Muhammad Yunus

Bangladesh

Muhammad YunusWhat could happen if you gave the poor the power to help themselves? In the way of “teaching a man to fish,” Muhammad Yunus has spent much of his life tackling the problem of poverty with socially-focused economics. Yunus is a hero of creativity, innovation and economic good will.

Yunus was born in East Bengal (now Bangladesh) on June 28th, 1940. As a youth he was able to travel to Pakistan, India and Canada with Boy Scouts. This increased his interest in cultural activities and spurred him to attend Chittagong College for Drama. Soon after, Yunus switched his focus to economics and earned his MA in economics by 1961. After an early entrepreneurial success with a packaging factory, he was awarded a Fulbright scholarship to earn his Ph.D. in Economic Development at Vanderbilt University in the United States.

After graduating, Yunus became an assistant professor at Middle Tennessee State University and soon became involved in organizing a citizen’s information center for the Liberation War of Bangladesh. He also published a newsletter reporting on the events of the struggle in Bangladesh. After which, Yunus spent a short time on Bangladesh’s Planning Commission but soon returned to Chittagong University as head of the Economics department.

In 1974 a famine caused great suffering and starvation across the land. “We tried to ignore it,” Yunus said. “But then skeleton-like people began showing up in the capital, Dhaka. Soon the trickle became a flood. Hungry people were everywhere. Often they sat so still that one could not be sure whether they were alive or dead.”

“If I could be useful to another human being, even for a day, that would be a great thing. It would be greater than all the big thoughts I could have at the university.” – Muhammad Yunus

Unable to connect the theories and methods of standard economics he had learned in school, Yunus stepped out of the academic world and into the suffering. He began researching the famine and became involved in poverty reduction efforts. He worked with the government to establish village councils as a form of independent aid. Yunus also noticed that the poor had almost no access to usable cash. Traditional banks avoided the high risk loans altogether and moneylenders saddled the poor with high interest rates. This meant the majority of the poor’s profits went back to the lenders.

After running through many ideas with his students, Yunus decided to lend $27.00 (USD) of his own money to 42 women in one of the poorest villages. He believed that given the chance and adequate support, the poor would be able to repay if they didn’t face high interest rates. Yunus also knew that women who were poor were often isolated from each other, had low self esteem and were at higher risk of domestic violence. All of the women were able to make a profit and repay their loans. This experience led Muhammad Yunus and his colleague Dr. Akhtar Hameed Khan (founder of the Bangladesh Academy for Rural Development) to pioneer the development of microcredit and microloans in the surrounding communities.

Yunus named his organization the Grameen Bank (Village Bank) and worked to secure loans from much larger banks. In order to ensure payback, he implemented a system of informal “solidarity groups” that would apply for loans together, support and hold each other accountable. The system is built upon trust rather than written legal contracts. In addition to relieving poverty, these groups also improved the social position of women in their homes and communities. In less than 6 years Yunus was able to hand out thousands of micro loans and support the self-advancement of over 28,000 villagers.

“We have created a society that does not allow opportunities for those people to take care of themselves because we have denied them those opportunities.” – Muhammad Yunus

However, this process hasn’t been without resistance. The Grameen Bank shareholders have faced physical violence and verbal abuse from radical male relatives as well as public resistance from the conservative and religious right who preach that the women who borrow from Grameen Bank will be denied a proper Muslim Burial.

Though no economic model is without its faults and limitations, Yanus’ experiment-turned-program has been received as a success. The programs and organizations of the Bank have expanded to include educational, energy and community development programs. More like a credit union than a bank, 94% of the organization is owned by the borrowers who number over 3 million members, the rest is owned by the government which is a major donor. The bank also provides interest-free loans to beggars with extended repayment schedules.

So what happens when you give the poor the economic ability to help themselves? Thousands are able to work their way out o f extreme poverty. Muhammad Yunus is recognized as a moral hero for stepping out of the academic safety zone into the famine and impoverished world around him. His pioneering vision of microcredit and innovative economic effort on behalf of the poor has improved the conditions of countless villagers and families throughout the region.

Written by | last updated on December 22nd, 2010