“They cripple the bird’s wing, and then condemn it for not flying as fast as they.” –Malcolm X
On Friday evening, I was fortunate enough to attend a talk by Muhammad Yunus, Managing Director of the Grameen Bank, at the London School of Economics. It was humbling to have the opportunity to meet someone who has done so much to change the lives of so many. On a more personal level, Professor Yunus is a deeply engaging speaker, with a great sense of humour.
Profit Maximisation: The Means or the End?
A central theme of the evening was about changing mindsets and challenging conventional ideas. Time and time again, economics professors tell us that the objective of business is profit maximisation. Professor Yunus, however, says that taking into account profit maximisation alone is a robotic view of the world that fails to take into account the multi-dimensional nature of humanity. Making money is the means, but somewhere along the line, society has made making money the end goal.
Challenge Existing Conventions
The business model of the Grameen bank defies traditional banking conventions. In fact, Professor Yunus said that prior to starting the Grameen Bank, they looked at how conventional banks did business, and then they did exactly the opposite!
In the traditional lending model, the more you have, the higher retention you get. Grameen Bank turned that model on its head, lending money to those who are most impoverished, what one might describe as a trust-based banking system, one that includes no collateral, no guarantee and no lawyers.
When Grameen first started, one of its objectives was to make change the ratio of male and female borrowers to 50:50, which it achieved six years later.
Not only do conventional banks not lend to poor people, they also do not lend to women. In 1970, less than 1% of borrowers were women, and in 2008, the situation remains largely unchanged.
In many places in South Asia, the man as the head of the household controls the division of the family income. By lending money to the women, Grameen empowers women and overturning the voice of history that says that women have no place but to look after the house and take care of the children. Now women are empowered to take decisions for their family and for their children.
After Grameen achieved the 50:50 rule, they set up opening up lending even further. Remarkably, today, 97% of Grameen’s borrowers are women.
Just some of Grameen’s achievements in furthering education include:
- Today 100% of borrowers’ children are now attending school.
- In 2007, 51,000 children were given scholarships.
- 21,000 students are engaged in higher education programmes, with scholarships being offered by Ivy League universities, including Harvard and MIT.
The Five Star System
Grameen has approximately 2,500 branches in Bangladesh alone. Each branch is awarded stars using the five star system, depending on its achievements.
- Green stars are awarded when a branch achieves 100% repayment
- Blue stars are awarded once the branch becomes profitable.
- Grameen does not offer handouts, so the first task is to mobilise deposits. When the branch has generated surplus deposits, they are awarded a violet star. This means that they are not dependent on handouts even in emergency situations
- Amazingly, the brown star is awarded once every child of every borrower is in school. This is a remarkable achievement when you consider a branch has on average 4,500 borrowers.
- And the fifth red star is when each of those 4,500 has worked themselves out of poverty. In this way, Grameen empowers people to work themselves out of poverty at no cost to the taxpayer.
Criticism of Microcredit
One of the criticisms of microcredit is that it requires an entrepreneurial spirit, so only the entrepreneurial poor are able to work themselves out of poverty.
Professor Yunus addresses through his firm belief that all human beings are born entrepreneurial, that we all have innovativeness within us, but not all of us discover it within ourselves.
Some human beings are simply not allowed the opportunity to ever unwrap that precious gift.
My own views on this are that we have to start somewhere. We could sit back and criticise Professor Yunus’s achievements, but at the end of the day, if we only look at the negative, then nobody would try to change anything. Change does not come overnight. Of course, there will always be things that Grameen could do better, but just consider the scale of the goal that they are trying to achieve.
It’s these same people who criticise fair(er) trade, but that is because they have the one-dimensional view that Professor Yunus is talking about. Should we just sit back and do nothing then? Or instead, should we look at the millions of families that Grameen has helped to work themselves out of poverty?
Nobody said that changing the world would be easy. But surely, if you can make the life of just one human being better, then that’s progress.
Removing the Seeds of Poverty
The central message of the talk was that individuals do not create poverty. Poverty is a product of our existing institutions and pre-existing concepts, which leave the most vulnerable in society impoverished. Like Malcolm X once said: “They cripple the bird’s wing, and then condemn it for not flying as fast as they.”
Getting out of poverty does not mean simply crossing a line. Rather, social business offers a genuine, sustainable way to permanently remove the deeply sown seeds of poverty.
Photo credit: New Life by Justin Tosh on Flickr.