'Poverty is a threat to peace. Extreme poverty destabilizes societies. Microcredit helps reduce that threat.’


November 27 2006

'Poverty is a threat to peace. Extreme poverty destabilizes societies. Microcredit helps reduce that threat.’


November 27 2006

'Poverty is a threat to peace. Extreme poverty destabilizes societies. Microcredit helps reduce that threat.’



In 1974, Muhammed Yunus started a revolution by reaching into his pocket. On a visit to a rural village in his native Bangladesh, the economics professor discovered that workers were virtual slaves to local loan sharks for want of just a few dollars to finance their farms and businesses. With a total of$27—to be paid back whenever they were able—Yunus helped 43 families, and kick-started the global microcredit movement. Three decades later, his Grameen Bank has made $5-7 billion worth of loans to 6.6 million poor borrowers—most of them women. In October, Yunus and his bank were named co-recipients of the 2006 Nobel

Q: You've said that "access to credit should be a human right."That goes far beyond most people's thinking. Why should we see borrowing as a basic, universal necessity? A: Because the accepted human rights are food, shelter, health and education, and the basic responsibility of a society is to make sure that an environment exists so that people can have these things. Employment is also a right, but society can’t assure wagebased work for everybody, so the alternative self-employment. If I can go ahead and take money and start my own income generation, then the other rights—food, shelter, etc.—become easier to implement. The big financial institutions currently ignore almost two-thirds of the world’s population. So I say the right to credit should have the topmost

priority on the list of human rights.

Q: At the Global Microcredit Summit in Halifax this week, Canada pledged $40 million for microcredit programs in the developing world. Your response was that you’d like to see foreign donor handouts come to an end. Why?

A: Gradually. That support helps build necessary capacity. But if microcredit is a financial service it should be self-contained like the banks—taking deposits and lending money. That’s what the ultimate shape of it should be. This is an interim arrangement to build it up. But we will need an enormous amount of money, and I don’t think donors should be burdened with supplying it as grants. It should be done commercially.

Q: Grameen hasn’t taken donor money since 1998. Doesn’t that independence come with a price? Couldn’t you help more people?

A: Oh, we have plenty of money. Money was never our problem. Last year we opened a branch a day, on average. We tell new branch managers, you raise the money from deposits and then lend it. There is no start-up money. The real problem is the legal status. Most micro-finance institutions can’t legally take deposits.

Q: What obstacles do you face hi getting that status?

A: Grameen Bank has legal status. But most of the microcredit in the world is done by NGOs, and NGOs aren’t designed to handle financial transactions, so technically whenever they do microcredit, it’s illegal. We’ve proposed two laws, one allowing NGOs

to convert themselves into microcredit banks, and another creating an independent microcredit regulatory authority. These two laws are important in every country if you want to do microcredit in a big way.

Q: Microcredit has become fashionable lately, attracting the support of people like Bono, Bill Gates and Bill Clinton. Now with the Nobel Prize, you’ve become an overnight success after 30 years of hard work. How do you capitalize on that?

A: I keep on talking like I have for 30 years, and now, hopefully, people will listen. Like the legal questions. These are the basic issues that have to be taken care of, country by country. Now, hopefully, the policy-makers will pay more attention than they did before.

Q: Some people found it strange that you were awarded the Peace Prize, not the Nobel Prize for Economics. What’s the link between loans to the poor and world peace?

A: Poverty is a threat to peace. Extreme poverty destabilizes societies. And if there are neighbouring countries that are rich, then that creates tension, and leads to conflict. Wherever you see conflict there are always elements of economic privation. So if you consider poverty a threat to peace, then microcredit is helping to reduce that threat by getting people out of poverty. It’s a very effective tool. It’s not government coming to help, you are in the driver’s seat of your own life.

Q: The Nobel Institute described the Grameen Bank as “a challenge to radical Islamists,” for your decision to charge interest and focus on

promoting the economie well-being of women in a Muslim country. But that appears to put your Peace Prize in the middle of the West’s war on terror. Are you comfortable with that?

A Yes. I’ve been part of the war on terror ever since it began. But the solution to terrorism will not come by military means. To address terrorism you have to go to its root cause—that strong sense of injustice. It could be economic injustice, extreme poverty, etc., or political injustice. People turn to violent solutions because all other means have been ineffective for them. We have to address those privations to end terrorism. Even if you kill the terrorists, it doesn’t mean the roots of the problem have disappeared.

Q: Grameen Bank has had its own problems with militants. In 1995, religious groups organized a repayment boycott. Last year, some of your branches were bombed by radical Islamic groups. Will the Peace Prize offer a measure of protection or does it make you a bigger target?

A: We’ve had more problems with the radical left—they think this is a terrible capitalist intervention, part of a bigger conspiracy. To them, we are enemy No. 1. Religious people aren’t so much of a problem. They have limited appeal. They can’t articulate their position. All they say is that we’re going to hell. People don’t take it seriously.

Q: You’ve predicted that poverty in its “absolute form” will be eradicated from the face of the earth by 2030. How are we to accomplish such a huge task?

A: The UN millennium development goals were to reduce the number of poor people by half by 2015. I believe it can be done, and Bangladesh will probably be one of the countries that succeeds. So by logical extension, it should only take another 15 years to get to zero poverty. The second half should even be faster—we’ll have gained a lot of experience and built up the programs and institutions. And once it’s done, I say let’s build a poverty museum, because that’s the only place you’ll be able to see it.

Q: But isn’t poverty relative?

A: When we talk about poverty, we’re talking about the poverty line, whichever way you define it. We’re not taking about relative poverty—you have a billion dollars, I have a million, so I am poor. It’s people who suffer from a lack of income to take care of their basic needs, housing, food and nutrition.

Q: You’ve extended your loan program to the poorest of the poor in Bangladesh—beggars. Why provide someone who has nothing with a loan instead of charity?

A: I’m not stopping anybody from giving

charity. I’m saying if you can use a loan, here it is. We’ve never told people to stop begging. We’ve given people options—you can sell things at the same time as begging. If you are going house to house anyway, would you like to carry some merchandise—cookies, candies, toys for the kids?

Q: Is it a more effective way to help?

A: A lot of people stopped begging and have become door-to-door salespeople. That helps other beggars to say, “Hey, I can do that too.” Right now we have about 84,000 beggars in that program, and more than 4,000 have already stopped begging completely, others are part-time salespeople.

Q: Your other Grameen companies now operate the largest mobile phone network in Bangladesh, as well as a mutual fund. How does that benefit your microcredit work?

A: There’s no connection with the bank. These are independent companies without any financial or ownership connection. The mobile phone company is partly owned by Grameen Telecom, another company I helped create. It’s a very profitable company, and it pays the most corporate tax in Bangladesh.

Q: But is there a link to the bank’s work?

A: Yes, we give loans to Grameen borrowers to buy themselves cellphones and start selling the service to others. It’s a very good income-generating activity for our borrowers— we call them Telephone Ladies. Now we have nearly 300,000 of them all over Bangladesh.

Q: Grameen Bank is a success, but the World Bank estimates that only one per cent of microcredit institutions around the world are financially stable. Some see that as an opportunity for big banks to help. But can the microcredit movement keep its principles if that happens?

A: Our complaint is that big banks don’t lend money to two-thirds of the world’s population. They should. They used to say that it couldn’t be done. We showed that it can be done. Governments and society should be telling them to do business with the poor, too.

Q: Would you be happy to see that?

A: Of course. We’ve been inviting them all along.

Q: What’s next for you? You’ve been talking about creating a new type of company—social business enterprises. How does that work?

A: The present concept of business is so restricted. It gives the impression that human beings are just money-making machines. It’s such a narrow interpretation of capitalism. There could be another type of businesssocial businesses—to do good, and where investors are not interested in making profits, and no dividend is expected. So we invest to address issues like the empowerment of women, poverty, or clean drinking water. The same people that run profit-making enter-

prises can also run these companies.

Q: Have you had much success so far?

A: We recently started a joint venture with Danone to bring nutrition to the malnourished children of Bangladesh by producing and selling fortified yogourt. Danone won’t take any profit and neither will Grameen. The investors can take their investment back, but there are no dividends.

Q: What are your plans for the US $1.4 million Nobel Prize money?

A: I’ll set up a social business. It could be in health care. We already have some eyecare hospitals. Another possibility is prenatal care, which doesn’t exist in Bangladesh.

Q: Do you have political ambitions?

A: No, I don’t.

'The right to credit should have the topmost priority on the list of human rights’

Q: But you’ve been a force in Bangladesh calling for the creation of a “clean” party. That’s not something you want to be involved in?

A: No. I’m just saying that we can’t eliminate corruption in the country if we send corrupt people into the parliament.

Q: So you have no intention of ever going into politics?

A: Ever is a long-term thing. Of course, circumstances could force me into it, but I don’t have a plan to go. M