Green Credit for Green Growth


Questions & Answers

Q & A with

Muhammad Yunus

In 2006, you and Grameen Bank won the Nobel Peace Prize for your pioneering work with microcredit, something you wrote about in your first book, BANKER TO THE POOR. What is microcredit, and how does it help the poor?

Microcredit are small collateral-free loans that give poor people the opportunity to generate income for themselves and their families through activities that they choose.

In 1976, I discovered that very small loans could make a significant difference to a poor person’s ability to survive. The first loan I gave was $27 from my own pocket. Then I became a guarantor to the local bank to encourage it to give loans to people in the village. Before this, they used to take loans from village loan-sharks with high interest rates. Banks were not interested in giving tiny loans to poor people, whom they considered not creditworthy.

Grameen Bank offers small loans to poor people, to whom conventional banks would never grant loans. Grameen Bank has 7.5 million borrowers, 97 percent of them are women. Borrowers of Grameen Bank own the bank. Repayment rate to the bank is 99 percent.

Your new book CREATING A WORLD WITHOUT POVERTY focuses on a new idea that you call ‘social business.’ What is social business? How is it different from traditional free enterprise?

Social business is a new kind of business introduced in the market place with the objective of making a difference to the world. Investors in the social business could get back their investment money, but would not take any dividend from the company. Profit would be reinvested in the company to expand its outreach and improve the quality of its product or service. A social business will be a non-loss, non-dividend company with a social purpose.

It is meant to address a basic fault in the capitalist system: in the capitalist economic theoretical framework, you have only one kind of business, business to make money. There’s no other kind.

Social business may be a noble idea. But why would a businessperson invest in a company that produces little or no profit?

Social Business creates an option for entrepreneurs and investors. It is based on the idea that all people have an urge in their minds to do something that makes a difference in the world. It is dedicated to social gain, instead of purely personal or private gain.

Human beings are not just money-making machines. Human beings are much bigger than that. Human beings are also caring beings, sharing beings. These qualities are not admitted in free market, profit-driven capitalism that is based on a very partial view of human being.

The first step, in order to accommodate the whole of a human being, would be to create at least another kind of business: business to do good to people without expectation of any personal benefit out of it.

In your book, you tell the story of Grameen Danone, one of the world’s first social businesses. How did it get started?

We began a social business with the multinational company, Danone. Our joint venture company brings nutrition to poor children through a yogurt enriched with minerals and micro-nutrients. When I met with Franck Riboud, the chairman of Danone, in October 2005, he wanted to learn more about the idea behind the Grameen Bank, what interested people in this bank, why they were talking about it. He also briefed me about Danone. I proposed to him: “Why don’t we create a business called Grameen Danone? It would be a social business.” I explained what a social business was. The business would be exclusively dedicated to the social objective. The investor would not receive any profit from the company except to get back the investment money. Riboud stood up, shook my hand and said: “Okay, let’s do it.”

You believe that someday the world will contain thousands of social businesses. What are some of the opportunities you see for creating social businesses in the world today?

Almost all of the social and economic problems of the world could be addressed through social businesses. The challenge is to innovate business models and apply them to produce desired social results cost-effectively and efficiently. Social businesses could provide healthcare for the poor, nutrition for the poor, housing, sanitation, safe drinking water, affordable medicines, financial services for the poor, renewable energy, information technology for the poor, education and training for the poor, employment opportunities for the unemployed, options for getting people to stay away from being welfare clients, marketing for the poor – all of these are exciting ideas for social businesses.

Social business is important because it addresses very vital concerns of mankind. It can change the lives of the bottom 50 per cent of the world’s population and help them out of poverty.

Is the social business idea relevant only to the developing world? Is there room for social business in a prosperous country like the UK or US?

This is a concept for the whole world, not just for developing countries. Rich countries have many social problems too. Rich countries are overwhelmingly responsible for environmental degradation. Life style in rich countries need to be redesigned. We cannot leave it to the profit-maximizing companies to take good care of societies and the planet. Social businesses can be dedicated to putting the world on the right course. Social businesses can do it, because they are not guided by personal gain at all. They are guided entirely by social considerations. This will bring balance to the market place. Young people all around the world, particularly in rich countries, will find the concept of social business very appealing as it will give them a chance to make a difference by using their creative talent. Many young people today feel frustrated because they cannot see any worthy challenge that excites them within the present profit-maximizing capitalist system. Young people wish to create a dream world of their own.

Some may find your idea of business that produces no profits to be a surprising shift from the traditional vision of free markets. Is your goal to undermine the concept of capitalism, with its pursuit of profit?

No, the goal is not to undermine the concept of capitalism but to complete the picture. In my book I have argued that capitalism is a half completed structure. Social business completes the logic of capitalism. Capitalism is about giving people options. When it comes to `businesses’ there is no option. I have proposed an option. That improves the structure of capitalism; it does not undermine it.

People may be skeptical about your idea that it is possible to create a world without poverty. What steps do you think could make this vision come true? In particular, what can people in America and Europe do about poverty in the developing world?

If the whole world can believe in and pass a UN resolution to reduce poverty by half by 2015, isn’t it logical to believe that we can bring poverty to zero in another 15 years? In order to make it come true, we would have to believe in it. Believing is the first step. We can make something happen only when we believe in it.

People in America and Europe must show that they believe in creating a poverty-free world by making their own countries poverty-free. They can create social businesses for their own countries and expand them to poor countries. They can come up with social business ideas, set up social business funds, social business venture capitals, establish Social Stock Markets, publish social Wall Street Journals, universities can introduce degrees in social businesses.

You’ve been critical of international organizations that aim to help the developing countries, such as the World Bank. If you could reform them, how would you do it?

I have suggested many steps for the World Bank to take, such as creating a separate window to invest and encourage social businesses, give funding and technical assistance in setting up social businesses, come up with great designs for social businesses, create infrastructure companies to be owned by the poor, among others.

The World Bank has to take the mission of eliminating poverty seriously and encourage countries to set dates for ending poverty. Local country offices should be given the opportunity to work independently and to set its policies according to the need of the individual country.

So far the World Bank has not adopted microcredit as part of its poverty alleviation program. While the World Bank lends out around $20 billion (U.S.) each year it does not allocate even 1% of it for microcredit programs. It should immediately raise it to at least 5%.

How can young people who are inspired by your vision of a world without poverty help make it come true?

I would like to encourage young people worldwide to become designers and promoters of social businesses. They can publicize their designs on the Internet to inspire others. They can form groups to come up with innovative ideas for social businesses and launching such companies. They can design the future world that they envision.


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