ISOBEL COLEMAN: Good afternoon. Good afternoon, everybody. You can please take your seats. We will get started.
Good afternoon. Thank you so much for coming. We have a full house here at the Council on Foreign Relations today, and for obvious reason. I’m Isobel Coleman. I am a senior fellow here for U.S. foreign policy and I also direct the Women in Foreign Policy Program.
And I just want to remind you all that this meeting in on the record. Please take this opportunity to turn off all electronic devices; BlackBerrys, Redberries, cell phones, whatever you may have. And also this meeting is being webcast.
It is with tremendous pleasure that I have the opportunity to introduce our speaker today, Professor Muhammad Yunus, who is one of my personal heroes. And I must say he arrived a little bit harried. His luggage had gone astray. He was wearing, I think, jeans and a green cardigan, but looked every bit as distinguished as he does now that he has changed and cleaned himself up.
Muhammad Yunus, as all of you in this room know, took a small idea, making loans to the very poor in Bangladesh, and has turned it into, along with the help of many other people, but really turned it into one of the great big ideas of our time. And for that, he and the Grameen Bank were recognized for their efforts this year with the Nobel Peace Prize. And he has been on the short list for, I know, over a decade, and all I can say is, about time. This truly is a person—(interrupted by applause).
Grameen today has made over $5 billion in loans and served 6 million people, 97 percent of them very poor women. And this man and this concept needs no further introduction. Thank you.
MUHAMMAD YUNUS: (Applause.) Thank you so much.
Well, I got back my luggage. I could—(laughs)—make myself presentable quickly. I’m so honored that you organized this meeting and that this gave me a chance to meet many of my friends here; otherwise, probably I would not get a chance to meet them in a kind of rushed visit to New York.
I’m very happy that the Nobel Peace Prize Committee decided to give the prize to me and Grameen Bank this year because it—suddenly world changed for me personally and for microcredit. I’m just coming from Halifax, where we had our Microcredit Summit, which is held usually after five years. So this is our third summit that we are having.
Our first summit was in 1997 in Washington, D.C. Many of you may remember it. And we set a goal to reach 100 million poorest families with microcredit, preferably to the women of those families, by 2005. And 2005 was declared as International Year of Microcredit because that was our terminal year. Last year U.N. observed the year as International Year of Microcredit. And we have reached 100 million. When we declared it in Washington D.C., everybody said you are crazy, it will never happen, because you don’t have the money, you don’t have an institution, you don’t have the manpower. You have nothing. We said we have determination, that’s only thing we’ve got. And we’ll make it happen.
And we’re lucky. At that time we were not sure whether we’ll make it. We said even if we do 50 million that’s good enough. If you have reached 50 million people, poorest families, poorest women, with microcredit, that’s an achievement by itself, so 100 million was not something that we have to really on the dot have it delivered.
So we did it, 100 million have been reached, so that’s a cause of celebration in the summit, that we came all the way and did it. And also other celebration, of course, was the Nobel Prize, because everybody who came, there were 2,300 delegates in Halifax coming from all over the world, from all countries, and it appeared like they, every one of them, are the Nobel laureates.
This is a fantastic energy that created in them, so now we can achieve anything we want. First of all, have done something, and then right on the date, we got the Nobel Prize. So we said they set the new goals now.
What does it mean to have microcredit for the poor people? And one example I gave was, suppose suddenly today, 16 th of November, all the banks in the world become dysfunctional. All the banking in the world doesn’t work anymore. Your check doesn’t work. Your credit card doesn’t work. You bank account doesn’t work. Nothing works. It will be such a horror story, worth a Hollywood movie. You can really build a Hollywood movie on how we—blackout on this, suddenly something happened.
But this happens for almost two-thirds of the world population every day. For them it doesn’t exist. Nobody cares. Nobody feels the horror in it. So microcredit is a kind of window, a little opening for them to see that it’s possible for them. And it works as good as any other banking anywhere in the world, even better.
Today Grameen Bank has nearly 7 million borrowers. Ninety-seven percent of them are women. And it’s owned by them. And the money that we lend out comes from its own deposits. It doesn’t take money from outside. It doesn’t borrow money from anybody. No donor money is involved in it. And we have plenty of money to lend money to people.
Last year we opened branches because we—one decision we took recently, that nobody in Bangladesh, the poor families—no poor family in Bangladesh should be left out of the reach of microcredit. Today we cover 80 percent of the poor families of Bangladesh. So our goal is to make it 100 percent so that there is no family left out. So we are opening branches wherever we left out corners, pockets. So last year we had opened branch on an average of one branch per day for every day of the year. So that’s quite a management challenge. This year we thought we’ll kind of level off. This year we have done on an average of two branches per day, every day of the year. (Laughter.)
And it works. And our direction to each branch is, you go there, mobilize the money from the locality that you’ll be serving, and take that money and give it to the poor people of the locality. And help build up the local economy.
So money doesn’t come from Dacca to some remote village, Dacca to some little village. It’s all local money. And then they generate surplus. They have more excess money to spare, which they send out to us. We give them—we say that if you have excess, you send it to head office, we’ll give you interest, so don’t worry about your cost part of it.
So this is what appears. It is owned by the borrowers, and the children are going to school. Hundred percent children of Grameen families are in school. And they not only went to school, now going into higher education. We are giving higher education loans. Right now there are more than 12,000 students who are in medical schools, engineering schools and all kinds of professional schools, universities. And waves of new students are coming because it’s for the first time this generation is going to school.
Their parents never went to school, they’re all totally illiterate, cannot write, cannot read. Never in history of their families ever anybody ever went to school. So a new generation is coming with 7 million families where they are going to school, and some of them are now at the top of their educational level, already several of them got Ph.D.s.
It’s amazing kind of change that happens in the family. So all these things can happen with just doing business. Grameen Bank makes profit. So if all can be done just by doing business, the question that I always raise: Why aren’t we doing more of this business? And that’s the question to you, too: How do we do it?
Thank you very much. (Applause.)
COLEMAN: Thank you for those comments.
YUNUS: Thank you.
COLEMAN: I’m just going to start out by asking you a question that I was asked frequently by the press who called me on October 13 th and shortly thereafter, after you were awarded the Nobel Peace Prize. And the question I got put to me in one way or another was generally this: If microfinance is so great, why is Bangladesh still so poor? And I’d love to hear your answer.
YUNUS: You’ve got me there. (Laughs/laughter.)
Yeah, we started so far back, so it takes time to get out. Fifty-eight percent of Grameen borrower families have moved out of poverty. Each year they’re moving out. So this is one good news that we did in Grameen. So far 58 percent of them moved out of poverty, and with a very strict evaluation of that, how you consider a family getting out of poverty.
And all the studies have been done on Grameen, they see steadily people coming out of poverty. World Bank study which was done in the middle of ‘90s, it’s a long, longitudinal study, concludes that on an average, 5 percent of Grameen borrowers get out of poverty every year. So that’s something.
So this is within the Grameen. And I’ve talked about the children part of it, how the new generation is emerging from Grameen Bank.
The other part is, Bangladesh is also as a country doing very well on poverty reduction. During the decade of ‘90s, on an average of 1 percent of poor people got out of poverty. So a reduction in poverty by 1 percent on an average of entire decade. So almost 10 percent of poor people who are under the poverty line got out of poverty during ‘90s.
We were hoping that this will continue during 2000 and later, but our expectation was over-fulfilled. During 2005, up to—2000 to 2005, on an average of 2 percent reduction in poverty has taken place. And if we continue to do it at 2 percent level for the rest of the time until 2015, we will be one of the lucky countries, fortunate countries who will be reducing poverty by half by 2015, the Millennium Development Goal that we promote so much.
So we are right on the track. If we do a little better than 2 percent per year, we’ll be over-fulfilling our target. So this is happy news, because when we talk about Millennium Development Goal, people have a kind of little smile on their lips; that this is something to talk about but it’s not real. But for Bangladesh, this is very real.
And I’m sure in the whole thing, microcredit—as I say, 80 percent of the families, of poor families in Bangladesh have been reached with microcredit—has played a very important role. And not only poverty reduction as such. If you look at the population growth rate, Bangladesh is one country, again, fascinating country where population growth rate has declined very sharply over the last 20 years. Fertility rate declined by almost—brought it to half. It used to be something like 6.6, 6.7, 20 years back; today it’s 3.5, 3.6. So this is one country silently, quietly achieved something like that.
And it’s all because, both of them—just one more point and I’ll stop—it is because of the involvement of women. And that microcredit has helped tremendously in changing the whole status of women in Bangladesh.
COLEMAN: Today in the microcredit industry, there’s a tension between profits and social justice. And I wonder if you could talk a little bit about that.
YUNUS: Yeah. Sure.
COLEMAN: I mean, just recently I read an article where a critic of yours said, “Oh, Yunus; he’s against the banks.” And there is a feeling that Grameen really is very much focused on social revolution, whereas others in the industry are more focused on the long-term profitable sustainability of their microfinance institutions.
YUNUS: One issue that I promote, and I have been talking quite frequently about it over years, saying that one big mistake, or big gap to interpretation of capitalism has been in the area of how you define a business. The way it is done is very narrowly defined: business mean business to make money. I said, that’s a shame, business can be so many other kinds. I’m not saying business to make money is dirty; it’s not. It’s very good thing to do, making money. But think about other things.
Why should you ignore that: for example, business to do good to people, the sole objective of business just simply doing good without having any inkling at all of making money? Right from the up front, we say: This is a business where I don’t take any profit out. I want to do this to do good to people. That could be another business. After all, human being is not a moneymaking machine. Human being is so much bigger than moneymaking machine. Moneymaking is wonderful thing, but there are other wonderful things too: to solve the problem of the world and leave a signature on the world that this is where I came and spent some time here, and this is the signature I left behind. So I’m calling them social business: non-loss, non-dividend companies.
So we can have a health care program, we can have poverty alleviation program, we can have microcredit programs, we can have environmental programs, on the basis of social business. So we’ll compete with each other. For-profit, profit-maximizing companies and social business companies will be competing in the free market. There’s nothing wrong with that. Competition is something you want, and this promotes competition.
So bringing that idea into microcredit, I said I’m in the microcredit as a social business. I want to do good to people, help work people out of poverty. That’s why we’re talking about poverty. That’s why Nobel gave me the prize. If I’m making money, Nobel would give me a prize? (Laughter.) Are you kidding me? (Laughter.) You wouldn’t be listening to me here.
So that’s what I do. So I talk about it. I said this is wonderful thing. You change people’s lives by doing business with them. And this bank is owned by the poor people. They make profit. There’s nothing wrong with that. So I said, if you want to make money by lending money to the poor people, go ahead and do it. That’s not my business, that’s some other kind of business. That’s all I’m saying. I’m not saying you stop that business. You do it, but I’ll compete with you. That’s all I’m saying.
COLEMAN: As part of that social justice agenda, I know that Grameen has recently started lending to the poorest of the poor; in your own words, beggars.
COLEMAN: The most destitute in Bangladesh. And there are some skeptics that that can actually work. Can you talk a little bit about that?
YUNUS: The skeptics say it may not work. But it means it may work, too. (Laughter.) That’s a chance we are taking. (Chuckles.) We don’t guarantee that it will work. What we do—it will be something interesting to discuss why the whole issue came. We always lend money to the beggars, that’s nothing new. But some people, academic-minded people, or some other orientation in their mind, they said microcredit is a great idea but it works only at the top layer of the poor people. If you were the middle layer of the poor people, bottom level of the poor people, it doesn’t work. Because why? Because they’re illiterate, because they don’t have the entrepreneurial ability, they don’t have the skill to run businesses, they don’t have the initiative and drive.
So I said this is all wrong, because we have been doing it with all those people. That when you reach 80 percent of the population, poor population, you’ve brought everybody inside, all kinds of people. And we’re saying we want to make sure 100 percent of the poor people are inside of microcredit. So we’re not leaving anybody behind, the middle level, bottom level, and so on.
So every conference we go, we come up with this artificial debate. So in one conference, I was so tired of this argument that I went back, I said, look, why don’t we just run a program for the beggars just to demonstrate, because you cannot be poorer than beggars. This is the last stage of human survival: stretch the hand, “Please give me something so that I survive for the day.” A daily thing, not annual, monthly, just for the day.
And in Bangladesh, like any other country, like in New York City, there are beggars. So our beggars in the villages go around from house to house and announce their arrival by reciting some religious thing, recite from the Koran, so your religious feeling is aroused and you give her something. And something in Bangladesh is just a handful of rice, you give her a handful of rice. So she goes around several houses to collect those handfuls of rice so that she has enough at the end of the day to cook a meal for the family. That’s all. And next day you’ll start that way again; everybody you come to gives you handful and you have it.
So when I said let’s do it with the beggars, my colleagues said, what do we do with them? What do we say? I said, very simple thing. We go to try and to understand about their life. Let them feel that we are close to them, we are not something coming to mock you or something. They feel close to us.
And then say, “As you go from house to house, will you carry some merchandise with you? Some cookies, some candies, some toys, something the kids will love or the women will love.” And advantage in Bangladesh, women can’t go to the market because market is far away and market is totally male-dominated place; women don’t go there. So if somebody brings something, she can say, “Okay, I can buy something.” So I said, it may work. And if they agree, we give the money to credit this. This is the whole simple idea.
So we went around talking to them, and we hoped that maybe 2,000, 3,000 such beggars will be in the program, but it became such a popular program, today there are 84,000 beggars in that program. And many of them quit begging completely because their business division has worked so well—(laughter)—their begging division has been closed down. (Applause.)
We said, “You don’t have to stop begging, that’s not our deal. We should give people option. (Laughter.) Give people option whether they will give rice or buy something from you.” Some people say, “Okay, I’ll buy something from you. It’s good. I’ll buy some toys. Bring me some toys like this tomorrow with a red color, with this, my kid wants one of them.” So she comes the next day, she brings it. So she becomes a kind of business agent for you. She goes and picks up the thing you want. Some people are giving her a list of things to bring because she cannot go herself.
So this is the begging thing. Now you ask us the question, is she entrepreneur? Of course she’s entrepreneur. She’s running a good business. She even decided to close down one division. (Laughter.) So this is a simple thing.
And now you say, will 84,000 of the beggars come out of begging? I don’t know. If eight of them came out of begging, I’ll be dancing on the floor, eight of them will stop begging, because not only she is doing the begging, her parents did the begging, her grandparents did the begging. So you made a break in their history.
If I do it eight, I get excited. If I get 800 I get more excited. I don’t have to wait for 84,000 all of them to come. So if they have doubts, I have the same doubts too. But I see the other side; there is a chance and I take the chance.
COLEMAN: You just said earlier that a huge part of Bangladesh’s success has been the empowerment of women.
COLEMAN: Can you talk about how the 16 points that you have your borrowers abide by, how that has influenced now two generations of women and men in Bangladesh and what impact it’s had on the broader society?
YUNUS: “16 Decisions” that is referred to, is something that over years—in the initial years we have been discussing, let them discuss about their lives. Is it just taking the money, paying back? What is it that they want to look forward to? What are the problems in their life? What are the things they would like to happen in their life? So that went on for months, for years, and gradually one thing emerged, and another thing emerged, and it became known as decisions. First there were four decisions, then the next year they added two more decisions, became six decisions, so by 1984 we had 16 of them, 16 of them on the list.
And then at next meeting of the national convention of our borrowers, they wanted to adopt two more decisions. And I stood up. I pleaded with them. I said, look, we already have a plateful of decisions. Let’s concentrate on implementing those decisions. Clip it. Stop here. And once we can complete all those then we’ll take the next list. So they agreed, okay. So gradually became known as 16 Decisions.
What are those decisions? One, we shall send our children to school and make sure they stay in school. Another one, we shall not take any dowry at the time of the marriage of our sons. We shall not give any dowry at the time of the marriage of our daughters. Because this is a caste—anybody who is familiar with dowry system in India, Bangladesh, they know that poor people are totally demolished by these customs.
So the way they debated and discussed, the final argument was, “We are the mothers. When we try to marry off our daughters, we’re just scared to death; where are we going to find the money to marry off the daughters, for the dowry money?” Well, the same mother, when they want to find a bride for the son, is looking for the family who can provide me the biggest dowry possible. Same mother. So it’s not something coming from a god or something, it’s me. So as mothers, if we don’t take, we don’t have to give. So if you are so scared of giving, only way to stop it, don’t take it. So that became a very popular idea, so it came into the decision: We shall not take, we shall not give. And that became a system.
Another one is we shall grow vegetable all year round and eat plenty of it, and sell only the surplus. There’s a lot of discussion behind it. This is a decision taken when the night blindness in Bangladesh was rampant, children with night blindness. Very simple cure. We didn’t know that about, but gradually seeing this development of night blindness all over Bangladesh in our families of Grameen Bank, we asked around, what is this? They said, well, it is a Vitamin A deficiency. UNICEF came forward, “Okay, we’ll give you all the vitamin pills. You’ll distribute, and through you we can reach out to poor people.”
We debated about it among ourselves. We said, no, we don’t want to take the pills. And what is others? Said, “Well, the other alternative is vegetables, colored vegetables particularly. If you give them, that’s a source of Vitamin A.” We said we’ll take that option.
So how do you encourage them? We grow vegetables. It became such a popular item, we had to start selling vegetable seeds. Very soon we began that, Grameen Bank became the largest seed seller in the country. (Laughter.) We made penny packets of seeds, literally penny packets, and put a little bit of seeds of this, a little bit of seeds of that. Each one is a penny, or something like similar, one-Taka packet.
So people loved it. Soil in Bangladesh is very fertile. You throw some seeds, it grows right back at you. It’s beautiful, the fresh vegetable. People are poor, but they don’t eat vegetables, for strange reason. For the first time we have to go back and explain why vegetable is important. People love rice. You give a plateful of rice.
You gave me little rice; I was very disappointed. (Laughter.)
COLEMAN: We’ll work on that. You’re right, you’re right.
YUNUS: We need plateful of it, whole big stack. (Laughter.) That’s what the Bangladeshis love, but no vegetables, for strange reason. But it grows so well. So it became a very popular one. End of decision was we shall grow a lot of vegetable all year round and eat plenty of it. It’s not making money. Eat plenty of it, meaning feed the children; and then sell the surplus that we couldn’t eat any more. That’s what we sell. Today night blindness in Bangladesh became history. It doesn’t exist in Bangladesh anymore.
So this is how all these items came. You said what difference did it make. One, night blindness doesn’t exist, dowry declined, and children are in school, I just told you, right from the beginning. A hundred percent Grameen families’ children are in school. And not only they went to school; the environment that created, today they are in the top classes. They are in the medical school, they are becoming doctors, engineers and so on and so forth.
So we have a completely different program coming in the second generation. How to support them? And one, just quickly to put, one of the things we are discussing, when they say, “Where are we going to get the job, how are we going to pay back your money?” we said: Let’s listen. Let’s talk about it. As Grameen students, you should be adopting a pledge, make a pledge to yourself and take it very seriously. Every morning you wake up in the morning, look at yourself in the mirror, and repeat this pledge: “I shall never seek a job from anybody. I shall give jobs to people. I’ll create jobs for other people.”
And it was, “How are we going to do that? We don’t have jobs, and you want us to create jobs?” I said: Look at your mother. She didn’t apply for a job anywhere. She took a loan from Grameen Bank, created herself a business, and took care of you. Today you are in the university, you are in medical schools. If you don’t find answer, you look at her life because you have seen her how she has struggled too. And what good is your education if you’re not as good enough as your mother, who is an illiterate person? So if she can take care of herself, you should be doing much more. You should be not only taking care of yourself, you should be creating jobs.
And they say, “Well, other kids don’t talk about creating jobs. Why are you imposing it on us?” I said: There is a big difference. Other kids’ mothers, they don’t own a bank. Your mother owns a bank. (Laughter.) So money’s not your problem. We have plenty of money. You just come up with idea, like she came up with idea, one idea after another. She raised chickens, she raised cows, she did basket making. She has now conglomerate of business in her house. You can think what you want to do. So we are trying to encourage that in the new generation, looking at the world not as a job seeker, as a job creator. So, hopefully, some of them will succeed in that. I don’t know. We want, again, to take a chance.
COLEMAN: I’m going to turn to the audience now. My only regret today is we have a shorter time than usual. We need to end exactly at 1:30. We have a full house, and please wait for the microphone, please introduce yourself, state your affiliation, and keep your questions short, concise.
Thank you. We’ll start right here.
QUESTIONER: Thank you very much. I appreciate your contributions very, very much. I’m a big fan. My name is Hoyt Webb. I’m with IBM.
I held a small symposium here at the council several years ago on microcredit. And one of the comments made by participants, particularly in the financial industry, were that the cost to provide these loans, the microcredits, often is too high. This doesn’t seem to be an issue for Grameen, so maybe you can share some insights to the larger financial—
YUNUS: It’s a trade secret. I don’t want to give it up. (Laughter.) You’ll be competing with me. (Laughter.)
QUESTIONER: Not IBM. (Laughter.)
YUNUS: (Inaudible.) I’ll welcome, welcome it.
QUESTIONER: If you could share anything further.
YUNUS: It’s not as expensive as being told. We cover all our costs with the revenue that we generate; we make surplus. Last year we had about $7 million of net profit. This year we are looking forward to some 20-plus million dollars as profit. So it’s something that—we are expanding. Our profit is increasing and people are happy. So, we cover all the costs.
Like we have our deposit rates in bank, where our cost—one big item in our cost is minimum of 8.5 percent interest in our deposits, and it goes all the way to 12 percent interest. And our lending rate is—the highest one is 20 percent interest rate for income-generating activity, which is above our maximum deposit rate and minimum deposit rate.
Then we have our housing loans. Our interest rate is 8 percent, which is below our minimum deposit rate. In other words, we pay you more for the deposit than we charge you for the loan. But we do it because housing is such an important element that we want to make it attractive to them.
Then we give the student loan. During the study period, as long as you’re in school, zero interest. No interest is charged. When you finish school, it’s 5 percent. Again, below our deposit rates, all the way down.
And the beggars, as I told you, that this is interest free. So you can take as much time as you want, money doesn’t grow. You take your time, whatever you can pay, pay us. Only thing is you pay us the full amount finally in six months, in one year, in six years; whenever you do it you are ready to take another loan. So that’s an incentive to pay and get into a bigger loan and so that they can expand their business.
So with the four interest rates, three of them are below the deposit rates. So we are cross-subsidizing it with the 20 percent interest that we charge. And still we make money.
And how we do it is a question now. You can look at it how, with our delivery system and so on. It doesn’t have to be expensive.
And on top of it we provide scholarships, which is a grant, which is not something—the reason we give a scholarship is also very interesting, because we noticed some of these kids, some of these students not only went to school, they are at the top of the class. Coming from illiterate families, coming from poor families, competing with all the children of the village from all kinds of economic class, they are at the top of the class. We said this needs to be celebrated. Recognize that this is something, a miracle is happening. So we said the only way that we can do it in an institutional way, give them scholarships.
Today we give nearly 30,000 scholarships every year, and that number keeps on increasing. And this is all from our own cost. So we do that, and still we make profit. So those who say it’s expensive, I say they don’t know the business, we’ll teach them how to do the business. (Laughter.) No problem. Our job is to make more people coming to that. And when we do it, 100 percent families covered. We want the whole world to have 100 percent covered. That’s all our intention.
COLEMAN: Thank you.
QUESTIONER: Hi, sir. James Sussnik (sp) with the Small Enterprise Assistance Fund. How much of Grameen’s success would you attribute to the unique situation within Bangladesh, and how much of the Grameen model do you think is transferable to other countries?
YUNUS: Thank you. I’m just coming from Halifax, and everybody says, “We are a Grameen project, we are a Grameen program.” So it’s all over the world. And not only that, they even name their programs as Grameen program. There are Grameen Spain, there are Grameen Mendoza, there is Grameen Argentina, there’s Grameen—we can’t keep track of how many Grameen all over the world. Meaning that they are committed to the ways it is being done. So it is very much replicable; otherwise they won’t be in this business and they won’t be doing the same things.
So I would say it is not peculiar to Bangladesh, it is peculiar to poverty. Wherever poverty exists, it works. It works in New York City. In Harlem they have a program called Project Enterprise. Some of you are familiar with it. I see people from Grameen Foundation USA who run the program. It’s in Dallas, Texas. And there are several government replications in the USA. So this is not something peculiar situation and environment. If there is any peculiarity, any kind of strange, it is strangeness about poor people, if it is quote-unquote, “strange” in the eyes of other people. That’s all.
QUESTIONER: Thank you. My name is Roland Paul. I’m a lawyer. Some years ago I was in the U.S. government. My question, Mr. Yunus, follows on the first question. I think it would seem the key to your success is not having an excessive lost loan situation, losing money on loans. How do you avoid having too many bad debts?
YUNUS: A book just came out from Kumarian Press. It was being sold at the microcredit summit. The title of the book is, Poor Always Pay (sic/The Poor Always Pay Back) And this is true. And the whole book is written about how people didn’t pay, disappeared, came back five years later, say, “Can I come back?” “Yes, you pay and come back.” So they pay and come back because they want to keep the door open. That’s the only thing. Not because somebody is beating over the heads. Because they have no other option. No place to go.
This is an opportunity bank. You don’t want to close down the opportunity bank. So you keep on paying. And our rules are so simple. If you couldn’t pay back—your term was you should pay back in one year. It’s a weekly installment and so on, you agreed and did it, but you paid only have the amount within a year and the other half couldn’t be paid. So we don’t go with a stick to hit him or hit her. We said, “Okay, you have problems, what would you like to do?” “Can I give smaller installment?” “Of course you can give a small installment.” We’re not interested in bigger or smaller, we’re interested they keep that movement going.
So she pays a smaller installment. What does it mean? It means more than a year to pay back. So you take more than a year to pay back, but you’re paying interest on that. As long as you’re enjoying the money, you are paying interest. So if you are paying interest, bank doesn’t suffer, you do not suffer. Our job is not to make you suffer. Our job is to make you feel happy and move on.
So this is the reason why they pay back, because it’s so easy to pay back. She doesn’t have to stand in line to go to the bank to pay the loan. Bank comes to her. Every week, she knows exactly when the bank person will come, and their friends will get together and everybody pay. And she takes pride that she’s paying. If she cannot pay the full amount, she pays half amount. It’s all right. All you have to do is negotiate for a longer period. You renegotiate, you have a longer period. You pay back the whole loan.
So this is how it works, and this is convenient for them, and there’s nothing wrong with the banking part of it. So this is why they pay back. It’s 99 percent repayment. That’s how it is achieved. And that’s why the bad debt is so small.
So this is a big cost for any bank. But even the little amount that we write off, because it’s never—we have very strict rule about writing off loans, because if you’re—it’s a time bomb. If you’re not paid back in one year, then it’s a—(permission ?) is made, if you have not paid back the amount, whatever amount in two years, it’s totally written off. But she’s still paying. We are getting the money, she has no problem, but it exceeded our cutoff line and we have written off. And we get the money back. So most of the written off money also comes back to the bank. So it’s a continuous process like this.
COLEMAN: Back here.
QUESTIONER: Hi. Professor Yunus, thank you for being here. My name is Kate Kroeger. I work at the American Jewish World Service. And I wanted to ask you something about something that we struggle with in our microcredit programs, which is sometimes microcredit users go further into debt, not necessarily with the institution that they’re taking microcredit from, but sometimes what happens is that because they’re creditworthy, they’re able to get credit from other institutions as well.
And they can’t manage multiple debts, or because of the peer pressure in the self-help group model, where everybody is watching and making sure that you make your 10 rupees payment or whatever per week or per month, in order to be able to make that payment in front of all of their peers, often people take loans from the village money lender in order to appear creditworthy in front of their peers. So I’m sure you’ve thought about this a lot and I wondered if you can offer some solutions.
YUNUS: It’s true. I mean, human being is human being. They get tempted. They have, particularly the point that could be added to it, social reasons, People need extra money. No matter what we say, you want to get your daughter married off, how poor you are, still you have to entertain your relatives, your friends. You need extra money, you don’t have money, so you go to the money lender. You do that. It’s possible.
At the same time, for Grameen I would say that it’s kind of a little bit counter-balanced with our savings program. And I mentioned that all of the money comes from the deposits of the bank. Bank doesn’t have to borrow from anybody. Bank doesn’t have to take any donor money or take subsidy from the government. It doesn’t take any money from anywhere. It all comes from internal deposits, people take deposit. Sixty-seven percent of that deposit comes from the borrowers of the bank. It’s not small money. Grameen Bank lends out nearly a billion dollars a year; to be exact, something about $800 million. All coming from the deposits. And 67 percent of that money is bank money and this is their money. So if you go around and talk to borrowers, she will tell you how much she has in her savings account. So she is not running to the money lender just like for whatever reasons, because she has her savings.
So this is one protection she builds up, that if we need that extra money. Not only social reasons. Another reason is disaster. Bangladesh is a country of disasters. We have man-made disasters, like our politics is a disaster—(laughs/laughter)—and natural disaster, like a flood is a very recurrent phenomenon in Bangladesh. She has to prepare that coping capacity, and savings can come in handy. Of course, for disaster, bank has also policies to give them fresh loans to keep them—move on, restart the whole thing.
I’ll still say, yes, this could happen, but not in a kind of general global sense. Of course there are people who—(inaudible). Sickness is another reason; that you are so desperate you don’t care what happens to you. You’ll do anything to save the life of your wife, your daughter, your son, your husband, whoever it is. So you go into debt. But not everybody’s family having crisis. These are crisis situations or social crisis situations. Thank you.
COLEMAN: (Calls on questioner.)
QUESTIONER: Thank you. Inger Elliott, IME, Ltd. Is it something about the culture of Bangladesh, or might it be the drinking water, that 97 percent of your clients are women?
YUNUS: No, it was very deliberate. (Chuckles.) It goes back to the initial period of Grameen Bank. Before I launched the program, I took the responsibility of taking that step. I was struggling very hard with the conventional banks to open the door to lend money to a few people in the village next door to the university where I was teaching. If they had given the money, today Grameen Bank would not be born. I’ll be happy and will go to—carry on. But they refused for the simple ground that poor are not creditworthy. “You cannot lend money to the poor people. They will eat up that money. They will never pay it back. And then they don’t have the collateral. Without collateral, bank cannot work.”
So my struggle began to convince them at least you try. You may be wrong, may be right. If it is right, it will be fantastic. Can you try? They said, “No, we don’t have to try. It doesn’t make sense to give money to the poor people.” Anyway, so I was becoming more and more critical of the banking. I said banks have long—they’re unjust. They deny access, deny service to the poor people. This is financial apartheid. All kinds of things which will irritate them. It irritated them, but didn’t work. (Laughter.)
Then I came up with another thing. I thought this will irritate them more. I said, “Not only you reject the poor people, you reject women.” They said, “No, this is a crazy complaint.” I said, “No, it’s not crazy. I said, “Look at the gender composition of your borrowers. If you can show me even 1 percent of your borrowers happen to be women, I will not complain.” There was no 1 percent. Still there is no 1 percent. So, I said, you are against women. Even if she’s a rich woman you don’t lend money to her. It’s not a question of just poor.
So when I began, I wanted to make these two points very clear. One, I lend money to the poor. And I lend money to both men and women. Fifty percent of my borrowers must be women. And I made it rigid.
But I go to the woman to lend money, and she said, “Don’t give money to me, give it to my husband. I don’t know anything about money.” Some said, “I never touched money in my life. It scares me to death to handle money. So it is something you should talk to my husband.” We kept saying, “No, it’s not a husband issue. It’s you. You think about it.” “I don’t know anything. What can I do with it?”
So this is a struggle. And I took my students, girl students because I cannot talk to them because Muslim women are not supposed to talk to men. So I had a big handicap. So I took my student, the girls—one of the girls is present here who was—Nurjahan? Ah, here she is. She is now the general manger of the bank. (Laughter, applause.) Thank you.
So she would go around, try to persuade. And questions that she cannot answer, she will come out and discuss with me, which I’m standing outside under the tree. She goes back, explains. (Laughter.) So this is how it began.
Finally, we made it happen. We got that 50 percent after six years of our work, not on the day one.
Then we started noticing something new. Money that went to the family through woman brought so much more benefit to the family than the same amount of money going to the family through man. Very clear. Women took very good care of it. And being a poor woman, she had an amazing skill, the skill to manage a scarce resource, because her husband is the one who is the provider, he gives only little, and expects everything has to be taken care of with this little. Everybody has to be fed, everybody has to be clothed, all the children have to be—but gave only so much.
So, if you’re a poor woman, that’s what you get, and she became very careful person to see everything goes right and she doesn’t run out of anything. And she brought this excellent skill of managing a scarce resource to the little money we gave her. She got the largest, biggest mileage you can ever think. Man was more careless, he handles money all the time, he doesn’t pay much attention. And if mother is earning money, children become the first beneficiary of it and everybody else gradually benefit from it. She is the last person to benefit. Woman has always—I mean we can say it’s a universal trait, a self-sacrificing mode. She’s happy to see others happy. Man wants to be happy himself, rather than—(chuckles). (Laughter.)
So we saw those things and we kept talking about it and we changed our policy. We said: Forget about 50/50. Who says 50/50? Let’s concentrate on women. And that’s when we came to this. And gradually we moved from 70 to 80 percent, 90 percent and stayed like that. So we are always—from long time we are above 90 percent. It is now 97 percent.
So this how the women—as I said, boldly I’m saying 100 percent of the children are in school, and all those things are happening because mother is the borrower, because she has been building up the new life in the family. And that makes lot of difference.
When Grameen ideas spread worldwide, something else happened. They forgot about men completely. Just, you see, today microcredit became synonymous with credit for poor women. It’s a universal trait. So what happened in Bangladesh is the same globally, and people see it. Because we started with 50/50, we still have some men in the program, but those who didn’t start 50/50, they started 100 percent and stayed 100 percent women.
QUESTIONER: Thank you. I’m Connie Duckworth, Arzu, Inc. In part due to your tremendous success, microcredit seems to be held out as the universal panacea to global poverty. Are there particular characteristics of developing countries or scenarios in your mind where microcredit is not the answer?
YUNUS: Microcredit is not the answer for everything anywhere. It is just one more thing. If somebody says microcredit will take care of it, forget everything else, you are listening to a wrong person. Microcredit is important. Financial service is important. That is missing. That’s what I said, why should it be missed? Nobody argued, let’s stop education because we got the key, get the money, forget about everything. We never said that. That’s why we’re saying 100 percent education. That’s what we’re saying. This is important. We didn’t open the chapter of health. That’s another story. We just slightly came with the Vitamin A deficiency. That’s health. We didn’t say, “Oh, let them have night blindness, who cares as long as my money comes in and I’m okay? They should be okay.” We never said that.
One thing I said, of course, on the health issue, just briefly, I’ll quickly add, is that income is the best medicine. If you have income, you eat for the first time. And if you eat, if you have nutrition, you fight the disease better. So if you give all kinds of health care but no income, you’re wasting your resources and your attention on those people, because they cannot absorb anything. Because their basic condition of the health is gone. You’re not eating.
So, microcredit creates self-employment. That’s what the beauty of microcredit is. Anybody will tell you the solution to poverty is to create jobs. Nobody will dispute that. But the dispute that we bring in is not on creating jobs. But when they say you create jobs, they’re talking about wage-based employment. There are not too many wage-based employment in Third World countries. So we said, well, don’t stop there. Why can’t you think about the self-employment? Let people take care of themselves rather than go to the factory, find a job, apply for something.
They have energy! Human being is bundle of energy and creativity. Unleash them. And that’s where the microcredit comes. If you give this little money, first time she figures out how to take care of five chickens. Once she’s successful with five chickens, she says I plan now I’ll have 20 chickens. And she goes for 20 chickens. Now she is becoming confident that I can do that. And soon she’s running a poultry farm of 2,000 chickens or whatever. Just started with five chickens.
So that’s the self-employment thing. We’re saying that’s the income part. But there are other things we must address. Human life is not just one thing. I started out by saying human being is much bigger than money-making machine. So human being, even here, human being is not just making income, human being has to have all other things.
They have to have democracy. They have to have their friendly relationship with each other. They have to have education. They have to have health. They have to know the world, where they live and so on, awareness. And all kinds of values, cultures. So nothing is ignored. Simply said, this piece is an important piece that is not there. In the jigsaw puzzle, you put that, it will make the picture complete.
And we never say stop everything, do microcredit. We say you do everything that you think important, but don’t forget microcredit. That’s all we say.
COLEMAN: Right here. Bill Carmichael.
QUESTIONER: Bill Carmichael, a former Ford Foundation hand. You referred earlier to man-made disasters, and you just spoke about democracy. I’d like you to speculate a bit about the impact of the Grameen experience on better governance.
YUNUS: Well, one quick one that I can say. Grameen Bank is mentioned—in any discussion in Bangladesh, discussion immediately goes into corruption because it’s number one in the corruption in the world. So it’s always you’re talking about corruption, how life is miserable, it’s corrupt, everything is corrupt. And somebody will say, “If in this corrupt country a Grameen Bank-like organization can run without corruption, why aren’t we creating more of those organizations so they can fight this corruption? How come they are corruption free?”
So that gives courage to people that they don’t give up. Just that few people on the top are corrupt, that doesn’t mean the country is corrupt. People are very honest. We lend money without collateral. We lend money without any guarantee from anybody. No joint liability. No legal instrument to take anywhere, to the court or something. Still people pay back. So that is part of honesty, part of their necessity and so on. So, we can’t complain against the common people of Bangladesh. So this always comes back to reference.
Second thing that comes into reference, the efficiency part of it. Grameen Bank, in a country where if you say, “Let’s meet at 3:00” and you don’t know what that 3:00 means—(laughter)—Grameen Bank works like a clock. And we established that. If the central meeting is to be held 8:00 in the morning, everybody knows it is 8:00 in the morning. So that culture has been developed.
People say, “Oh, you are destroying the basic culture of Bangladesh. Women are not supposed to do this. You are not supposed to do that.” I said, “Yes, I do. I destroy your culture, yes, because I create counterculture.” If you continue with the culture that you already have, you never get anywhere. Culture is a dynamic thing. You keep on changing for a better thing. If you hang on to the same old thing over and over again, you’re still where you are.
So with your life changing, you change your culture, you adjust yourself. I said, this is the counterculture. You have to get out, the way we are. And people accepted that. And that’s the kind of thing people see. So I will say it has, in Bangladesh, has a reference point with which to measure that it can be done.
In a country where we have all kinds of bad news, when suddenly this news comes we got a Nobel Prize, suddenly people will stand up, say, “Hey, we can do that! It’s us! It was not done by the World Bank. It was not done by a donor. It was our local kids who did that.” It’s really local kids. When you began in the first village, it was girl like Nurjahan, who’s just in the neighboring village, and there’s another one, who is number two in Grameen Bank, Depal, he’s also here. Depal? Yeah, (is outside ?), who is number two, he is right from that village. He was my student. These are all my students,
So I just took the students in the village, tried to do that. So it’s the local kids, and a local idea can grow into something which can get a Nobel Prize. So, “What are we afraid of? We don’t have to wait for other people to tell us what we can do.” So that gives a tremendous amount of self confidence that you can do that.
But, as I said, our politics somehow got into—stuck into mud, can’t extract ourselves. That’s our bad luck, yeah.
COLEMAN: Unfortunately, we are out of time. I think we could all sit here all afternoon and listen to you. But I highly recommend his wonderful autobiography Banker to the Poor. If you haven’t read it, I do encourage you to read it.
YUNUS: Thank you.
COLEMAN: And can we agree that this year the Nobel Committee made a very good decision. (Applause.)
YUNUS: Thank you. Thank you so much. (Applause.)
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