The Nobel Prize winner who started microlending phenomenon says its power is illustrated in the transformation of lives.
Muhammad Yunus, the father of microcredit and founder of Grameen Bank in Bangladesh, has proved that poor entrepreneurs, mostly women, can advance economically with small loans. The doctor of economics made his first loan of $27 out of his pocket to several women who were paying exorbitant loan rates to a loan shark in order to buy bamboo to make tables.
Before Grameen, there was no bank to lend money to the people who needed modest amounts of capital to buy a sewing machine or expand inventory in anticipation of greater sales. Yunus spoke Friday at “Business Day” at the Nobel Peace Prize Forum hosted by Augsburg College and the Humphrey Institute of Public Affairs at the University of Minnesota.
Q: It’s said that Grameen Bank has loaned something like $7 billion to working-poor entrepreneurs since you started it in 1983, after several years of successful making small loans of less than $100 to people out of your own pocket. How do you quantify the impact of microlending?
A: Each person is a story by herself. There are millions of them who transformed their lives from a feeling of nothingness, to somebody who can take care of herself. That is the power of the loan ... and the ability to go from a lower-size loan to a larger-size loan. There are now a lot of seasoned businesswomen and their children are inspired by them. This is the story of how microcredit has expanded, including in the United States. We have 6,000 borrowers of Grameen Bank America in San Francisco and New York.
Q: Are you surprised that the movement has grown so large?
A: I never believed this could be so large. I was trying to solve a local problem. Loan sharks were putting poor people under so much misery. I thought I could solve this problem, in one town. I began with $27 and it was paid back to me. I thought, “Why can’t I go on doing that?”
Q: What has been the repayment rate at Grameen?
A: Microcredit at Grameen has always been 96 or 97 percent throughout the years. And there is no collateral. People pay back even though we could not force them. At Grameen Bank in New York City, the repayment is 99.6 percent. The system of solidarity groups responsible for the loan and a small repayment every week is why it works. They are not overwhelmed by the size of the loan. You build up the customer and the culture of investment and repayment that they can handle. Earn income. Keep the door open. And cooperate with each other.
Q: I recently wrote about a young woman from Bangladesh, Fahmida Zaman, who is studying at St. Catherine University in Minnesota. She says this was made possible largely because of her mother’s drive and a $100 loan, the first of several, from Grameen. Zaman says her goal is to earn a graduate degree in politics and economics and be part of political reform in Bangladesh.
A: This is fantastic. I’ve been talking about the children of Grameen Bank. That’s very exciting for me to see girls completing their education. To see qualitatively there is no difference between a poor child and one from a rich family.
Q: The success of microlending and Grameen Bank led to conflict with the Bangladesh government that eventually led to your retirement from Grameen. How do you describe this period and what effect did it have on you?
A: It was a sad experience, but I’ve continued with my work. I’m developing social businesses in Bangladesh and other countries. My work continues ... and I’m 72 years old.
Q: How do you spend your time now?