Social Business

Professor Muhammad Yunus
Chairman, Yunus Centre
Founder, Grameen Bank

(Remarks by Nobel Laureate Professor Muhammad Yunus delivered at AmCham Luncheon Meeting on July 12, 2011)

Thank you Aftab and thank you Gafur!

Assalamu Alaikum! First I apologize for being delayed. This is due to the familiar circumstances that are beyond the control of citizens.

But these fifteen minutes of delay is not as big a delay compared to five years of delay. Gafur has been very persistent for the last five years that I come and speak at this meeting and his persistence has become more and more intensive as the years went by. This has brought me to the conclusion that if you want to accomplish anything impossible, you can assign it to Gafur. You can rest assured, he will make it happen; he is a very persistent person.

I was always promising, but not delivering. So today I am very happy that finally I could deliver myself here to talk about social business. And that is the issue that he wants me to discuss in this meeting.

The basic concept of social business came to my mind because that is the kind of thing I was doing. Traditionally we talk about business as a vehicle to earn money, to make profit. The whole idea of business was built around the idea of making money. We all know that the earliest form of business was barter, the exchange of one good for another goods. You have something, and I have something else, and we exchange them so that both of us are better off. You have rice and I have fish. So we exchange some rice for some fish. After the exchange both of us have rice and fish. Both are happier.

Growing Up With Two Giants

February 4, 2006

By Professor Muhammad Yunus

Happy Birthday to the Daily Star!

This is a great occasion to celebrate. Pages of the Daily Star have documented fifteen years of history Bangladesh history. For Bangladeshis this is a period to be proud of. Fifteen years of democracy itself is a great cause of celebration.

Now we are at the outset of a new year which is going to be a critical year for Bangladesh democracy. Whole country is abuzz with one single question: Can we hold a peaceful and fair election on schedule as required by the constitution and desired by the nation? We see many bad signs. They upset the citizens. Despite all the bad omens, the nation must express its resolve by saying: "We shall hold the election on time. We shall make it more peaceful, more credible than any other election ever held in the past. Despite all shortcomings still remaining, we shall accept the result of the election and move on to build the nation unitedly."

Election is the Overriding Agenda

Let holding a peaceful and fair election be the overriding agenda for 2006 for our nation.

Holding the national election on time is a necessary condition to keep the process of democracy alive and strong. Any derailment from this course will be a disaster for the nation. Getting derailed is easy and, sometimes, attractive, but it becomes costlier by the day to stay derailed. Getting back on the rail is an extremely painful and slow process, and exhausts the nation by consuming all the energy and attention of the nation.

Despite outstanding accomplishments recorded by Bangladesh, people of Bangladesh feel unsettled, unhappy and frustrated. Our politics is killing our spirit. It has led to our major national crises: 1) limitless corruption, 2) rise of unprecedented terrorism, 3) fast deterioration of the public service structure. They are all inter-connected and linked to politics.

From all indications it is absolutely clear that Bangladesh has quietly and steadily built a very strong foundation to make the big leap forward. But our non-stop political bickering does not give a respite to celebrate or get inspired by our enormous successes to prepare ourselves to reach out to still higher levels of accomplishments. We are ready to launch ourselves into a path to cross USD 1,000 per capita income, 8% GDP growth rate, and reducing poverty level to under 25% in the near future. But our political attention remains riveted to day to day party politicking rather than strategic national issues.

Lucky to Have Two Giants As Our Neighbours

India and China are almost there. They have already reached the 8% growth rate and 25% poverty level. They are becoming such political powers and economic power-houses that the whole world is gathering around them to get their attention.

Bangladesh is lucky to have two globally sought-after giants as her next door neighbours. These giants are not sleeping giants. They are super-active, and growing very fast. We must learn how to take advantage of fast growing giants. We must assess our best interest in building our relationship with them. In their turn, they'll assess their best interest in having us as their neighbour.

Obviously, they will look at us as their market, their competitor, their partner, and also as a potential trouble-maker. From our side we must make it absolutely clear that we have no intention to be trouble-maker for our neighbours, nor do we want to see them as trouble-maker for us.

But a section of our politics find it a very attractive theme to impress on the common people of Bangladesh that India is behind all the terrible things that happen in Bangladesh. If you don't vote for our party, India will turn Bangladesh into her client state.

Countries are not made of saints only or angels only. There are bad people in India, who can dedicate themselves to do bad things to Bangladesh. Similarly, there are bad people in Bangladesh committed to do bad things to India. Both countries must remain vigilant to catch the bad people and punish them forthwith to uphold the friendship between the two countries.

Growing Up With Giants

When our giant neighbours bring the whole business world to their door-steps, our door-steps come very near to the business world. Visibility and contacts are very important factors in business. They come to us easily because of having important neighbours. If we play our cards right our economy can pick up the speed of our neighbours. Even if a small proportion of their business finds its way to our shores, we benefit tremendously. Before business moves away to Africa, buyers and investors will examine our capability. It will be our failure to catch them that will push businesses away from us.

Growing neighbours are also sources of technology and experience. Expanding economies keep moving towards more and more high-profit products and services, leaving behind low- profit, labour intensive items. This creates opportunities for neighbours. This is not to suggest that Bangladesh has to satisfy herself only with the markets and the products which giant neighbours are not interested in. What Bangladesh can do will depend on our level of efficiency and management skill. Bangladesh can find niche to provide high value specialised products and services to her giant neighbours.

I am emphasising on the fact that having two fast growing giant neighbours is a great boon for us. Let us dispel the fear that living between two giants is a scary prospect --- that we may be stepped on from any side, any minute! On the contrary we'll be the beneficiary of coasting effect of having two giants next to us. We can get a ride on the fast train with them.

An Open-Door, Open Arm Country

Future of Bangladesh lies in being an open-door, open-arm country. We must not live under the fear of Indian wolf. We must get the constant fear of Indian wolf out of our system. If it is a real threat, we'll have to prepare for it and get on with our lives. If it is imaginary, we'll have to get our minds cleansed out. Frequent cries of Indian wolf is a sign of our political emptiness. We carved out a separate country for the Muslims in 1947 to protect us from Hindu domination in the united India. We created Bangladesh to protect us from the Punjabi domination. Now some of us are rediscovering Hindu domination coming from India. Where do they want us to go now?

We are not going any where. We stay where we are. In the world today domination does not come through sneaky conspiracies. Domination comes from economic power. If we remain a poor country, everybody will dominate us, not just India. Moving up the economic ladder quickly is the best protection from all dominations. Let us not confuse this issue.

In order to move up the ladder quickly we should open all our doors, invite everybody in, encourage our people to spread themselves all over the wide world, show their talents and win over the confidence and appreciation of the whole world. Hiding behind closed doors is no protection at all.

Let's Make Bangladesh the Cross-Roads of the Region

Let's vision Bangladesh as the cross-roads of the region, if not the world. Let people, products, investments from all over the world flow into Bangladesh, and out of Bangladesh, with utmost ease, safety, and efficiency. Let's make our laws, institutions, bureaucracy, travel and transportation facilities, financial system most friendly to the movement of people, investments, goods and services in and out of Bangladesh. Let's build everything in Bangladesh in such a way that Bangladesh becomes the natural first choice of hard-nosed investors and traders. Let Bangladesh be Bangladesh International. Let us all agree on this vision and then move forward unitedly to make it a reality in the fastest possible speed.
To make Bangladesh an international cross-road we'll have to address the following:

  • Reduce corruption level drastically.
  • Provide reliable electricity all over the country.
  • Open up ICT and make Bangladesh a very attractive country in terms of state-of-the-art ICT.
  • Build a mega-port in a suitable location along the Chittagong coast line capable of serving the following countries: Bangladesh, Nepal, Bhutan, Eastern India, Myanmar and South-Western China.
  • Build highways to connect the mega-port with all six countries.

We must visualise Bangladesh as the ICT, industrial and trading hub of the region. On the first day of 2006 we have signed a document which has the potential to change the economy of SAARC region. The document we signed was the document relating to SAFTA agreement. Now Bangladesh should take the lead, rather than wait for initiatives to come from other countries, to move SAFTA forward. We can be smart, open our doors, convert disadvantages into opportunities, and change our destiny. Our biggest worry is corruption. In a corrupt environment it is easy to befool the system; by throwing in money, one side can take away all the gains of trade (even so, I'll not support a closed border, which creates a fertile ground for higher-stake corruption). There is no way out but to eliminate corruption in politics, from where the infectious disease of corruption spreads around.

Geographically Bangladesh is strategically located to provide access to international shipping to Nepal, Bhutan, Eastern India, Myanmar and South-Western China. We should start making appropriate preparations, in consultation with these countries, to create facilities for access. Again, it'll to be our call to draw attention of our neighbours. We'll have to do our home-work well to show them the benefits accruing to them by opening up the access to the sea-routes through Bangladesh, and doing business with Bangladesh. We'll have to resolve formidable political and technical issues with India. Remaining passive is not at all to our interest. It is actually very costly in terms of gains foregone. True leaders not only have visions, they have to have the burning drive to push through the solid walls of obstacles to make their visions come true. Vision must be backed up by hard work and dedication.

Mega-port at Chittagong

Mega-port at Chittagong is the key to making Bangladesh the cross-road of the region. With the economy of the region growing at a sustained high speed, demand for the access to a well-equipped well-managed port will keep on growing. A region, which includes two giant economies, will be desperately looking for direct shipping facilities to reach out to the world. Chittagong will offer the region the most attractive option. Even today, despite the problems of present Chittagong port, Kunming is requesting permission to utilise this facility.

With global competition becoming more fierce shorter and shorter lead time for delivery will become the magic formula to attract business. An efficient mega-port at Chittagong will be in high demand. This port can be built and owned by a national or international company with government participation in equity. It can contract out the management of the port to a professional port management company.

International Airport

Mega-port may support an international airport in its proximity. With appropriate aircraft servicing facilities and hotels, this airport can become an airline hub. It has the advantage of cutting distances to many Asian cities like Tokyo, Osaka, Beijing, Shanghai, etc, and taking off the pressure from important SAARC airports.

Highway Network

During the SAARC Summit held in Dhaka recently, Dr. Manmohan Singh, Prime Minister of India, proposed to build a highway network to connect the SAARC countries. We should enthusiastically welcome this proposal and offer our plan to build highways connecting Nepal, Bhutan, eastern India, and Pakistan. We should make sure that our highway network extends upto Cox's Bazar, so that it can be connected with Myanmar, Thailand and China --- in the eastern side.

Need a Regional Water Management Plan

With borders opening up, highways criss-crossing the region, businesses growing, we can create mutual trust among our neighbours leading to right kind of political climate to engage them to work towards preparing a regional water management plan in conjunction with the plan for regional production and distribution of electricity. Fortunately, this region has an enormous capacity to produce hydro-electricity. With political understanding Bangladesh can meet her ever growing electricity need from a mutually beneficial arrangement with Nepal, Bhutan, and India.

Human Resource of Bangladesh

Human resource is our best resource. We must pay our top priority to make sure our young generation get prepared to play important roles in a global framework. It is nothing but utter disgrace that we have allowed some of our young people to turn into suicide bombers. This is an unforgivable failure on our part. We must take the blame without any excuses, and must ensure that no other young man has to choose the path of suicide for any reason.

USD 100 Lap-tops to School Children

Bangladesh has a very young population. Half the population is under the age of 18 ! If we pay serious attention to them we can create a dramatically different next generation. Some countries are already signing up with MIT Media Lab to provide USD 100 lap-top to each school student, just like text books. Lap-top to a child gives a message. Message is: Discover yourself, discover the world, create your own world. There is no reason why we cannot sign up with MIT Media Lab to do exactly the same and give lap-tops to our students. Let us not miss this world-changing opportunity.

One way to let all children, poor or rich, boy or girl, urban or rural, feel equal is to ensure access to computer and internet. This connectivity also takes off some of the unevenness in our educational facilities. We have already witnessed a telecommunication revolution. Within a short span of five years mobile phones have reached every village in Bangladesh. At the end of 2006, one in every eight persons in Bangladesh will have a telephone! With USD 100 lap-top, every school student will have access to internet telephony.

Our Young People Can be Role Model

The world that these young people will create will be the world of innovative ideas. Old resistance to new ideas will crumble away. Ideas will chase ideas. Seekers of ideas will sift through mountains of ideas to get to the ones they are looking for. Unlike in old times, ideas and innovations will no longer remain unknown. Creativity in every direction will be rewarded more than anything else. Our education system has to be oriented towards promoting creativity in our young people.

Grameen Bank employs 17,000 staff. Ninety per cent of them are young people. I see the dedication and commitment with which they work. They can be role model for young people any where in the world. Grameen Bank gives student loans to Grameen borrowers' children to pursue higher education. Nearly 10,000 such students have received student loans from Grameen Bank to study in medical schools, engineering schools, universities, etc. Their parents are illiterate and poor. It is for the first time in the history of their families that some one went to school. They are making a sharp break in their family history --- going from illiteracy to highest level of education ! It is a thrill to meet them and talk to them.

I meet many Bangladeshi young people when I am visiting foreign countries. Many of us are used to meeting Bangladeshis in New York. But it is a quite different experience to meet young Bangladeshis in a small town of Spain, or in an island in Italy, or in Argentina, Chile, Columbia. They show up to meet me at the hotel, or in the conference where I am speaking. They discover my presence in the town from the newspaper reports. They come individually. They come in groups. Among everything else they express their worry about the political situation in the country. I ask them how they got there. Each tells a horror story. Each time it is a story of perseverance, tenacity, and high risk adventure. It is quite an experience to hear them tell the story of how they moved from one country to the next, how they switched from one livelihood to another. They are doing well now. They have learnt the local language, and understand the local way of life. They are at ease with local people. Story one gets from a migrant worker working in an Asian country is different, but not too different. It is the story of how they are cheated by the man-power agents, and how they are mistreated by the airport officials, at the time of departure as well as at the time of visits.

Bangladeshi young people reached out to all corners of the world with basically individual and family initiative, using network of friends and relatives. Government has built some facilities to help them by making it easy for them to go out. But you hear more about the harassment, bribes. extortion and unresponsiveness of the government officials than nice things about these arrangements. These young people who live under extreme difficulties are making a big contribution to the national economy. They have been sending a very substantial amount of money as remittances.

Overseas Remittance

The piece of information that amazed me is: in 2004, Bangladesh received USD 3.4 billion in remittances, compared to India's USD 21.7 billion (China USD 21.3 billion). That is quite an achievement! With nine times larger population, India's share would have been USD 30.6 billion if she had received the same per capita remittance. Bangladesh remittance earning rate compares well with Pakistan too (Pakistan USD 3.9 billion). Total remittance to Bangladesh constituted one-third of the total foreign exchange earning of the country. Despite all the problems faced by Bangladeshi migrant workers, this is a very significant chunk of foreign exchange earning contributed by them.

More important than the quantum of foreign exchange earning, remittances go directly into poverty reduction. The World Bank Global Economic Prospects Report says this remittance inflow has helped cut poverty by 6% in Bangladesh and given a boost to rural economy.

This is one fascinating example of low-income people making direct strategic contribution in achieving nation's economic and social goals. This is also an example of common people's initiative in changing their own lives. As an appreciation of their great contribution to the nation we could have done a lot more to reduce the risks involved in venturing out of their own known world to totally unknown territories. We could help them increase their earnings, reduce their costs, and humiliation.

Must Keep On Building Up Respectability As a Nation

Bangladesh is a rather new name in the list of nations. It came to world's media attention mostly through disasters --- floods, cyclones, tidal-waves, etc. Reporting on disasters always highlight poverty, and helplessness. That's the image of Bangladesh that sticks in people's mind. Two recent negative images have been added to that. One, Bangladesh has been repeatedly found to be the most corrupt country in the world, and two, suicide bombers are killing innocent people in Bangladesh.

Image of a country is very important when it comes to dealing with the world. The better the image a country has, the better is the deal it gets. To be successful in international relationships we'll have to build up respectability as a nation. Luckily for us Bangladesh has a very strong positive side which counters the negative image to a large extent.

Bangladesh is enormously respected globally for being the birth place of microcredit. Every country in the world feels the need for microcredit. No country can ignore it. They study microcredit in academic institutions, discuss it in meetings, conferences and workshops. Most countries, rich or poor, have active microcredit programmes. They all pay respect to Bangladesh for being the originator country. Bangladesh, microcredit, Grameen have become synonymous in the minds of people around the world.

Bangladesh is remembered as the country which gave the world oral saline to combat diarrhea.

Bangladesh earned respectability by demonstrating her skill and efficiency in disaster management. World media publicly suggested that Tsunami affected countries and the USA, after devastating Katrina, should learn from Bangladesh in disaster management.

Bangladesh is cited as a success story in producing enough food to feed her people despite doubling the population in 35 years.

In Terms of Human Development Indicators Bangladesh is Third From the Top

Bangladesh birth rate has declined significantly. Fertility rate declined from 6.3 in 1975 to 3.3 in 1999 - 2000 reduced almost to half. This is cited as a global success story.

During early 1990's world looked at Bangladesh with pessimism. But it all changed dramatically. Now Bangladesh stands up with many laurels over her head. World is trying to understand how can a country do so well when it is number one country in corruption, its weakness in governance is so unbearable, politics is so chaotic and confrontational, work stoppages are so frequent and unpredictable.

Economic performance and human development indicators of Bangladesh have been moving upwards since early 1990s. GDP growth has been over 5 per cent during this period.

Bangladesh has very impressive performance in terms of the human development indicators. In terms of these indicators Bangladesh came out in number three position in the developing world, after China and Cave Verde.

Life expectancy of women in Bangladesh used to be lower than men. Now it is higher than men --- a better performance compared to South Asia as a whole.

Female labour force participation rate increased dramatically between 1983 and 2000, both for rural and urban, with sharper increase in rural, than in urban. Female labour force participation rate in rural area increased from 7 per cent in 1983-84 to 22 per cent in 1999-2000. Urban rate increased from 12 per cent to 26 per cent during the same period.

Child and infant mortality have been falling at more than 5% a year, malnutrition among mothers has fallen from 52% in 1996 to 42% in 2002. Primary school enrolment rates have reached 90%, up from 72% in 1990. Enrolment in secondary education has been rising. Bangladesh has already eliminated gender disparity in primary and secondary school enrolment and has made remarkable progress in providing universal basic education.

In the past decade, Bangladesh reduced infant mortality by half ---- at a rate faster than any other developing country has done, increased adult literacy rates by 8 per cent for women, and 6 per cent for men.

In terms of infant mortality rate and female primary enrolment, Bangladesh is ahead of West Bengal, Punjab and Uttar Pradesh of India.

Progress towards achieving millennium development goals (MDG) in Bangladesh is surprisingly on track. According to data on current trends, Bangladesh has either met or is expected to meet most of the MDG targets. If right policies are pursued dedicatedly there is a good chance that Bangladesh will reduce poverty by half by 2015.

Capacity Has Been Built, We Are Ready to Go

Bangladesh has outstanding accomplishment in reducing child labour. According to UNICEF, percentage of child labour in Niger is the highest (66%). Bangladesh has one of the lowest percentages (7%). Nepal is 31%, India 13%.

The list of our accomplishments is long and very impressive. We notice the admiring eyes of international delegates focused on Bangladeshi delegates when we attend international conferences, be it microcredit, disaster management, health, education, renewable energy, environment, women empowerment, or child labour.

When we visit capitals of SAARC countries we are always asked, "How did you do it? What must we do to catch up with you?"

I am not saying that Bangladesh is on top of everything. Far from it. Our list of failures is much longer than the list of successes. I bring up the list of successes to point out how wrong we are when we throw up our hands in the air to say in frustration that we'll never make it. This list of successes will convince anybody that not only will we make it, we have already made it in many respects, and will do better than many others around us, and like us.

Good news that comes out from these successes is that we have created the capacity to address all our problems roundly and solidly. Not only we have gained self-confidence, we are ready to earn the confidence of the world. Soon a Bangladeshi passport can bring out admiration and respect from others, rather than suspicion and disrespect.

It is hard work to score points in respectability. It is easy to lose points. One tiny incident, one tiny misstep, one tiny callous decision can push us down quite a bit in respectability. Let us hold on to what we already have, and add to it, as much as we can. It is our very precious capital in facing the world.

Here are our two most important tasks at the moment: we must combine all our efforts 1) to make sure we hold our election on time with the participation of all major political parties, and 2) make sure we reduce corruption sharply and immediately.

Voters Must Unite to Say 'No' to Corrupt Candidates

Yes, Bangladesh has done very well so far. We may thank our luck for it. But let us not get used to relying on our luck alone. If we do, everything around us will crumble soon.

This year, 2006, is the year for the nation to sit up and make a desperate attempt to put our house in order. People have to wake up to the fact that they are the boss. People have to make their minds known to the politicians who want their votes to run the country on their behalf. This is the election year. This is the best time to get heard. Voters should not allow themselves to be treated as absentee owners who do not have any knowledge of their own properties. All that the absentee owners are offered by their employees, is to sign on the dotted lines. No question is allowed.

Voters must refuse to sign on the dotted line. When political parties nominate their candidates, they do not consult the voters. Voters are not given any real choice, such as a choice of voting for an honest person, for a person who is committed to work for people, for someone who is not known to have amassed wealth by using his power as a member of parliament or as a party official or a worker. Only choice voters are given, is the choice of voting or not voting.

Voters want to vote, and want to vote for a person they admire, rather than be compelled to vote out of party loyalty, or on some other considerations. Voters must create their own choice. If political parties offer corrupt candidates, people will put up their own clean candidates. If we don't do that we'll continue to be the most corrupt country in the world, and our dreams will never get a chance.

Voters Can Organise Campaign for Clean Candidates

I propose that this year the voters create their own option. They tell the political parties who is to be nominated in their constituency. Supporters of each political party or alliance of political parties will organise themselves to prepare a three member panel of clean candidates of their choice, in order of their priority, and give it to the political party/parties to nominate one out of them. If none of their candidates are nominated voters will be free to submit blank ballots as a protest, unless they actually ask one of their candidates to run as an independent candidate. Similarly, voters who do not vote on party lines will organise themselves and suggest to all parties who they should nominate.

Voters must start speaking out their minds from now on. Rather than speculating about who is going to get which party's nomination, party supporters and independent voters have to start speaking out who they think should be nominated. This year people should get themselves heavily involved in the nomination process. This will be the only way to get the bad people out, and good people in.

Core agenda of the voters and non-voters this year will be to eliminate corrupt candidates from the ballot-paper. If they still get on the ballot-paper, it has to be ensured that they'll not be the only ones on the ballot-paper. Honest persons as protest candidates will be put on the ballot-paper as people's choice. The loudest message the voters must give to the political parties is: "We shall not give votes to a candidate who is known to be corrupt, who is known to have amassed wealth by misusing his power and authority or using his power to terrorise people."

All civic groups, associations, professional bodies (teachers, doctors, journalists, etc.), youth groups, farmer groups, women groups, business groups, student groups, political parties, individuals, both voter and non-voters, can prepare and submit their panels to the political parties. They can make a panel for each alliance of political parties. Groups can share these panels among each other, can come up with common panels to make their cases stronger. If the clean candidates within the party do not want to run against the party candidates, voters can select an independent clean candidate to run.

When sending the chosen names for party nominations to respective party, voters should give those names also to the press. Voters should keep lobbying with the parties to let them know how strongly they (voters) feel against the potential party candidate and promote the case of their own candidate. Voters should tell the party that if they nominate the person that voters reject, then that candidate will not get their vote. Voters will vote for their own candidate instead. Even if their candidate does not win, voters will have a tally of protest votes. If these protest votes add up to be a significant number, it may have an impact on the outcome of the election. Some protest candidates may even win.

I invite the media to launch their own Clean Candidate Campaign. They can start a series of reports identifying and highlighting at least three potential clean candidates for each contesting political party, in each constituency. They may refrain from publishing speculative news about possible nomination of non-clean candidates who are usually considered as front-runners. Media can play a decisive role in bringing out support for clean candidates, and destroy the chances of non-clean candidates in getting nominated or elected.

Students can play a vital role in this Campaign for Clean Candidates. But they'll have to start building up the campaign organisation right from now. They can work in the constituencies where they appear as voters, or volunteer in other constituencies. Electing clean people to the parliament is very important task this year.

A Proposal To Resolve Election Impasse

Opposition parties have put some conditions for their participation in the next general election. These conditions can be discussed and resolved if the two opposing sides can sit face to face. But given the past history, we do not expect this to happen.

Here is my proposal. I request both sides to find a Respected Person, accepted by both sides, who will come up with a solution package in consultation with both sides. He will be given 30 days. If both sides agree time can be extended. The Respected Person can co-opt two persons of his choice to help him prepare the solution package.

There may be other proposals to resolve this impasse. Let us all put them on the table to see if any one of them can interest both the parties. Although ruling party's position on those conditions is clear and constitutionally correct, there is nothing wrong or unconstitutional about making attempts to bring all parties on board to hold a peaceful, credible national election.

Our media, and individual or groups of citizens can suggest names of the possible Respected Person. Ruling and opposition alliances can come up with their own choices and pass on to the other side.

Important thing is to hold the election in the right manner, and right mood, to uphold our democracy and move forward.

Tremendous Energy Waiting to be Mobilised

World is changing very fast. If we are late by a day we'll fall behind by years. We have come a long way and we are ready to go forward with speed. Bangladesh has the fire in her belly to keep pace with her giant neighbours. Let us not allow ourselves to slow down. We need the right politics and the right leadership to mobilise the tremendous energy in Bangladeshi young people.

Let us think and work hard to make it happen.

7th Nelson Mandela Annual Lecture


"Creating a New World: A Dream or a Reality?"

by Muhammad Yunus

A very good afternoon to everyone.

I am deeply honoured and privileged to be invited to deliver the Nelson Mandela Annual Lecture here in South Africa. I have been to South Africa many times before, but it is indeed very special to be invited by the Nelson Mandela Foundation to deliver the 7th Annual Nelson Mandela Lecture bearing the name of one of the greatest icons of our times.

Madiba is not just an icon for South Africa, he is an icon for the whole world. His life and example is an inspiration to all freedom loving peoples of the world. He led his country from one where injustice and violence prevailed to one of peace and democracy. He taught the rest of the world that in even most extreme conditions of oppression, forging peace and reconciliation is the only way forward.
Madiba did not stop at the liberation of his country, but has continued to devote his life to fighting untiringly for human rights and justice. His example of never giving up, always fighting no matter what the obstacles, is something that inspires all of us. Madiba, you have instilled hope in millions around the world that it is possible for us to live together in peace for the common betterment of humanity.
It is a particular joy for me to be here as we approach your 91st birthday. I am so happy to be here to participate in the celebrations leading up to this very special day. Happy 91st Birthday and long healthy life to you!
Thank you again to the Nelson Mandela Foundation, Dr Dangor, Mothomang and colleagues, for inviting me and my colleagues to South Africa. It is a delight for me to return to this beautiful country, and I am so happy to be here to share my ideas and experiences with all of you today, and to participate in the various dialogues organized by the foundation on important social issues faced not only by South Africa, but indeed all of the world.
My work over the last 33 years has centred on the issue of poverty. As Madiba has said, poverty is the greatest challenge facing humanity. This is very true. But I for one am optimistic that it is a challenge that we can overcome. My experience in Bangladesh over the last 30 years has made me a firm believer of this.
We had our own freedom struggle in my country, which resulted in the birth of Bangladesh in 1971. When we became an independent country, I like many others of my generation were very excited to build a new nation of our dreams. I had returned with from the United States with my PhD and began teaching economics in Chittagong University full of hope for our new country.
However our dreams started to fade when our country was struck by famine in 1974. In the backdrop of the famine, I found it difficult to teach elegant theories of economics in the classroom. Suddenly, I felt the emptiness of those theories in the face of the crushing hunger and poverty that I saw around me.
That's when I felt an overcoming need to do something immediate to help people around me. I wanted to find a way to make myself useful to others, even for just one more day.
That brought me to the issue of poor people's struggle and helplessness in finding even tiny amounts of money to support their efforts to eke out a living. In the village next to my university, I was shocked to discover a woman borrowing US $ 0.25 with the condition that the lender would have the exclusive right to buy all she produces at the price the lender decides. This to me was a kind of slavery. I decided to make a list of the victims of this money-lending business in the village next door to our campus.
When my list was done it had the names of 42 victims. The total amount they had borrowed was US $ 27. What a lesson this was to an economic professor who was teaching about billion dollar economic plans. I could not think of anything better than offering this US $ 27 from my own pocket to get the victims out of the clutches of the moneylenders. The excitement that this action created got me further involved in it. I thought If I could make so many people so happy with such a tiny amount of money, why shouldn't I do more of it ? That was the start of our journey.
When I first gave that US$ 27 in Jobra village, I never imagined that we would one day create a bank. All I was trying to do was to try to solve a local problem. Because the banks refused to lend to the poor, I was pushed to creating a separate bank after a lot of battles with banks and the government. That was Grameen Bank, or village bank.
Today, Grameen Bank lends money, without collateral, to nearly 8 million borrowers, 97 percent of whom are women, and offers services all over the country through 2,500 branches located in all 84,000 villages. The bank has lent out over US$ 8 billion in Bangladesh over the years. Grameen Bank disburses around US$ 100 million every month. Grameen Bank has given loans to build more than 600,000 houses. It has given loans to 360,000 villagers to buy mobile phones as a means of income generation. Collectively, our members have mobilized more than half a billion dollars of savings. The bank is owned by its borrowers.
Unlike the previous generation, the children of our 8 million members are all in school, and excelling at that. Our focus now is to ensure that they can stay and complete primary and secondary school and go on to higher education. We are doing this through scholarships to our meritorious students and student loans for those who are pursuing further studies.
We are helping to create a brand new generation who will make a break from cycle of poverty that has repeated generation after generation in their families. This will be a historical break.

The Financial Crisis

I had to create Grameen Bank because the conventional banks refused to lend to the poor. This is the same for conventional banks the world over. Today, after 32 years, we reach with microcredit in  Bangladesh, 80 percent of the poor population in Bangladesh. In the next two to three years, 100 percent of the poor will have access to microcredit. Globally, 130 million poor families receive microcredit. Even with the experience, banks have not changed the way they do business. They do not mind writing off a trillion dollars in a sub-prime crisis, but they still do not lend $100 to a poor woman despite the fact such loans have near 100 per cent repayment record globally.

Banks explain that poor people are not credit worthy. The real question to ask is whether banks are people worthy. In Grameen Bank there are no legal instruments between lender and borrower, no guarantees, no collateral. And yet our money comes back while the prestigious banks all over the world that went down had all their intelligent paperwork, all their collateral, all the lawyers and legal systems to back up their lending. This contrast raises many questions in one's mind. Here's how Grameen Bank works: The bank gives loan to the poorest of poor on their promise to pay it back. There's no collateral, only mutual trust, accountability, participation and creativity. Loans are granted on the potential of the person instead of the amount of material possessions. The bank is owned by poor women, not rich men. And its goal is to make the world a better place by eradicating poverty.

For example, when we give a $100 loan, behind that there's a cow, there's a few chickens, there's something real. The banks that are collapsing were based on chasing papers. It was a race to create a fantasy world of papers. And when something went wrong, the whole thing collapsed. The Grameen Bank is locally based; our source of money is local. In other words, the money comes from the deposits of the people in the bank. We take the depositors money and lend it; we are not connected with international banks, so their crisis could not reach us.While other experts are banking on gloom and doom, I see the economic downturn as a prime time to shake things up in a positive way that will lead to permanent social change. This is a big crisis, but this is also a big opportunity to redesign and retool, so we don't have to go back to the same normalcy. So in a certain way, the crisis is good; it gives us a good opportunity to redesign for the better. This is an overwhelming crisis, but it is not the only crisis.

In 2008, before this crisis began, there were other crises, including the food crisis, the energy crisis, and the ongoing environmental crisis.  Although they all are happening at the same time, because of the sudden disappearance of enormous wealth and the number of big companies collapsing, financial crisis has occupied all the news media. I'm trying to bring attention to those forgotten crises, because they have not disappeared, they simply got pushed back. They are very much alive and have to be addressed.Global warming, for instance, is hitting Bangladesh, which is a flat, highly populated country. The sea level is rising 4 millimeters a year, the ocean is rising, and Bangladesh is sliding into it.

The projection is that within this century at least one-quarter of Bangladesh will disappear.These crises must be examined and solved together because they are not separate; in reality it is only one crisis with separate manifestations. They are all coming from a fundamental cause, and that happens to be the very way we have conceptualized our world. There is something basically wrong with the framework that we have developed. As of today, we have only seen the beginning of these crises; it is going to be a long and painful period ahead.

The combined effects of the financial crisis, the food crisis, the energy crisis, and the environmental crisis will continue to unfold in the coming months and years, affecting the security of the bottom three billion with special force. And of course the troubles of the world's poorest will have an impact on the developed nations, too.

Social unrest, border clashes over scarce resources, spreading instances of state failure, and vast migrations by populations desperate for relief from poverty and environmental disaster will create political and military hot spots around the globe that will threaten world peace.Over the past year, world leaders have been particularly focused on the emergency situation on the financial front. This narrow view of the financial crisis is likely to exacerbate our global social and political problems. The human aspect of the financial crisis must be integrated into all policy proposals. The appropriate thing would be to treat all four crises as one crisis, since all are linked together.

So far, many governments have been creating bail-out packages for the financial institutions which were responsible for creating the financial crisis in the first place, yet little is being done to bail out the victims of the crisis the three billion people at the bottom of the economic pyramid and the planet that sustains us all. For this reason, I have repeated that this mega-crisis be taken as a mega-opportunity to redesign our existing economic and financial systems so that they can become the foundations for lasting global security. To find the solution, the world right now has to work together, must concentrate on the opportunity, not the crisis, and capitalize upon the lessons of these crises. When things don't work, that's the best time to re-do it, to reorganize it, to re-conceptualize it, to redesign it. The change must begin in the financial sector because that's what caused everything to collapse like a house of cards. How do we make the financial system different, and how do we make it inclusive so nobody falls through the cracks? How do you change it so everybody has a chance? We have to create an inclusive global financial system.

Capitalism is Half-Done Structure

In the last 50 years, capitalism has reigned supreme. It has brought unprecedented wealth and prosperity to some countries and to some people. But billions are left out. The situation, in many cases, is getting worse and worse for those who are left out. Even if we can overcome the problem of financial crisis, we are still left with some fundamental questions about the effectiveness of capitalism in tackling many other unresolved problems. In my view the theoretical framework of capitalism that is in practice today is a half-done structure. The theory of capitalism holds that the marketplace is only for those who are interested in making money, for the people who are interested in profit only. This interpretation of human being in the theory treats people as one-dimensional beings.

But people are multi dimensional. They may have their selfish dimensions, but also they have their selfless dimensions. Capitalism, and the marketplace that has grown up around the theory, makes no room for the selfless dimensions of the people. If some of the self sacrificing drives and motivations that exist in people could be brought into the business world to make impact on the problems that face the world, there would be very few problems that we could not solve.The present structure of the economic theory does not allow these dimensions of people to play out in the market place.

I argue that given the opportunity, people will come into the market place to express their selfless urges by running special types of businesses to make a change in the world. In the absence of such opportunity in the market place people express their selflessness through charities. Charities have been with us since time immemorial, and they are noble, and they are needed. But we have seen that business is able, to innovate, to expand, to reach more and more people through the power of the free market. Corporate social responsibility was an important development in the business world but it still does not let business people to express the selfless urges I describe within the framework of the market. The concept that there could be another type of business, crystallized in my mind through my experience with Grameen companies. Over the years, Grameen created a series of companies to address different problems faced by the poor in Bangladesh. Whether it is a company to provide renewable energy or a company to provide healthcare or yet another company to provide information technology and cell-phones to the poor, we were always motivated by the need to address the social need.

We always designed them as profitable companies, but only to ensure its sustainability so that the product or service could reach more and more of the poor - and on an ongoing basis. In all these cases the social need was the only consideration, making personal money was no consideration at all. That is how I realized that businesses could be built that way, from the ground up, around the specific social need, without motive for personal gain.

I am proposing a different structure of the market itself. Along with the profit maximizing business, I propose a second type of business to operate in the same market along with the existing kind of profit maximizing business. I am not opposed to the existing type of business - although I call for many improvements in it like many others do. I propose a second type of business alongside the existing one.

This new type of business I am calling social business, because it if for the collective benefit of others. This is a business whose purpose is to address and solve social problems, not to make money for its investors. It is a non-loss non-dividend company. Investor can recoup his or her investment capital but beyond that, there are no profits to be taken out as dividends by the investors. These profits remain with the company and are used to expand its reach, improve the quality of the product or service it provides, and design methods to bring down the cost of the product or service.

The idea of social business got a boost when we launched a joint project with Danone. Grameen has collaborated with Danone to supply nutritious fortified yoghurt to the undernourished children of rural Bangladesh. The goal of this social business is to fill the nutritional gap in the diet of these children. Grameen Bank borrowers buy cows and sell the milk to Danone. Once the yogurts are prepared by Danone, Grameen Bank borrowers sell the yogurt door to door in the villages. The yogurt is sold at an affordable price, charging just enough to make the company self sustaining. Beyond the return of the original investment capital, neither Grameen nor Danone will make any money from this venture. The aim of the Grameen-Danone venture puts micronutrients in the yogurt that the kids are missing. They don't spend money on fancy marketing or on design of packaging. If children eat two cups of this yogurt a week regularly over a period of eight or nine months, they get all the micronutrients needed to be healthy. We have one yogurt plant already operating in Bangladesh, and in time we hope to have 50 such plants throughout the country.

We have created a joint-venture with Veolia of France to deliver safe drinking water in the villages of Bangladesh.This joint venture is building a small water treatment plant to bring clean water to 50,000 villagers, in an area of Bangladesh where the existing water supply is highly arsenic contaminated.  It was launched just last month. We are selling the water at a very affordable price to the villagers to make the company sustainable, but no financial gain will come to Grameen or Veolia.

We also have built an eye care hospital on social business principles. A second one will open next month. We have also created a joint venture social business with German chemical giant BASF to produce treated mosquito nets to fight mosquito borne disease and also a nutritional sprinkle to combat nutritional deficiencies in women in children.

There is also great synergy between the rapid development of technologies and social business.Technology is the one most fast developing sectors in the world today. The various methods of communication and networking have made it possible to reach anyone in any part of the world. Being a witness to these wondrous improvements I have voiced again and again that technology is one very powerful tool which can be used to bridge the gap between the rich and the poor, in a manner other devices cannot possibly do so. If we could channel some of this intelligence and creativity into building IT solutions for the poor, we would make giant leaps in our race to end poverty. From e-healthcare to mobile phone banking to online supplying to products and services to the poor we are beginning to visualiase what the possibilities are. Grameen has created a social business with Intel to bring these technologies to benefit the poor.

More and more companies are coming forward to partner with us to set up new social businesses. We feel excited about creating a series of examples of social businesses, which, hopefully, will encourage others to join in.Some people are skeptical when I describe the concept of social business. Who will create these businesses? Who will run these businesses? Why would anyone devote time, energy, and money to projects with no hope of personal gain? I always say that, to begin with, there is no dearth of philanthropists in the world, no dearth of donor countries giving grants. People give away billions of dollars every year. So do donor countries. Imagine if those billions could be used by social businesses to help people. These billions would be recycled again and again, and the social impact could be all that much more powerful. In the same way, money allocated by companies to corporate social responsibility projects could easily go into social businesses. Each company would create its own range of social businesses. We can also create Social Business Funds to pool funds from many sources and invest them in social businesses.

The opportunities for launching social businesses are really limitless.We can also recognize a profit-maximizing company as a social business if it is owned by the poor. This constitutes a second type of social business. Grameen Bank falls under this category of social business. It is owned by its poor borrowers. The borrowers buy Grameen Bank shares with their own money, and these shares cannot be transferred to non-borrowers. A committed professional team does the day-to-day running of the bank. Every year, dividend checks are sent to the borrowers, representing their share of the bank's profits.Bilateral and multi-lateral donors interested in supporting economic development could easily create social businesses of this type. When a donor wants to gives a loan or a grant to build a bridge in the recipient country, it could create instead a "bridge company" owned by the local poor. A committed management company could be given the responsibility of running the company.

Part of the profits earned by the company would go to the local poor as dividends, while a part would go towards building more bridges. Many infrastructure projects, like roads, highways, airports, seaports, and utility companies could be built in this manner. In additional to local projects, powerful multi-national social businesses can be created to capture a share of the benefits of globalization for poor people and poor countries. Social businesses will either bring ownership to poor people, or keep the profit within poor countries, since taking dividends will not be their objective. Direct foreign investment by foreign social businesses will be exciting news for recipient countries. Building strong economies in poor countries and protecting them from plundering companies will be a major area of interest for social businesses.

To connect investors with social businesses, we will need to create a social stock market where only the shares of social businesses will be traded. An investor will come to this stock-exchange in order to find a social business, which has a mission to his or her liking, just as someone who wants to make money goes to the existing stock-market. To enable a social stock-exchange to perform properly, we will need to create rating agencies, standardization of terminology, definitions, impact measurement tools, reporting formats, and new financial publications, such as The Social Wall Street Journal. Business schools will offer courses and business management degrees to train young managers how to manage social businesses in the most efficient manner, and, most of all, to inspire them to become social business entrepreneurs themselves.Making money in a profit-making business will be the "means". Using this money for social business will be the "end". Social business can work in tandem with profit-making ventures. Once the concept of social business is included in economic theory, thousands of people will come forward to invest in social businesses because of the social dreams they have in their hearts.

Poverty can be overcome

The thought that always energizes me is that the poverty is not created by the poor people. Poverty is an artificial imposition on the people. Poor people are endowed with the same unlimited potential of creativity and energy that any human being in any station of life, any where in the world. It is a question of removing the barriers faced by poor people to unleash their creativity to solve their problems.  They can change their lives, only if we give them the same opportunity that we get.

Creatively designed social businesses in all sectors can make this unleashing happen. I always insist that poverty does not belong in civilized society. Poverty belongs only in the museum where our children and grandchildren can go to see what inhumanity people had to suffer, and where they will ask themselves how there ancestors allowed such a condition to persist for so long.We have to decide that poverty no more! We overcame slavery. We overcame apartheid. We have done other things that people once thought impossible. We have put persons on the moon, into space to explore far away worlds. We can overcome poverty, if only we decide that this does not belong to the world that you want to create. We can take advantage of the global financial crisis by working together to make the 21st-century to be the beginning of a world that will be a better place for all to live, and where poverty will be found is the poverty museum. The people of South Africa have an indomitable spirit. With this spirit and with its vast human and other resources, South Africa can be the first country to build a poverty museum.

Madiba, I look forward to coming to South Africa in the not too distant future for the opening of the first poverty museum.

Thank you again for inviting me here.

Happy birthday once again our beloved Madiba.

Thank you!


Egon Zehnder International Speech

Jan 2009
New Year Reception
Egon Zehnder International

Guest Speaker: Prof. Muhammad Yunus
Founder, Grameen Bank

Good evening, ladies and gentlemen and a warm welcome on behalf of Egon Zehnder International. In a few moments our guest of honor, Professor Muhammad Yunus, will surely inspire us with his speech on a subject which concerns us all. But before I hand over, I would like to thank you for accepting our invitation and for making your way to this event in spite of your busy schedules. 

Most of my fifty colleagues at Egon Zehnder International in Germany are here in this room and I must say that we are very proud and honored by such an impressive audience. Thank you for being here. I would also like to thank you for the trust and confidence you have placed in Egon Zehnder International over the past year. 

Actually, 2008 was a very good year for us, another record year in fact. Now we all know that times have changed, and while we might not grow in terms of fee value this year, we are determined to grow our team in Germany to be able to provide even better service and discuss your challenges with you even more intensely.
The market dynamics might shift a little; we actually might see a lower need for Executive Search, something we experienced in the last downturn eight years ago, when our Management Appraisal service tripled to account for more than one third of our business. We are seeing similar things happening right now, with our Leadership Development Planning and Team Effectiveness services really picking up. We've seen that happening already in the last few months and we expect this to grow even further.
But returning to this evening's event, it now gives me great pleasure to introduce Professor Muhammad Yunus. Having being awarded the Nobel Prize for his life-long crusade against poverty, he will be known to all of you. But just imagine the courage it takes for a thirty-six-year-old accomplished professor to start a business of which everybody says: "That won't work." Having returned to his native country of Bangladesh in 1972 after gaining his Ph.D. at Vanderbilt University, Muhammad Yunus started teaching at Chittagong University.
Life could have been so easy for him, but it wasn't: Professor Yunus was appalled by the poverty all around him. People were literally starving to death outside his door while he taught elegant economic theories. In the search for a solution to this intolerable situation, he started to lend his own money to artisans in the outlying villages. When this initiative proved successful, he founded Grameen Bank to offer microcredits to the poorest of the poor and to women in particular. This system has worked so well over the past thirty years that it has spread all over the world.
However, Professor Yunus did not stop there; he has gone one step further. Making use of the dynamics of capitalism, he has pioneered ideas of social entrepreneurship and corporate responsibility in what he calls "Social Business": a new way to fight problems such as poverty, pollution, insufficient health care and lack of education.
These are topics that concern us all, and I am very much looking forward to what Professor Yunus has to say in the next thirty minutes. We are very happy to have him with us this evening, to present his fascinating vision of Social Business. Welcome to Munich, Professor Yunus.

Prof. Muhammad Yunus: Thank you very much. I'm delighted to have the privilege of talking to you this evening.
People make names for doing big things. In my case I didn't do anything big, I did lots of small things and that happened on purpose, not by accident. The reason I wanted to do small things was because I was very frustrated in the context of a major famine going on in Bangladesh. People were dying of hunger, and there was I with all my economic knowledge, thinking that I could solve the world's economic problems but I couldn't. So, after realizing that I couldn't change a country, which is too big, and I couldn't even change the district where I teach that's too big, as well I thought: "One thing I can do is to make myself useful to one other human being, and that way I can feel a little better. I do at least know how to help one person, whatever difficulty he or she may be in." So that's what I set out to do.
I was teaching at the university. There is a village next to the university campus, and I decided to go to this village to fulfill my ambition to find a person and make myself useful to him or her. So I did a lot of little things like that. Then I discovered a very ugly thing inside the village: loan sharking lending tiny little sums of money to poor people, whose lives are then in the hands of the loan sharks, which makes them totally miserable.
Having seen this repeatedly, I wanted to understand it a little bit better. So I made a list of those people who were borrowing from the loan sharks. When my list was complete there were forty two names on it, and the total amount they borrowed was twenty seven dollars. I couldn't believe it. There I was, coming from the USA where I'd been teaching economics for a long time, and when you teach economics you get used to thinking in millions and billions; you don't relate to smaller amounts. So when you suddenly encounter the reality of twenty seven dollars for forty two people, it doesn't make sense to you.
Having said that, I realized what a difficult problem I was facing. Then it dawned on me the solution was so simple: I thought, if I give these twenty seven dollars to all these people and ask them to return the money to the loan sharks, they will be free, nobody can touch them anymore. So I immediately did that. I gave these twenty seven dollars to all these forty two people, so they could return their loans and be free.
What I didn't expect was what happened next. I thought I would hand them the cash and those people would be out of the hands of the loan sharks. But then something surprising happened: It was the happiness and enthusiasm that my action generated in all these forty two families. They looked at me as if I had performed a minor miracle. I jokingly said to myself: "If you can become an angel with twenty seven dollars, maybe if you give another twenty seven you'll become a super angel."
But what came to my mind seriously, was that if you can make so many people so happy with such a small amount of money, why shouldn't you do more of it? So, as one young teacher trying to combat the problems in one village, I thought, maybe I should do more. Then another idea occurred to me: Why shouldn't I put the bank located on the campus in touch with these people? Then instead of going to the loan sharks they could go to the bank, and all the problems would be solved. I thought this was such a beautiful idea. I was very enthusiastic. I went to the bank and talked to the manager; I thought he would immediately agree. He said: "No way; a bank cannot lend money to poor people." I tried to argue with him, but he just argued back. The more he tried to defend himself, the more agitated I became. I thought all the explanations he gave me were absurd, completely unreasonable. He told me that the poor people were not creditworthy. This just didn't make sense to me. He told me that a bank's business is not lending money to the poor but only lending money to the rich. That didn't make sense to me either. I thought banks should be lending money to people who do not have money. Why should they give more money to people who already have enough? Do you see how naive I was?
I decided to take my arguments to a higher level. But the high-level bankers I talked to also came up with lots of arguments why a bank cannot lend money to the poor. It still didn't make sense to me. It went on for months like this, until finally I learned something about banking and I used it. I proposed to them: "Why don't you accept me as a guarantor? I become the guarantor, I sign all your papers, I take the risk and you give the money." This time, since I spoke their language, they couldn't throw me out of the office. So they took a little bit of time, studied me, studied my financial position, and finally agreed to lend money with me as a guarantor.
I took the money from the bank and gave it to the people. The first time I did so, the bank manager said: "Say goodbye to your money, this money will never come back." I said: "I'll try and I'll find out." I tried some little rules, little procedures to encourage people to pay back and it worked. The money came back. I was so happy. But the more successful it became, the more reluctant the bank became. They had agreed to my proposal, thinking this would be the last time they would see me because it would all fail, and I would never come back. Now that it was successful every time, they thought: "My God, this thing's going to stay with us; we can't get rid of it."
Seeing their reluctance, another thought came to my mind: Now that I know that people can take money, start a business of their own and change their lives, I don't have to go to this bank. Why don't I create a separate bank for them? And that became another difficult proposition.
When I went to the Central Bank, they said: "No way." When I went to the government, they said: "Are you crazy? You want a bank for poor people?" It took me several years, but finally, in 1983, we got permission. We were so delighted that we could create our own bank. We called it Grameen Bank, which means village bank, and it was a bank to lend money to the poor. I had started out in that first village in 1976, so it had taken all that time and effort to finally create a bank.
Soon we started expanding and were very happy. Our first idea was to grant loans in such a way that 50 percent of our borrowers would be men and fifty percent would be women, because I had a low opinion of the banking system in Bangladesh, which not only rejects poor people but also rejects women. They don't give loans to women. They said: "Women don't come to us." I said: "They do, but your rules are so twisted, women can't get through them. You made special rules for women. You always want their husbands to come and co-sign everything. This is your problem." So I wanted to get rid of that practice and make sure that half our borrowers were women.
We concentrated on women and encouraged them to come. But they said, "No, don't give the money to me, I don't know anything about banking; I don't know anything about money." Some would say: "I have never touched money in my life, I'm scared to death." So we had to overcome those fears. It took us six years, from 1976-82, to reach that level of fifty-fifty. We were very happy that finally we made it. We proved we could overcome that problem.
Then we started noticing something very remarkable: Money that went to the family through women brought so much more benefit to the family than the same amount of money going to the family through men. Does that sound familiar? And repeatedly we kept seeing this: Children became the immediate beneficiaries if the mother was the borrower. Household improvements were immediately noticeable if the mother was the borrower. With women you see long-term progress; they have a long-term goal. You don't see that so clearly in men. Men want to enjoy the money right away, rather than wait for tomorrow. So we asked ourselves the question: "What is so great about 50:50? Why don't we forget 50:50 and focus on women?" So we started focusing on women and, they gradually came to account for 60 percent, 70 percent, 80 percent, 90 percent of our borrowers.
Today we are at 97 percent women. Today, Grameen Bank has seven and a half million borrowers, of which 97 percent are women who take tiny loans and invest in whatever they know to make money; to start a small business. The initial loan will be something like thirty or thirty five dollars. That's such an enormous amount of money to a woman that she literally trembles when she takes the first loan. She cannot believe anybody could trust her with such an enormous amount of money, and tears will roll from her eyes. She cannot believe she is holding that money. And she promises herself that, as there is somebody who has trusted her with such an amount of money, she will give her life to make sure that trust is not disappointed. Now, if you multiply that by seven and a half million, you get some idea of what Grameen Bank is.
People asked me: "How did you figure out all those rules that you say you developed?" I tried to explain, but they didn't understand what I was saying. So now I put it a different way. I tell them that whenever I need a rule in a particular situation, I just look at how the conventional banks do it. After all, they have been in business for a long time. When I find out how they do it, all I have to do is do the opposite! And it works beautifully.
Conventional banks go to the rich we go to the poor. Conventional banks go to men we go to women. Conventional banks love to do business in the city center we go to the villages. Conventional banks ask their clients to come to their beautiful premises to do their business with them we adopted a simple principle: People should not come to the bank; the bank should go to the people. That was our rule, and today, although it may be hard to imagine with seven and a half million borrowers all over Bangladesh, every week we are on their doorstep to do the business right there. They don't have to go anywhere. They save time, they can carry on with their daily work and we don't disturb them. Ever since we started in 1976, our repayment rate has never fallen below 98%.
Conventional banks will not lend you money unless you offer a lot of collateral. We discarded collateral. Conventional banks bring their lawyers to tie you up tight. We say: "No lawyers." In Grameen bank there is no collateral, there are no lawyers. Today we lend more than one hundred million dollars a month, which means more than a billion dollars a year. With no collateral and no lawyers. Many bankers ask me: "Can you sleep at night?" I say: "I sleep very peacefully. Why shouldn't I? My money always comes back. You're the ones having trouble now. With all your collateral, all your lawyers; it doesn't work." Back in 1976, the bank manager's verdict was that poor people are not creditworthy. Today, in February 2009, I invite you to ask yourself: Who is creditworthy? Because the poor are the ones who are still paying back at 100%, 99%, 98%. It is those banks that need all the collateral, all the lawyers they are the ones in serious trouble.
Conventional banks are owned by rich people Grameen Bank is owned by poor people. Conventional banks are owned by rich men Grameen Bank is owned by poor women. Because our borrowers are also the owners of the bank. We designed it that way. Our borrowers sit on the board, they make the decisions and it works perfectly.
The next thing we did was to start encouraging them to send their children to school, because these are all illiterate women and their husbands are illiterate, too. Literacy never entered those families. We thought this was a good chance to break the cycle of illiteracy. Why shouldn't we encourage them to send their children to school? This became very easy for us, because the mothers were our borrowers. They understood perfectly the meaning of sending their children to school. It was difficult for them in the beginning, but they struggled to make it happen, and soon we had all the children in school I mean 100% of them, and many of them worked brilliantly at school.
As the next step, we started giving scholarships. Today, Grameen Bank gives more than fifty thousand scholarships every year to those children who are doing very well. And when the time came for them to enter higher education, we encouraged them to continue. Since higher education is expensive, poor families couldn't afford it. So we immediately introduced education loans, and the children of these families started entering higher education. Right now there are 34,000 students from Grameen borrower families in medical schools, in engineering schools, at universities. So we are in the process of creating a whole new generation out of the poor people who joined Grameen Bank, a second generation who will be very different from the previous one. And we will be able to make sure this generation will never see poverty in their lifetime again. No matter what difficulties, what financial crisis, what disaster, flood, cyclone takes place in the country, they will never be pushed back into poverty again.
Then we did something radical, because of a controversy I became involved in. Many people kept arguing that you can only lend money to the poor if they are entrepreneurial. "Entrepreneurial poor people will benefit from your microcredits," they said, "normal poor people will not." And you know it always irritates me when people say things like that, because I believe all human beings are entrepreneurs without exception. As human beings, we are born with that capacity, so entrepreneurial ability is part of being human. Some people are fortunate enough to discover that talent; some people never have the circumstances to discover it, but that's the only difference. I wanted to demonstrate this in a program that I introduced at Grameen Bank, focusing exclusively on beggars. My thinking was that if beggars can show that they can be entrepreneurs then my theory would be proven, because being a beggar is the last stage of human survival. There is nothing below that. When you've lost everything, every other option, then you stretch out your hand every day. You beg for food to feed your children, to survive another day.
So we started talking to the beggars, trying to understand what their lives are like, and as we gradually got closer and closer to each other, we told them: "As you go from house to house begging, would you carry some merchandise with you, some cookies, some candies, some little toys for the families? That way you can give people options, whether they would like to give you something out of charity, or whether they would prefer to buy something from you, or maybe do both. It's up to them, but you would have more options than just saying: 'I'm hungry, please give me something to eat.'" The beggars liked that. We said: "We'll give you the money to buy this stuff that you want to sell." So we started giving loans, and in the beginning we thought we'd have maybe two or three thousand beggars in the program. Then we'd wait and see what happened, whether they would really make it work or not. And what happened? It became such a popular program that soon we had more than 100,000 beggars involved, and by the end of 2008, eleven thousand of them had stopped begging completely, because they had become successful door-to-door salespersons. The remaining ninety thousand are now part time beggars, because they are mixing the two, sometimes begging, sometimes selling.
They are very smart. When I talk to them, they tell me which house is good for begging and which one is good for selling. And I say to my colleagues: "You see, they didn't go to business school, but they understand market segmentation."

All this is such an exciting experience when you see things gradually change and what is happening in people's lives. And all through our experience we ask the crucial question, again and again: Who is responsible for this poverty? Is it the poor who are responsible for their poverty? Each time my answer is: No, they are not responsible. Poverty is not created by the poor people. Poverty is the outcome of the system that we have created, the concepts that we have designed, the policies that we pursue. Poverty is an artificial imposition on people, it's not a natural thing. Human beings are packed with unlimited potential. Whether they are born on the street or born in a palace, in terms of potential they are the same. One will become a prince because he was born in a palace, and the other will become a street beggar or a street criminal because he was born on the street. That's the difference. If you switch those two babies on the day of their birth the one born on the street transported to the palace, and the other from the palace transported to the street, what will happen? The one who was born in the palace but grows up on the street will become a street criminal; the other will become a prince. The circumstances make the difference, not the person.
Now let me switch the focus to Social Business. In the theory of economics, business has been described, conceptualized, as a mechanism by which you maximize profit. The mission of business is the maximization of profit. You know, the more I look at it and the more I consider my own experience, the more uncomfortable I feel with this description. It is the only concept of business in economics there is no other concept. But human beings are not one-dimensional; human beings are not born to become just money-making robots; human beings are much bigger than that. They want to make money; they want to enjoy making money, but there are many other things they enjoy that are not included in economics, and I think that's a flaw in the theory and the way we put it into practice. People get so engaged in making money they forget everything else. As a result, society accumulates many things that businesses cannot handle because they are too busy making money.
The way I see it, being self-centered, being selfish, is a part of being human. You cannot ignore it. It's an important part of every human being, but selflessness too is part of a being human. By this I don't mean that there are selfish people and there are selfless people. I mean that every human being is endowed with both attributes.
Now when we look at businesses, there are only businesses based one of these human attributes, which is the selfish side. To become a philanthropist you have to step outside of business, outside of economics. But if economics is a social science, all of me has to be included, not half of me or part of me. So I had the idea of starting businesses that are based on what you may call selflessness and that are aimed at doing things for others, rather than for the people who are doing the business. And I called it "Social Business".
Basically a social business is a non-loss, non-dividend company with a social objective. I have set up many of these businesses, but some of the recent ones have become more high profile. One is a joint venture with a major company, Danone of France. Together we created Grameen-Danone Company in Bangladesh as a social business. What does it do? It produces yoghurt. Danone is a big yoghurt company that makes delicious yoghurt. We wanted to use that for a social purpose. What is the purpose? There are millions of children in Bangladesh who are malnourished. So we created this company to produce yoghurt. We take all the micronutrients that are missing in the children and put them in the yoghurt: vitamins, iron, zinc, iodine, everything they need, and we make the yoghurt very delicious and very cheap, and sell it to poor families at a price they can afford. And if a child eats two cups of yoghurt a week and continues to do so for eight or nine months, what was formerly a young life wasting away for lack of nutrition becomes a healthy, robust, playful child. This is the purpose both Danone and Grameen have agreed on. We also agreed that we will never take any dividend out of this company except to repay whatever investment we have made. We can take back the investment, but not a penny more, because this is a social-cause-driven company.
In a profit-making company, you ask the CEO: How much money will you make this year? In a social business like this, you ask the CEO: How many children will you save from malnutrition this year? And next year, how many are you planning to save? Because these are the corporate profits, defined in terms of the company's social objective.
In the meantime, another company has approached us: Veolia again a French company, a water company. Together we created Grameen-Veolia Water Company in Bangladesh. Bangladesh has a serious drinking water problem. In most parts of the country, the water is highly contaminated by arsenic. Since there is no other water, more than 50 million people in Bangladesh out of 150 million drink arsenic-contaminated water. Children drink poison every day. What we did through this company was set up a small water treatment plant in a cluster of villages to produce very high quality water for the villages and sell it at a very cheap price. People pay the price and get pure water, the company recovers the cost. The price we have fixed for this water is one penny for four liters so that everybody can afford it. Currently that company is still "work in progress". If it becomes successful in terms of people accepting and enjoying it, and we get all the money back, we will keep on expanding. Many other companies have also expressed an interest in joining with us to create social businesses; some of them are German companies, like BASF. We have good discussions going with them and are in the process of finalizing our plans to create a BASF-Grameen social business in Bangladesh, also focused on nutrition. We also plan to produce treated mosquito nets. Mosquitoes are a big menace in a country like Bangladesh, so we want to produce the nets in a way that everybody can afford them. So that's another social business to ensure that you have nutrition and can protect yourself from mosquito-borne diseases.
Then we approached another company Adidas with a proposal, which they were very happy to consider. The objective that we have defined is that nobody in the world should remain barefooted. To begin with, Adidas would supply its brand name and produce shoes for less than one dollar, so that everybody can afford them. Adidas would recover its cost and at the same time people would get shoes.
Similarly we have been discussing with Volkswagen, giving them ideas about social business, and they are seriously considering producing a new kind of vehicle for Bangladesh and other countries where the road conditions are extremely poor. In addition, we want to create a green engine for the vehicle, which will be a multi-purpose engine, so that it's not just used for carrying agricultural produce. The idea is that the engine will never sit around doing nothing. You simply pick it up and it becomes an engine for irrigation, or for producing electricity, or for powering a boat. So it has multiple uses and we make it affordable for the ordinary people.
There are lots of such ideas and lots of possibilities, and if we can create this series of social businesses it will be wonderful. We got such a good response from Germany that some of my friends have already created a kind of institute called Grameen Creative Lab in Berlin, so that people can exchange ideas, discuss who is doing what and bring people together to create social businesses. Because social businesses can address all the problems that we have ignored and failed to address: poverty, malnutrition, disease, health care a wonderful subject for social business pollution, unemployment, street crime, alcoholism. Whatever problem you have, all you have to do is to bring together your business creativity, talent and an innovative idea of how to put it into a business format. If you can do that it becomes a wonderful thing.
Of course you can address all those problems by charity, too, but the problem with charity is that you give the money and things get done, but the money never comes back. So it's only a one-time solution; to repeat it you need fresh money. If you don't get the fresh money it stops right there. But if you can convert this into a social business, your money becomes very powerful, because it recycles itself and keeps on going. You can create an organization with a life of its own, a self-sustaining business like Grameen-Danone or Grameen-Veolia. Whatever investment we make, for the rest of our time we'll just be recouping the cost, without the need for any fresh injection of money.
After a company like Grameen-Danone gradually returns the initial investment, it will continue to go on by itself and touch the lives of many, many children. Once you've created that tiny little social business it becomes a seed, and all you have to do then is replicate that seed and plant lots of them, so that each one can grow and flourish.
I keep saying that, in this crisis, this is one idea which needs to become incorporated into our minds and vested in the political framework, so that we can address all those problems that we left behind, and create a world where nobody will be poor anymore. Because as I have said so often: Poverty is not part of human civilization. Poverty doesn't belong to human beings. Poverty belongs in museums and that's where we should put it and cleanse the whole world of poverty. Thank you.

That was a long story told in a very short time, so I'm sure that there are a lot of issues that need to be clarified or elaborated. If you have any comments or questions I'll do my best to answer them.

Question: How do you motivate the people who work for social businesses, or would you say the work is self-motivating?

Prof. Muhammad Yunus: Well, if you take the case of Grameen Bank, it's just like any other business. You hire people, give them good salaries, and give them good retirement benefits, so that they can give their full attention and energy to their work. Within the Grameen Bank we have more than 38,000 staff. It's a large number because we have to serve seven and a half million borrowers, and that takes a lot of people. They get their salary, they feel very good that they are doing something useful, and they enjoy the work because they are touching people's lives. Our workers are all local kids, high school graduates. But the Grameen idea has spread all over the world now, there's hardly any country that doesn't have it. It has become known as microcredit or microfinance, words that you'll keep hearing. It's also found in the developed countries, like France, where it has been running for twenty years now, in the UK, Spain, Italy, Canada and the United States.
There were many such programs in the United States but they were not working very well. People said: "Grameen Bank won't work in the United States, it's too different." So last year we launched our own Grameen program in New York City, in Jackson Heights in Queens, to demonstrate that the problem was not inherent to Grameen methodology. The problem was that the people trying to implement it didn't know what the Grameen methodology was. That's why we thought we should do it ourselves. We sent one of our staff from Bangladesh to New York City, to get things moving. The good thing was that he had never been to the United States before. So he landed in New York City and started work the way he would have done it in the villages of Bangladesh and it worked beautifully. We started in late January last year, today we have over five hundred borrowers in that program, all women, and they follow the same principles and rules as we follow in Bangladesh: Five women get together and form groups; loans are for income-generating activities and they are paid back in weekly installments. Every week the borrowers have to gather together in one corner of their homes, fifteen or twenty of them together, and the bank staff will come and do the banking with them. Repayment has remained very near 100%; it's currently at 99.6%. The average loan in New York City is 2,200 dollars. So we have a paradoxical situation: Where the big banks in New York City are falling, there's the Grameen program with 100% repayment… without collateral, without guarantees just imagine. This ought to make us stop and think about what could be done to the financial system as a whole. Why should this system exclude billions of people? Two thirds of the world's population do not have access to financial services. We need to and we can create an inclusive financial system where nobody is excluded, not even the beggars.

Question: Have you had any negative experiences in the programs you work with, and would you be prepared to share those with us in the sense of lessons learned?

Prof. Muhammad Yunus: Sure. First of all, whenever you do something new, everybody is against you, because we are all creatures of our own mindsets. We believe what we like to believe; we do what we are used to doing. If something new comes, we resist. First we are suspicious, and then we are aggressive and try to stop it, because it's new. Those things happened to us. Bankers hated us because we said: "Look, this is working." They said: "It's crazy, it cannot be happening. We have trouble getting our money back with all the collateral and all the legal papers, and you are saying that you have neither collateral nor lawyers, and your money comes back? You must be manipulating your books." So the suspicious people were all around us. And then, we lend money to women, which, it would seem, is the greatest crime anybody can ever commit. Men become very angry, even the husbands of the women that we are lending money to are not in favor. They feel totally insulted. They say: "How dare you give money to my wife while I am still alive?" They thinks it is their prerogative to get everything, rather than their wives. So the husbands formed a strong opposition party to the whole program, to the extent that, in the beginning, it created tension in the families. The women were scared of their husbands who wanted to snatch their money, because they could not believe their wives could independently own money. All money should be their money, they felt. So we had to go make a huge effort to ensure the tension levels didn't go too far and could be reduced.
That was a very elaborate process I won't go into the details but we succeeded.  We went through lots of training sessions with the women borrowers and our goal was very clearly stated: We must protect the money and protect the marriage. "Don't give up one for the other. We have to find a way to protect both," we said, and we succeeded.
The most critical part of this tension is that the husbands cannot believe their wives can actually handle money. They have always thought their wives were simple women who needed directing every step of the way otherwise they wouldn't know what to do. If the women get the money, they think, they will waste it, and in the end the bank will come and ask the husbands to repay the loan, so they are very worried men.
We had to repeatedly explain to the husbands that, no matter what happened to that money, we would never come to them and ask them for it: It's between us and their wives. We would offer to give it to them in writing: "We will never ask you for that money." But still they didn't feel comfortable. They were sure that when their wives took the money, and the first weekly installment was due, they wouldn't have the money. They would have to come to their husbands to ask for the money to pay the installment. So when a woman doesn't come to her husband when the first weekly installment is due, he is very surprised. He wonders what's going on. Maybe she still has some money left from the original loan. The second week she has to come but she doesn't. The third week she simply must come but she doesn't, and he begins to see what is going on here. And then finally she clears up the whole loan. He doesn't say a thing, but he watches and thinks, and his attitude towards his wife changes: She's not as simple as he thought. She knows something, and the relationship becomes quite different in the second year. And by the third year they are drawing very close to each other, because now he has started admiring her ability.
He had never understood that his wife was capable of bringing money into the family, because she was supposed to be there to do the cooking and look after the children and now she is bringing in money. In many families of those seven and a half million Grameen borrowers, women have become the number one income earner of the family. So it's quite a trustful mission in a very conventional, traditional society, to see the woman coming to the front and she owns a bank, that's another thing.

Question: There are major cultural issues here and you are confronting traditions that have become established over centuries. Don't you come under incredible pressure to let the men take the loan. Don't they simply insist that they should be the ones to get the money?

Prof. Muhammad Yunus: Oh, they do it all the time, because they cannot accept the fact that the wife should get the money. So when the Grameen Bank comes to a village for the first time, it is the men who surround us. "Ah, yes we are very poor," they say, "give us the money." We tell them: "Yes, of course we'll give you the money, but our rule is that we start with the women. If you are interested in having the money, we're coming to your village at such and such a time. Why don't you send your wife to talk to us? If you want to borrow the money yourself, though, you will have to wait until we have finished talking to all the women." We use a lot of tactics like this, and luckily we get away with it.
In 1984 we introduced a housing loan, because we thought this is such an important thing. The housing is so bad… I'm not sure if you understand poor people's housing. The roof is made of rotten straw or something similar, you can see the sky through the openings, and in a monsoon country like Bangladesh all the water comes in, and it's muddy inside, so you raise your children in the mud. We thought we'd offer a housing loan so that people can have a solid roof and a sanitary latrine and a clean house. But we also introduced a little rule to go with it. We said: "To qualify for a housing loan from Grameen Bank you have to show us a document proving that the land belongs to you the wife. After all, we're giving the loan to you, so you must show us that the land belongs to you."
Of course, the land doesn't belong to the women at that stage. So the wife will say: "Well, this land doesn't belong to me. It belongs to my husband, I'm in my husband's house." To which we say: "We're sorry; we cannot give you a loan. But you can do one thing: Why don't you encourage your husband to transfer the title of the land to you?" She says: "He will never listen to that." We say: "We know, we know, but just in case he agrees, we will be very happy to give you a loan. If he has difficulty in understanding, why don't you send him to us? We'll explain it to him."
Well, the need for better housing is so drastic that, one after another, the husbands started agreeing. Then they went through the huge process of transferring the title of the land to the name of the wife. It's not easy to transfer title of ownership. You have to go to lots of government offices; you have to establish that the land belongs to you in the first place, and then go through the whole legal process. Finally, after three or four months, they succeed, and the wife joyfully brings us the document. "Look," she says, "I have the land title." Then we give her the loan. And then, one after another, other husbands start agreeing because their wives keep saying: "Look, her husband did it, why don't you do it for me? We will have a better house. I'm not the only one who is living in the house, you live there too, our children will live there too so, what is the big deal?" Finally they yield, one after another. We have given nearly 700,000 housing loans.
You have to realize that, in Bangladesh, divorce is very easy. All you have to do is say: "I divorce you" three times and that's that. But in these 700,000 households those words are not spoken, because the husband is very smart. He knows that if he divorces his wife, he has to pack up and go, because the house is in her name and it's all documented. You know, if any government passed a law that the land title should be with the wife, that government would fall right away! But we did it so quietly; nobody said a word about it.
These are the problems when you do new things and you have to be very skilful in the way you manage them. On top of all that, the religious people were very much against us as well, again because we were giving loans to women. They said: "Religion will be destroyed if you give loans to women. Women are not supposed to do business, not supposed to go outside, and not supposed to be seen by other people." Religious opposition became so strong that we were a little bit uneasy as to how we would overcome it. So we came up with a strategy. When people questioned our approach on religious grounds we said: "What's the problem? When the Prophet married the first time, whom did he marry? He married a businesswoman. First he used to work for her; she hired him and he worked for her, everybody knows that, and then later on he married her. So if you want to be a good Muslim, you should follow in the footsteps of the Prophet and marry a businesswoman, because that's what the Prophet did. And incidentally, if you are looking for a businesswoman and you can't find one, come to us, we have lots of them." Nobody could deny this story, because it is such a popular one everybody knows it. The religious people couldn't cope with this one. They simply said: "No, you are destroying our religion; the women will be out on the streets and all over the place." To which we replied: "That's not religion. Religion is religion; this is about life, and if a woman can make herself a better life, why shouldn't she?"

Question: Grameen Bank employs thousands of people and they have to be paid. How do you calculate the mark-up factor or the interest rate at your bank, because in the beginning it must have been very difficult?

Prof. Muhammad Yunus: In the beginning it was very simple, because we followed the conventional banks' interest rates. If they can cover everything, we can cover everything, so we didn't even think about it. As I explained earlier, we hand out more than one hundred million dollars in loans every month, which makes an annual total of over a billion dollars.
Where does this money come from? That's a major issue: It comes from our deposits. Grameen Bank doesn't take any international money or money from the government or any other bank. It doesn't borrow from anybody. All the money is generated within the system itself. We have two thousand six hundred branches all over the country, and each branch is financially independent. Each branch is required to mobilize deposits in its own area, and lend the money to the poor people in that area. So you don't go to other people to get money, it's within your jurisdiction.
Initially each new branch has one year to mobilize local deposits, start lending money to the poor and become profitable. Right from day one when we start the branch, we tell our staff: "We don't give you any money you just go out there and open a branch." All we give them is an address, they go there, and then they have only one year to reach breakeven. More than 80% of our branches succeed in reaching breakeven point within one year. The remainder take maybe 13, 14 or 16 months, but they get there fast.
So the deposits come from local people. We give them good interest; Our deposit rate starts at 8 ½% and goes up to 12%, which is a very attractive interest rate. And we charge 20% interest on borrowers for the top loan product that we have. The second type of loan that we offer is the housing loan, which I mentioned earlier. The housing loan interest rate is 8%. Note that our minimum deposit rate is 8 ½%, but we are lending money at 8%, meaning that we lose money on housing. You see, a housing loan is a long-term loan, and if you charge a high interest rate, it represents a big amount, so we decided to keep it very low. In fact we subsidize it from the 20% that we charge on the other type of loan.
Then there are the student loans that we give to the students of Grameen families. During the study period, there is zero interest. They don't have to pay anything while they are studying. Once they complete their education, interest starts at 5% and stays at 5%. That is also cross-subsidized. Finally the loans we give to beggars are at zero percent. We tell the beggars: "This amount will never grow, so don't worry about it." And the second thing we say is: "There is no time limit in which you have to pay your loan back, so there is no maturity date; nobody can ever say that you have defaulted because if there is no maturity date, how can you default? You are completely free zero interest, no maturity date. But if you pay us back, you can take another loan, bigger than the one before, and you can move on." They feel very comfortable with that, and of the over 100,000 beggars that we have, many are on their second or third loans. And despite the fact that we have no guarantees, no lawyers, no collateral, no maturity date, no interest, still the money comes back. That is the system. That is how it works.
So if you take the weighted average of the whole thing, our mark-up works out at about 8½ to 9 percent. And we make profit, which goes back to the borrowers, because they are the shareholders, they are the owners. Some years we have paid 100% dividends, some years we have paid 50% dividends and some years we have paid 20% dividends. It depends on how much money we have made in that year and how much we want to allocate to reserves. The board decides what to do. So it's a full circle.

Question: All the things you just described, particularly the returns, are the envy of the entire financial industry. Talking of microfinance or microcredit, we have seen a couple of funds being launched. I would be curious to hear if you think they will be able to deliver the types of returns you just mentioned, or are we being set up for disappointments by the male-dominated financial industry?

Prof. Muhammad Yunus: Let me clarify one thing in this respect, because it's the subject of great controversy between me and others: I keep repeating that we created the microcredit idea not to make money for ourselves but as a vehicle to help poor people to get out of poverty. So our plea to everybody is: Please don't come to microfinance to make a profit. The sole aim of this idea is to help people to get out of poverty. The controversy came because some people became so excited about microfinance that they wanted to make money out of it a lot of money. And some of them succeeded. They took their companies public and made personal profits running into millions of dollars. When the press started asking for my comments I said: "Look, we don't consider those things as microcredit. They are just using the name to look good, that's all. We are in the field to make this tool available so that people can free themselves from poverty. Those who are making money are not following in the footsteps of microcredit, they are following in the footsteps of the loan sharks; they are in the same category. We fight loan sharks; we don't embrace them."
We made the rules on how much interest should be legitimate for microcredit, and the rule that I try to popularize is "cost of funds plus 10% maximum mark-up". If you can keep within this range, you'll be in what we call the green zone of microcredit you are one of the good guys. If your interest rate is between cost of funds plus 10-15%, then you are in the yellow zone, meaning that you are a little bit high. We'll still consider you microcredit but try to come down to the green zone. If the interest rate is cost of funds plus 15% and above, you are in the red zone. You are no longer microcredit, you are simply another loan shark, misusing the name of microcredit. That is how we define it.
When we make money, that money goes back to the borrowers, it doesn't go outside. That is the protection the Grameen Bank has. It makes a profit, but the profit goes back to the borrower, not a penny goes to anybody else. So in that way it's complete: The borrowers don't mind what they pay because they know that ultimately they'll get back the surplus for themselves. That's the whole scenario we try to present.

Question: I work for an organization that supports social entrepreneurs all over the world and we find in our work for social entrepreneurs that they often have difficulty finding financing to bring their ideas up to scale. So my question is: With your experience with the Grameen Bank, which has achieved staggering scale, how would you change the financial system to make sure that social entrepreneurs and their businesses that may not generate as much money as other high return investments, can find the adequate funding to realize their ideas and achieve scale like your idea has?

Prof. Muhammad Yunus: In Bangladesh we tried to achieve that. We that is to say the government of Bangladesh created a microfinance wholesale fund for NGOs who do microcredit in Bangladesh. They need the money because the law doesn't allow them to take deposits. Any NGO can go in and borrow money to lend to poor people, with the result that microfinance has spread all over Bangladesh very quickly. Today we reach out to 80% of the poor families in Bangladesh. Bangladesh has a population of 150 million and half the population live below the poverty line. So out of that half, microcredit has reached 80% of families. And within the next three to four years our hope is that it will reach 100% of these families. So there are enough funds available within Bangladesh; we don't have to go outside. For other countries we are encouraging others to create such funds. We have already succeeded in creating one such fund, with Credit Agricole. This is known as the Grameen Credit Agricole Microfinance Fund. It is set up as a social business; it is not designed to generate profit for Credit Agricole but to support microfinance and other social businesses. And talking of social business outside microfinance, another initiative has recently been taken in Monaco, to create the Monaco Social Business Fund. This is still work in progress but hopefully within a month or so a social business fund will be created, so that anybody who wants to start a social business can turn to the fund, take the money and start their business. If you have an idea for a social business, you've designed a beautiful business plan for solving a social problem that you feel very strongly about, and money is not available, that fund will be available to support you. I hope many more such social business funds will be created to encourage everybody to move in the direction of social business, and to plant the seeds of social businesses, so that these can be replicated and we can resolve the problems that we face every day.

Question: American banks tried to copy you in some way. They lent money to poor people so that they could own their own homes; we know that as sub-prime. Obviously something went wrong. What do you advise the American banks, besides that they should probably lend the money in future to women?

Prof. Muhammad Yunus: Follow Grameen Bank policy! Get the husbands to sign over the title of their land that would be the best thing. But seriously, I don't like the term sub-prime, because if that's the word we use to describe the level of risk to which the U.S. banks were exposed, what would you call us? Sub-sub-sub-sub-prime? We don't have inadequate collateral, we have none. But still our model is not risky. We know our money will come back. We sleep peacefully at night. No, the sub-prime crisis came about because of the very aggressive way it was marketed, making potential borrowers feel that they would be stupid if they didn't sign up to get a loan.
Usually, when you ask a bank for a loan, they ask for some equity. You put some of your money in the bank and the bank finds the rest. You put up 20% and the bank 80%, or you find 10% and the bank 90%. In the USA, however, most of the time the reverse was true: You got 110% of the money. You got to keep 10% and 100% was the cost of the house. And because the housing market was rising so fast, when you became the owner you also became rich. Some people bought not just one house; they bought five houses or ten because the deal was so good or that's how the marketing went.
Also, when a bank had granted the loan, they would never see the borrower again; they wouldn't follow up what happened; they wouldn't even make a phone call. All they did was take the papers that the borrower had signed and sell them to get the money for themselves. Then those papers were sold to somebody else, who made money by bundling them up with many other things and selling them to somebody else. So the relationship between the borrower and the lender disappeared. I think that was the basic problem in the sub-prime crisis: over-aggressive marketing and the disappearance of the relationship between the borrower and the lender.

Professor Yunus, thank you very much for sharing your insights with us.