I first met Muhammad Yunus in February 1997, during a short visit to Dhaka. I found a remarkable man. He not only spoke the greatest good sense but had, against huge odds and in the face of dreadful cynicism on the part of so-called experts, followed his ideas through and made them work.

– Prince of Wales

The success of Grameen Bank in developing micro-finance in Bangladesh as a successful commercial operation has led to global interest in the process. There are variants of the Grameen concept all over the world, including in the United States. The micro finance revolution now has its own global conference every year.

– C.K. Prahalad,
Management Guru

A case study based on the autobiography of Muhammad Yunus, Banker to the Poor, The University Press. Muhammad Yunus is a Nobel Laureate in Peace and the founder of Grameen Bank, Bangladesh. The present degenerate condition of micro-finance in India should not blind us to the immense potentiality of this instrument for fighting poverty. As Mohammad Yunus himself pointed out in a talk the main problem with microcredit in India is that instead of using it to help the poor, entrepreneurs are misusing it to help themselves to become rich. Thus, there is a need at present to get back to the original idea of micro-credit as it was conceived and used by one of the most successful warriors against poverty.

Key Perspectives

Compassion in action; nightmare of poverty; birth of a solution; feminine advantage; harnessing the power of groups; business model; poverty, profit and beyond.

Compassion in Action

Most of us are sensitive to the poverty and hunger, which we see around us and feel sympathy for the poor. But there are a few who go beyond feeling sympathy to creative compassion, which means to do something for changing the lives of the poor. Muhammad Yunus, the founder of Grameen Bank is one of them, perhaps one of the most creative and successful. The autobiography of Yunus is an insightful and moving account of Compassion in Action.

Interestingly, Compassion is now recognized as a leadership quality in modern management thought. Richard Boyatzis and Annie Mckee, leading leadership consultants, in their book: “Resonant Leadership” published by Harvard Business School Press, describe Compassion, Mindfulness and Hope as core qualities of effective leadership. Richard and Annie define compassion as, “Empathy in action” and describe its main components as:

Understanding and empathy for others feeling and experiences.
Caring for others.
Willingness to act on these feelings of care and empathy.

Muhammad Yunus displays such an active and dynamic compassion for the poor.

This case study is not an exhaustive analysis of the leadership qualities, styles or strategies of Yunus. The main objective of this study is to examine an important aspect of effective entrepreneurship: how a creative idea or solution is born in the mind of a entrepreneur, takes form and gets converted into decisions and action. This case study examines this aspect of entrepreneurship in the life and example of one of the most successful social entrepreneurs of our age.

The Nightmare of Poverty

The most interesting and poignant part of the autobiography of Yunus is the one in which he describes how the idea behind Grameen Bank germinated in his mind. After obtaining his doctorate in economics from US, Yunus came back to Bangladesh and took a comfortable well-paid job in Chittagong University. He could have easily settled down and prospered in his job and become a top academic or a Vice Chancellor. But he was shaken to the core by the nightmarish famine and poverty he saw in his motherland. People were dying in the streets. Young and old, woman and children were simply collapsing and dying of starvation while sitting or walking on the roads. Muhammad Yunus describes poignantly with deep feeling in his heart what he saw in Bangladesh.

“The year 1974 was the year which shook me to the core of my being. Bangladesh fell into the grips of a famine. They were everywhere. You couldn’t be sure who was alive and who was dead. They all looked alike: men, women, and children. You couldn’t guess their age. Old people looked like children, and children looked like old people. One could not miss these starving people even if one wanted to. They were everywhere, lying very quiet. They did not chant any slogans. They did not demand anything from us. They did not condemn us for having delicious food in our homes while they lay down quietly on our doorsteps. There are many ways for people to die, but somehow dying of starvation is the most unacceptable of all. What a terrible way to die. It happens in slow motion. Second by second, the distance between life and death becomes smaller and smaller.”

However many might have seen and felt like Muhammad Yunus. But only a few might have converted their feelings into action to do something for the poor. Among these few, only Yunus was able to do it creatively, which had a substantial impact on the lives of the poor, not only in Bangladesh, but in the whole world.

As Yunus saw the grim reality of poverty, his academic mind built around economic theories collapsed. He saw concretely how sterile and useless these theories are for solving actual and grave economic problems like stark poverty. “I wanted to run away from these theories from text books” write Yunus, “I felt I had to escape from academic life. I wanted to understand the reality around a poor person’s existence and discover the real life economics that were played out everyday in the neighbouring village – Johra.”

The Birth of a Solution

So Yunus wanted to study the real world of poverty than theorizing about it. He interviewed one of the poorest in Johra, Yunus describes the simple interview:

“She was in her early twenties, thin, with dark skin, black eyes. She wore a red sari and could have been any one of a million women who labour every day from morning to night in utter destitution.”

“‘What is your name?’
‘Sufia Begum.’
‘How old are you?’
‘Twenty-one.’
‘Do you own this bamboo?’ I asked her.
‘Yes.’
‘How do you get it?’
‘I buy it.’
‘How much does the bamboo cost you?’
‘Five taka.’ That was 22 US cents.
‘Do you have 5 taka?’
‘No, I borrow it from the paikars.’
‘The middlemen? What is your arrangement with them?’
‘I must sell my bamboo stools back to them at the end of the day, so as to repay my loan. That way what is left over to me is my profit.’
‘How much do you sell it for?’
‘Five taka and 50 paisa.’
‘So you make 50 paisa profit?’

She nodded. That came to a profit of just 2 US cents.

‘And could you borrow the cash and buy your own raw material?’
‘Yes, but the money-lender would demand a lot. And people who start with them only get poorer.’
‘How much do the money-lenders charge?’
‘It depends. Sometimes they charge 10 per cent per week. I even have a neighbour who is paying 10 per cent per day!’
‘And that is all you earn from making these beautiful bamboo stools, 50 paisa?’
‘Yes.’”.

This interview gave Yunus the insight into what is the real and immediate cause of a large mass of poverty and a solution using micro-finance. The Doctorate in Economics from University of Colorado, US learnt a great lesson on the economics of poverty from that poor simple, uneducated woman. She taught the learned professor of Economics at Chittagong University that real cause of the miserable condition of people like her is not lack of education or skill or hard work but lack of unexploitative credit.

Sufia may be illiterate but she has the skill to make that beautiful bamboo stool and she works hard all day. What she needs is that five taka! As Yunus describes what he has learnt from his interview with Sufia:

“I simply tried to understand why she suffered: she suffered because the cost of the bamboo was 5 taka and she didn’t have the necessary cash. Her life was miserable because she could survive only in that tight cycle – borrowing from the trader and selling back to him. She could not break free of that circle. Right now her labour was almost free. It was a form of bonded labour, or slavery. The trader always made certain that he paid Sufia a price that only covered the cost of the materials and just enough so that she would not die, but would need to keep on borrowing from him. It seemed to me that Sufia’s status as virtually a bonded slave was never going to change if she could not find that 5 taka to start with. Credit could bring her that money. She could then sell her products in a free market and could get a much better spread between the cost of her materials and her sale price.”

In other words Sufia was not able to break away from the circle of poverty because there was no one who can understand her problem, lend her the money she needs and support her until she can stand on her own legs. The present source of credit to the poor, the money-lender is exploitative. The traditional banking system, government and private, is in general caters to the rich and not interested in the poor. As Yunus explains further:

“Sufia needed credit because she had no cushion to tide her over the adverse conditions which too often arose in meeting her family obligations, in carrying on her bamboo weaving and for mere survival in times of total disaster. Unfortunately, no formal financial institution was available to cater for the credit needs of the poor. This credit market, by default of the formal institutions, had been taken over by local money-lenders. People were not poor because they were stupid or lazy. They worked all day long, doing complex physical tasks. They were poor because the financial structures which could help them widen their economic base simply did not exist in their country.”

Thus Yunus came to the conclusion that what people like Sufia need to breakaway from the clutch of poverty is a new banking system which is specially tailored to the needs of the poor, which can provide the financial and institutional support that will help them to get self-employed. Another unique feature of Yunus’s approach to poverty is that it views the poor with a healthy, positive attitude. Most of the conventional approaches to poverty look at the poor as helpless, wretched creatures who need constant external support to stay alive and desperately in need of a “job” from an employer to survive. But Yunus looks upon the poor person as a capable, hardworking individual with innate skills, and a potential entrepreneur. A social science like economics, says Yunus, must “enable and encourage human beings to explore their unlimited potential and not start with the assumption their capacity is given and limited.” Commenting further on the present approach of traditional economics to creating employment, Yunus states:

“The whole world agrees on what is the best way to eliminate poverty: it is to be achieved by creating employment. But economists recognize only one kind of employment – waged employment. In their book there is nothing called ‘self-employment’. Economists have created a world for us where we are supposed to spend our childhood and part of our youth working hard to prepare ourselves to be attractive to potential employers. The idea of a young human being working hard to make himself or herself useful to an employer is very repulsive to me… It reminds me of the old days when a young girl would be trained by her mother to become attractive to a young man so that she could find herself a husband. A human life is too precious to be wasted in preparing to find an employer and then devoting one’s entire existence to serving that employer. Opening up opportunities for self-employment by creating appropriate institutions and policies is unquestionably the best strategy for eliminating unemployment and poverty.”

Yunus is a pragmatist but not a narrow-minded one who cannot see beyond its nose. He saw the immediate causes of poverty but without losing the long-term vision. He saw clearly that the immediate cause of poverty of a large mass of people is what he describes as, “lack of control over capital.” They don’t have sufficient economic freedom to make use of the fruits of their labour to stand on their own legs. They need an understanding, sympathetic and flexible credit system to breakaway from the exploitative grip of the moneylender and get started on the road, which leads to decent living, prosperity and a better quality of life.

This is the rationale behind the concept of micro-credit, which has become a potent weapon in our battle against poverty. The great success of Grameen Bank in using microcredit has awakened the development experts and practitioners all over the world to the immense potentialities of this financial instrument in poverty-eradication.

However, Yunus also understands that micro-credit is not the long-term solution to poverty but only an initial ignition to kick-start the growth engine which carries the poor to a better world. He is very much aware that long-term solution to poverty requires a holistic approach which includes education, health, technology and many others. As Yunus sums up briefly his long-term blue-print for elimination of poverty:

“The economic advancement of a poor family needs a broader enabling and sustaining environment. Micro-credit starts up the engine in the family, but that engine now needs refueling, maintenance, expansion of capacity and a good road to make good progress. Reaching the survival point with micro-credit can be accomplished without difficulty. To go much further one needs good a health-care system, education, a pension plan, good communications, market information. If no such support system is developed the economic advancement made by the borrowers may come to a halt or even slide backwards.”

In his autobiography, Yunus gives brief descriptions of the initiatives and plans of Grameen Bank for its borrowers in the area of housing, health and retirement, education, technology, energy, communications.

But in any new project or undertaking, creating the idea or vision is the least difficult part of the enterprise. The most difficult and challenging part is the implementation and execution. It is beyond the scope of this study to analyse all the decisions and strategies of Yunus, which made his Grameen movement a big success. We will confine our discussion to a few major decisions and strategies behind the success-story of Grameen Bank.

Nivas

The author is a student and practitioner in the path of integral yoga.