Nobel winner pushes for banking with a conscience

L.A. Cicero Muhammad Yunus

Muhammad Yunus began making microloans to destitute basketweavers in Bangladesh in the mid-1970s.

He helped transform poor women into entrepreneurs and beggars into businesspeople. Now Muhammad Yunus is encouraging the next generation of financial thinkers to follow his lead of putting people in front of profits.

Speaking Friday to a capacity crowd in Cubberley Auditorium, the 2006 Nobel Peace Prize winner and founder of the Grameen Bank said the economic future lies in the creation of "social businesses" that address the most basic needs such as providing clean drinking water, feeding the hungry and creating a system of affordable health care.

"Today, business means business to make money," Yunus said. "To me, that looks like a very narrow interpretation of a human being—to depict him or depict her as a money-making robot."

Yunus founded the Grameen Bank in 1976 in Bangladesh on the theory that giving no-collateral loans to the poor would help them out of poverty. Because hardly any women in Bangladesh could qualify for a loan 32 years ago, Yunus saw to it that 50 percent of Grameen's borrowers were women.

Once he realized women were investing more of their loans into improving the lives of their families, the bank started lending to them almost exclusively.

Of Grameen's 7.5 million borrowers, 97 percent are women, Yunus said. The bank lends about $1 billion a year, doling out individual amounts averaging less than $200. At first, the typical loan is for about $30.

"She's scared to death taking that money," Yunus said about the typical Grameen borrower. But once the women begin making weekly payments and have the loan paid in full, they're eligible for a larger loan.

The money is largely used for income-generating activity, like embroidery, basket weaving or raising chickens, cows and vegetables.

"At the beginning, she didn't know all these skills were things she could make money with," Yunus said.

With the early success of lending to women in Bangladesh, the bank turned its efforts to the country's beggars. Instead of simply giving them a charitable donation that would be a one-shot cash infusion, the bank decided to lend money to those who go door-to-door asking for money. The idea was to turn them into traveling salespeople by giving them loans of about $12 to buy things like candy and toys.

"We became the financier to beggars," Yunus said. The project now lends to more than 100,000 beggars, and nearly all the loans are paid back in full.

"The majority of people on this planet do not have the opportunity to do banking at conventional banks," Yunus said. "They say all the time that the poor are not creditworthy. And we showed how creditworthy they are."

Grameen Bank now operates in 38 countries and has started a program that gives microfinance loans in Queens, New York. Yunus is also working with multinational companies to bring safe drinking water and solar-power technology to villages in Bangladesh.

Yunus told his audience of Stanford students to think creatively and come up with ideas that could help the poor. That's the surest way to "leave your signature on this planet," he said.

"We did it not by consulting books or consulting experts," Yunus said. "We just went ahead with whatever common sense will dictate. We didn't wait for everyone's judgment. If it worked, we knew it was the right thing to do."

The ASSU Speakers Bureau and the Stanford Office of Public Affairs sponsored Yunus' talk.