26 Mar 2012

To help the impoverished—or in some cases, stop those helping them from griping about providing assistance—we must change our mindset about why the impoverished are poor.

To help the impoverished—or in some cases, stop those helping them from griping about providing assistance—we must change our mindset about why the impoverished are poor, says Nobel Peace prize winner Professor Mohd Yunus.

The poor do not live in poverty because they do not know what to do nor because of disinterest in changing their lives; they are poor because the system does not work for them, said Nobel Peace Prize winner and social entrepreneur Prof. Muhammad Yunus.

He is very critical of the financial system that governs the world today and demands that it becomes more inclusive. “We designed a system for the privileged people and then blame the poor for all the trouble they go through,’’ said Prof. Yunus in an interview on February 23, 2012. “The blame should come on the people who design those systems, play those systems. They are the ones responsible for the creation of the poverty and the misery of the people.” Yunus, who is also a Pioneer of Social Business and Chair of the Yunus Centre, visited the Lee Kuan Yew School of Public Policy to deliver a public lecture on “Creating a Supportive Environment for Social Businesses”.

Yunus, 72, said he had no idea of the global potential of microcredit when he started experimenting with lending money to women entrepreneurs in Bangladesh—42 bamboo basket weavers, to be precise—in the 1980s. The subsequent foundation and success of Grameen Bank (“Village Bank”) in Bangladesh made microcredit a global phenomenon, with Yunus leading the world’s first Micro Credit Summit in Washington, DC in 1997. He eventually was to be awarded a Nobel Prize winner in 2006, for championing the cause of lending to the poor “to create economic and social development from below”, a recognition that the reduction of poverty is key to world peace.

From there the concept gradually spread all over the world and today Yunus is often credited as the champion of the cause. The Global Financial Crisis brought additional attention to microfinance, because for many who are less fortunate, it represented the only option to generate income by being self-employed and starting up a small business.

Yunus remarked that the enormous amounts of money made from microcredit created some tension between his philosophy and the purely profit-oriented business models of microcredit. When the attention turned to microcredit as a model of a profitable business, Yunus said he got concerned that it was straying from its roots, a tool to help the poor, particularly poor women, to overcome their problems and lift them out of the cycle of poverty.

He is disappointed that microfinance as a tool to help the poor did not go as far as he hoped. So far microfinance has been mainly provided by non-government organisations, shunned by conventional banks. “I want microfinance to become mainstream in banking rather than a footnote in banking,” he said emphatically.

Legislation as enabler

He attributed this gap to the absence of specific legislation necessary to institutionalise microcredit markets, as key to creating a supportive environment for such activities, citing a lack of will from policy makers. Still, no legislation was better than poor legislation as the framework must be very carefully crafted given its ability to shape society in both positive and negative ways, he mused.

He pointed to the seminal “Grameen Bank Law” in Bangladesh that created a separate legal regime to govern microcredit. Without this law, the microcredit institution he founded, Grameen Bank, would have become a conventional bank which typically would not lend to the poor, deeming them not credit-worthy, and not the kind of bank it is today, he said.

Yunus used a metaphor to describe the impact of globalisation on the poor. Globalisation is like a massive highway that operates in a system with traffic rules. Without rules, all those big, prosperous vehicles will occupy all the lanes and marginalise the smaller ones. Therefore, he is worried about what he calls financial imperialism, which needs to be patrolled by norms and rules. Aware that globalisation cannot be undone, he has shifted his focus to calling for a better set of rules. During the financial crisis, transactions between two market players morphed from business to gambling, he said, defying all the norms of business.

The crisis has proven that the poor’s creditworthiness is much higher than the big corporations’ creditworthiness, says Yunus. “All my life, I have been trying to explain that the poor are very much capable, and bankable. I think with Grameen we have illustrated that it can be done.” For Yunus there are no reasons why the financial system should be an exclusive system for the rich.

He believes that the world should not rely on governments to fix the system but be empowered to force the change needed to help each other. To do this, he promulgates the idea of social enterprises, with social businesses working with established companies armed with the resources and reach to achieve the scale he envisions.

Thus was born Grameen Check, clothing which promotes traditional hand-loom weaving skills. He has also worked on social business ideas with global players such as French company Group Danone which addresses child malnutrition in Bangladesh by producing a yogurt fortified with micro-nutrients, produced with solar and bio gas energy and served in environmentally friendly packaging. Calling it a “big ambition to suit a big company”, he recounted successfully challenging the German sports apparel company, Adidas, to adopt a mission of ensuring “nobody in the world would go barefoot”.

These initiatives are legitimate, self-financing businesses with a social mission that reinvest rather than extract profits, completely different from typical social corporate responsibility initiatives focused mainly on charity work, he said.

Muhammad Yunus is not done yet; his vision of the future is a world that accommodates social businesses where nobody has to depend on handouts. This would not only empower and uplift entire generations of disadvantaged people but also reduce the burden of assistance from richer lender nations for a healthy world financial system.

Claire Leow is the Managing Editor of GiA.
Johannes Loh works as a Research Associate for the Asian Trends Monitoring Bulletin. His email is