I came across a very moving talk by Muhammad Yunus at Stanford GSB.  He begins the talk with details about the inspiration for the microcredit revolution. Yunus was a professor of Economics at Chittagong university which has several villages around it. He did a survey in a village and found that a total of 42 people had borrowed 27$ from the moneylender (at extraordinary rates)!! Since this seemed to be a problem which he could personally solve, he started by giving loans to these people for investing into income generating activities. Initially he tried borrowing money from banks, offering himself as a guarantor because the banks did not consider the poor as credit worthy. However haggling with the banks was a very tedious process and he decided to start a bank for this purpose. Grameen Bank currently has 3.5 million borrowers, 95% of them being women. The average loan size is about 200$.

Yunus then moves on to talk about other social changes he tried to bring in.  He encouraged the “grameen families” to educate their children. This was a big step forward because most of the borrowers were illiterate. Student loans and scholarships were instituted to help students pursue higher education.

When the Bangladesh government was liberalizing the telecom sector, Grameen phone was created. It is the largest telecom company in Bangladesh now. A drive to bring the telephone to the villages was started. Currently there are 55 thousand “telephone ladies” in the villages of Bangladesh. They get loans to purchase the mobile equipment, and then offer the service of communication to villagers for a cost. Since some of the villages dont have electricity, solar panels have been installed to charge these mobile phones. This has turned out to be a very successful business for the borrowers.
Another social initiative was to try and bring beggars into mainstream society. Grameen Bank introduced beggars to local merchants, guaranteed upto 2000 Takas per beggar so that they could borrow goods from the merchants. These beggars became a link between the shopkeeper and the household. According to Yunus, it was a big hit in Bangladesh because the women are not encouraged to step out of their houses. Thus the beggars could start earning by providing the service as a middle-man.

This concept of addressing poverty through business is mind blowing. Philantrophy money is always limited, and the effort is to make the poor self sufficient. Yunus’ ideas are really simple, sometimes downright obvious, yet the kind of change they have brought about it profound.

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