One Man Makes a
In Ending Poverty For Millions
"Poverty can be solved, declares Muhammad Yunus. Charity is not the way to help people in need; it is not a healthy basis for a relationship between people. If you want to solve poverty, you have to put people in a position to build their own life."
-- Ode Magazine interview with Muhammad Yunus, Issue 25, July 2005
We can end poverty. In 1976, Muhammad Yunus founded the Grameen Bank to make small loans of about $100 to poor people with a business plan in his home country of Bangladesh. Since then the Grameen Bank has issued more than US$ 5 billion to help literally millions of poor around the globe to pull out of poverty. To ensure repayment, the bank uses a system of "solidarity groups." These small informal groups apply together for loans and its members act as co-guarantors of repayment and support one another's efforts at economic self-advancement. The system has been tremendously successful. I have little doubt that once enough people see the incredible value of this system, we can and eventually will end poverty in this world.
Below is an engaging interview with Mr. Yunus in my very favorite magazine—Ode. For those who don't know about the microlending movement started by Yunus, a microloan of $100 can very often pull an entire family in the developing world out of poverty in as little as one year. As this is by far the most powerful way of investing money for a better world I've found, I have invested all of my retirement money in microlending. To learn how you can pull several families out of poverty every year with only a $1,000 investment and still make a return on your investment, see http://www.weboflove.org/051023microcredit. By each of us choosing to use our money to better the world, we can powerfully build a brighter future for us all.
The world champ of poverty fighters
This article appeared in Ode issue: 25
Poverty can be solved, declares Muhammad Yunus. But as long as politicians and starry-eyed idealists are blinded by good intentions, poor people will remain poor. Yunus, founder of the Grameen Bank, which pioneered the idea of microcredit, knows how poverty can be effectively tackled. Marco Visscher looked him up in Bangladesh and they sat down for a long talk.
This spring, poverty was suddenly way up on the political agenda again. European leaders were elbowing each other aside to present their plans to combat poverty. France's Jacques Chirac called for cancelling developing countries' debt. Britain's Tony Blair set up the African Commission, which proposed eliminating trade barriers and combating corruption. The United Nations presented a report, written by American economist Jeffrey Sachs, which optimistically envisioned that more development aid would create a world without poverty.
If there's one spot where this flow of news reports should be welcomed with open arms, it's poverty-stricken Bangladesh. But the man in this country who has done the most to liberate people from the grip of poverty, can only shake his head. In his simple office—in the capital city of Dhaka on a busy street where traffic inches along and rickshaw drivers stand along the side of the street waiting for customers—Muhammad Yunus is not impressed. The intentions are good, he believes, but out of touch with the reality of poor people's everyday lives.
"It's the usual approach: charity," Yunus begins. "But charity is not the way to help people in need; it is not a healthy basis for a relationship between people. If you want to solve poverty, you have to put people in a position to build their own life. Unfortunately, this is not how the aid industry works. Western governments and development organizations think they need to offer permanent charity. As a result, they keep entire economies in poverty and families in an inhuman situation."
Well that's something! Over the past 30 plus years, Bangladesh has received more than 23 billion euros ($30 billion U.S.) in aid and loans—and now an ungrateful Bangladeshi banker is criticizing the West for its generosity?
But beware. It's unfair to judge Muhammad Yunus as a man spreading rebellious ideas about development aid. Yunus is the undisputed leader of a radical new counteroffensive in the battle against poverty. As founder of the Grameen Bank, he is the creator of a concept that now represents an emerging force in the financial world: microcredit, small loans for poor people. Grameen has become a model for banks in nearly 100 countries, both in the West and the developing world.
A former economics professor, who holds honorary doctorates from 22 universities in 11 countries, Yunus has seen for himself what works and what doesn't work in Bangladesh, just about the poorest country in the world. He has witnessed how billions of dollars in foreign aid have created colossal projects (dams, bridges, huge industrial plants) but not created a situation in which the local population had to organize itself to solve its own problems. And that, according to Yunus, holds the key to a world without poverty. He outlined these ideas quite boldly and eloquently during our interview, quoted below:
"Poor people are not the authors of their poverty. Poverty is a creation of a complex system of conceptions, rules and attitudes we have thought up ourselves. Therefore, if you want to eradicate poverty you have to go back to the drawing board, discover where we have planted the seeds of poverty and make changes there."
"This is how I figured out that our financial institutions have incorporated an enormously high threshold—collateral, which means that poor people, who so desperately need credit to escape their poverty, never set foot in a bank. They'd be laughed at. We believe that poor people will never repay their loans. We consider it normal that banks—like other companies—must turn a profit and that they exclude some 70, 80 percent of the world population. Those assumptions are not up for discussion; this is simply the way it is. In reality, no one has ever tested those ideas. After all, what bank lends money to poor people?"
"The approach to poverty is thwarted by our fixed convictions. Poor people are helpless, unhealthy, illiterate and thus stupid, they have nothing, they know nothing, we must take care of them, we must give them food... It is completely wrong to think like this. I am convinced that poor people are just as human as anyone else. They have just as much potential as anyone. They are simply shoved into a box marked POOR! And it's written in giant letters so that everyone simply treats them the way poor people are treated, because we think this is the way we should treat them. This means it isn't easy to get out of the box."
"This applies to individuals just as it does to countries. Governments in developing countries receive money from wealthy governments that are kind enough to contribute a portion of their national income to what is referred to as "development aid." This required charity towards poorer countries has become a credential that is not questioned nearly enough. Even our religions tell us to give money and food to the poor; they don't say we should create certain conditions and rights so the people can help themselves. But this type of development aid is very damaging: the position of the government is strengthened, the money doesn't get to the people who need it."
"I'm not just referring to poor countries. I'm also talking about the wealthy, western countries where you have designed a great big box called "social welfare." You say: oh, he is ill, he is handicapped, he can't take care of himself, it is society's responsibility to keep him alive. I think that's completely wrong. That way of thinking creates a divide between those who work and can take care of themselves and those who cannot."
"And what happens? If you're one of the unlucky few, you'll get a benefit payment every month. The message is clear: you can't do anything, the government has to take care of you. So you become dependent. You get used to having society give you money. You get it, you don't have to do anything for it, you don't have to justify it. That is deadly to your initiative and you start waiting for more aid. That's when they've broken your creativity. They've taken away a fundamental human element."
"This social welfare system creates a human zoo. The animals in the zoo are given their meals on time and a doctor comes by when they're sick, but they are living in captivity. They still have a vague instinct that tells them they should hunt, but they aren't challenged to go hungry for days on end and hunt prey. The animals aren't as sharp and inventive as they would be in nature. What about them is actually still animalistic? They have become a poor imitation of themselves. By the same token, people who are swallowed up in the western social welfare system are also no longer themselves. They aren't stimulated to discover their possibilities, talents and creativity. They are robbed of every challenge. They are curbed in their development."
"Poor people don't need to think of themselves as poor and sit and wait for charity that won't ultimately save them. We can dispel poverty. And we were making good progress. The United Nations had established the Millennium Development Goals: poverty was to be cut in half by 2015 and completely eradicated by 2050. Never before had mankind set such a courageous goal for itself. We had a joint goal we were excited about, with which we ushered in a new millennium."
"And then came "9/11." That day plunged the entire world into confusion. It gave the U.S. president an excuse to send the world in a different direction, which created a global divide. Now everyone has become distrustful, anyone could be a terrorist. It will take a long time to get the world back on the track of optimism and on the track of a battle that I consider more important than that of exacting democracy in all corners of the world: the battle to grant very ordinary rights to people who are shut out and, as a result, live in inhuman poverty."
"And yet I still think we can cut poverty in half within 10 years and can eradicate it within a human lifetime. And I'm not just saying that because it sounds positive. I really mean it. Every country, every city, every village can halve the number of poor people. Come on, 10 years is a long time!"
"To solve the problem of poverty, you have to start thinking differently. You have to treat poor people the way you want to be treated. You have to offer them the same facilities you have access to. Indeed, like everyone else they should be able to go to the bank for a loan because with a loan you can create your own work, you can support yourself and generate income. Credit is one of the barriers we must eliminate so that the poor can clamber out of poverty. But it is not enough."
"For example, they must also have access to information technology because knowledge is power—and they haven't had power. For centuries, the supply of news has been dominated by journalists: an elite, in fact, that decided which information was appropriate to pass on and which was not. You always had to rely on journalists to find out what had happened in the country and the world. But thanks to the internet, a whole range of news sources has emerged that I can look to for information—from independent organizations to private weblogs around the world. I can weigh opinions against one another, I can form my own opinion based on various sources. That's a tremendous liberation because it ultimately means you can't cheat poor people any longer... Or at least you have to make more of an effort to cheat them."
"Thanks to the mobile telephone, farmers in Bangladesh can negotiate directly with their customers about the price (see the story on GrameenPhone in Ode, April 2005, ed.). Via internet, farmers find out the actual market value of their goods, enabling them to strengthen their negotiating position. This means that poor farmers are no longer limited to the village economy. They are no longer forced to rely on the clever middleman who kept the farmers in ignorance and took off with their money. They are now plugged in to the rest of the world."
"It is a good development that farmers are involved in the world economy, but it is not a panacea. Our textbooks have greatly simplified the world economy: it's an open market, it's a free world. But just try and launch a medicine on the Japanese market; they'll tell you all about the rules. In the real world, the market is only open to other parties insofar as it has been made accessible by those who write the laws and the supervisory authorities."
"But take the corner grocer on your street where you've been shopping for years. A big supermarket is being built nearby that is much cheaper and offers freebies. Before you know it, you're standing in that supermarket with your cart and that nice grocer has lost all his customers. Where are the regulations protecting the grocer? Where are the regulations governing the supermarket? Aha! So it's only a free market when you're big and have a lot of money."
"The economics textbooks are ripe for revision. Then we can also rectify the misconception that a company is not always just a way to make money and a businessperson is not always someone who wants to maximize profits. Companies can also have another goal: to serve a societal purpose. The Grameen Bank is one such example, there are more and we need many more. We need companies whose first priority is striving towards a good aim. We need businesspeople who are not driven by money but by their desire to contribute to society."
"They're out there you say? Of course, you mean those with a sense of corporate social responsibility. But tell me, how can you focus on corporate social responsibility if your primary aim is to turn a profit? The two don't mix. I can understand that a businessperson would want to make a donation to the tsunami victims. You give some money to a fund that helps sick children and you hang nice, framed documents in your office so that everyone can see the good things you do. But let me ask this question: why isn't your company as a whole aimed at furthering a good cause?"
"Mind you, I'm not talking about charitable institutions, social or non-governmental organisations—they cannot, for instance, go to the bank for a loan and are dependent on subsidies and donations. I'm talking about a new sector: companies that don't want to make a loss, so they can continue to do business that contributes to the community as a whole. There aren't many like that because the private sector has been wrongly labelled as a group of merciless profit-makers."
"So if you wanted to do something good for the world, you didn't think of starting a company; after all, you weren't interested in money. You signed up to work at a social service institution or became a researcher so you could develop medicines to cure people's ills—and which, by the way, would lavishly line the pockets of others. But there is another, more challenging, way: via the business community. Because I believe there is no better way to combine your desire for a better world with effectiveness than through a company."
Effectiveness. That's the key word coming from Muhammad Yunus. Effectiveness is an idea remarkably absent from many discussions about combating global poverty. All too often, efforts to bring prosperity to developing countries stall in good intentions, bureaucracy, pricey consultants and results that make too little difference in the actual lives of poor people. Muhammad Yunus refuses to accept this as the best we can do. Yunus has demonstrated that combating poverty starts with action. And that these actions can sometimes even make a profit.
"Sometimes I dream of an international stock exchange where 'social companies' are listed," Yunus continues. "If you want to help poor women in Latin America, you can invest in a Bolivian internet company that sells clothing made by local women. If you have more affinity with new technology, you can invest in a Vietnamese company that brings computers with speech technology to villages. Universities should set up business schools for young social entrepreneurs who don't learn how to make as much money as possible but the best way to realize a social goal. And there should be a Wall Street Journal that reports on this new group of companies. A whole new counterbalance should be created that will greatly enrich society."
For more information: Muhammad Yunus: Banker to the Poor: Micro-Lending and the Battle Against World Poverty (PublicAffairs, ISBN 1891620118), www.grameen-info.org.
Note: To learn how you can pull several families out of poverty every year with only a $1,000 investment, and still make a return on your investment, see http://www.weboflove.org/051023microcredit.
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How to End Poverty: Muhammad Yunus