Creating Technology for Social Change

Muhammad Yunus on the story and values of microcredit

Today, I’m a panelist at the Elizabethtown College Carper Memorial Lecture, which is on the topic of Ethics, Business, and Society. The headline speaker is the Bangaladeshi Nobel laureate Muhammad Yunus, creator of microcredit.

When I was an undergraduate at Elizabethtown College studying literature and the arts, I never expected that I would be coming back to speak at a business event. It’s a delight to reconnect with my alma mater today. I’ll be sharing blog updates throughout the day (Live etherpad notes here), starting with the talk by Dr Yunus:

Yunus started by talking about how he was led to give small laons to women in Bangaladesh, an approach they started out of desperation in a time of famine. If loan charks were giving money and creating problems through extortion, why not give money himself and solve the village’s problem for a few people? When Yunus brought this to the attention of banks, they declined to help– they simply wouldn’t give loans to people who weren’t credit worthy. So Yunus started offering himself as guarantor of these small loans. When the loans worked, Yunus grew the programme from village to village.

Yunus wanted to change the notion of banks by demolishing the idea of offices and the imbalance of power they create. Instead the bank should go to the people, reversing the power relationships between lenders and borrowers. This also makes it easier for people to pay back.

Another key idea was to offer loans to small groups of 5 women. Cooperatives weren’t an option in Bangaladesh because they were often an instrument of corruption. Furthermore, cooperatives fall apart as they grow and the leaders become disconnected from the members. In a group of five, you might be chairperson, but you’re still equal. Scaling this approach to millions of lenders is a massive task, especially since they operate on a weekly cycle. Every week, Grameen tries to meet all of their 8.5 million borrowers to check up with them. This requires 24,000 staff, who carry loans and payments by hand. Yunus claims that theft is very rare, and that people in the community are often able to talk to relatives of the thieves to recover the funds.

Yunus asks us a question: how does an organisation define poverty, especially if they try to offer loans to the very poorest? Grameen will offer loans to people who live in a single room and meet prospective borrowers where they live. The ideal Grameen borrower is a person in one room with a leaky roof and no furniture. They then ask that person if there’s someone less well off and follow the chain to find the least well off in a community.

The poorest people don’t ask for loans because a histoy of poverty erodes people’s courage. When the first loan arrives, people shake with concern and joy, since no one trusted her with money before. Yunus points out that a Grameen loan isn’t just a financial transaction– it’s creating trust and love in people’s lives.

Paying back the loan isn’t easy. Almost all Grameen borrowers are illiterate. So the Grameen community have developed the 16 decisions pledge, which women memorize when they join the bank. These goals involve a vision for family prosperity, education for their children, family planning, sanitation, and collective action.

Grameen also offers education loans to families whose children get university offers. This becomes a problem when young people graduate because they often find it difficult to find jobs. Yunus argues that poor graduates are unable to pay the bribes which. So Grameen asks university graduates to pledge against being a job seeker to be a job giver. Grameen asks university students to be job creators and givers, using their university education to start new ventures. “If your illiterate mother can do this, what good is your education if you cannot do better than your mother. Shame on your education. Your mother is a built-in business consultant. Ask her how she did it.” Grameen then funds ventures by university graduates.

Yunus then talked about Grameen Phone the largest mobile phone company in Bangaladesh and the hopes he has for the Grameen community as more people access networks and the Internet.

Yunus concluded by saying that if you can redesign the system, people can apply their creativity to solve problems. If we open up institutions and policies to people and give them room to grow, they will.