whose lives had been transformed was his greatest inspiration.
EDIT: This also posted on the Madera Group blog.