Yunus at 70 - A Discussion

Finance and Investment
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Professor Muhammad Yunus, Nobel Prize winner, founder of the Grameen Bank, and one of the pioneers of microfinance, celebrates his 70th birthday on 28 June.

To coincide with this, Business Fights Poverty and Microfinance Club UK are partnering to host a discussion on Yunus and microfinance.

  • What has Yunus meant to you professionally and personally?
  • What have we learnt about what works in microfinance?
  • What does the future hold - what are the future challenges and opportunities?

Add your comments, below, and read those of:

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Comment written by William Derban, Head of Community Relations, Barclays Africa:

For anyone who has ventured into the world of microfinance, one name stands out – Prof. Muhammad Yunus, founder of the Grameen Bank. As a student, I had read a lot on microfinance and the Grameen Bank, but it was after I read Banker to the Poor, the autobiography of Muhammad Yunus, that I began to really appreciate what he had achieved, not only for the people of Chittagong and Bangladesh, but for the world as a whole. Meeting him in London a couple of years ago and hearing him speak on social entrepreneurship was a great honour for me. Muhammad Yunus’s life and achievements have inspired me in two main ways.

Firstly, I admire the way he applied theory to practice and found solutions to the pressing needs of his people by simply identifying with them and understanding their problems. Not relying on external insights, nor waiting on the results from an extended piece of research, but based on his discussions with a group of women in the village, he devised and implemented a strategy that was suitable for them and that went on to benefit many others. In this way, Muhammad Yunus demonstrated that solutions to the many issues that surround us are often closer than we think. For instance, the onus is often on formal sector institutions to change their ways of working to accommodate the poor, who largely make up the informal sector, rather than vice versa. This is especially important in countries where the informal sector forms the majority.

Secondly, Muhammad Yunus showed that providing financial services to the poor was possible. He demonstrated that the poor could repay loans; they could save, and, through accessing appropriate financial services, could lift themselves out of poverty. For me, the real revolution that he started was much more than establishing the Grameen model. By applying the simple idea of customer centricity, a common concept in banks, to the poor, he clearly defined the poor as customers, rather than beneficiaries of aid, and allowed them to show him what solutions suited them. The Grameen model may not work in every part of the world, but the ethos of self-help, and of finding answers from the bottom up, will encourage the development of other indigenous and traditional models.

At Barclays, our work in financial inclusion in Africa has certainly been influenced by the idea that the best methods to promote financial inclusion among the unbanked are those that are rooted in indigenous and traditional models. Our successful support for susu collectors in Ghana and Village Savings and Savings Associations in many communities in Africa are a testament to the great work started by Muhammad Yunus.

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Comment written by Richard Leftley, President & CEO of MicroEnsure:

Professor Yunus and the microfinance movement has had a significant positive impact in the lives of the poor but the poor continue to face significant risk; poor housing, exposed to natural disaster, malnourished and exposed to disease there is a significant risk that all the gains achieved through prudent lending and savings can be undone by an unexpected event.

The poor need a safety net in order to stop them slipping back into poverty when disaster strikes. Insurance is not the only answer but taken in conjunction with credit and savings it provides a suitable mechanism for addressing those events that occur relatively infrequently but which have a significant financial impact; events such as the cost of a funeral, drought, fire or unexpected hospitalization.

In addition to providing a safety net for the poor, insurance can also provide a source of revenue through fees and commissions to the microfinance organization. Whilst many microfinance organizations have successfully implemented simple credit life products, many have struggled with more complex products such as health and weather index.

These products do seem to require specialist help in terms of product design, implementation and the day-to-day servicing of claims because a failure to service claims inevitably leads to reputational risk for the MFI with some MFI’s experiencing issues with loan repayment from borrowers who have experienced poor claims service. As with most things in life, choosing qualified partners who understand the market and are dedicated to providing service is a key decision for successful microinsurance.

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I read Dr. Yunus’s book that discussed his inception of the Microfinance without collateral to small business starting with his $ 500 loan to him in Bangdalesh. The support of facilitators to educate and give other Top Down services in support of them is what impresses me.

I have talked to Dr. Willian Derban of Barclays Bank before also about our Sustainable Energy Center of Excelle nce and our attempting to uplift the Poor in Africa. Biomass, Bioenergy and Biofuels is a group in Linked In that I started that is about the only renewable system that lowers Greenhouse Gas directly. Trees
and Grasses sequester some of the ppm of C in the atmosphere that causes Global Climate Change. This
can provide Rural Development and power Drip Irrigation for greater Food Security. The conservation of the
water by drip irritation permits other uses for a Cash Crop. This is in our business plan sent to Barclays to
consider in our regional approach of a Type Two Partnership. This is Public Private Partnership is with the
governments, non profits (university and tax exempta) and for profit busienesses coordinated and collaborating that is inclusive as well to uplift the poor. The spiritual mandate is found in words of the Muslim
and Christian Messiah Jesus (Isa) in the New Testiment (Injil) in Matthew 25 : 31 - 41. It makes economic
sense also for when the poor have more income they can demand more goods and services which in turn
create more jobs for others. The Bioenergy and Biofuel feedstock can be grown in communities and that is
our goal in the region of West Africa. This regional effort is supported in the United Nations Department of
Economic and Social Affairs Policy Brief 18 that I sent to William Derban and it is in a plan by the World Energy Council www.worldenergy.org. I look forward to productive discussions with the US State Department now to continue that which has started in the Global Partnership Initative.

Best regard,
Sidney Clouston

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Last year I helped to host dr yunus 69th birthday dialogue in Dhaka as part of the continuous networking round dr yunus social business goals actioned by two 1000 readers book clubs of dr yunus that my family has invested in. Dad (Norman Macrae who died earlier this month) penned Entrepreneurial Revolution in The Economist 25 December 1976 just as DR Yunus was piloting Grameen Bank. Both men are clear that the 2010s is the most exciting decade - the one when human race chooses whether globalisation is system designed round sustainable microeconomics or Big Brothered macroeconomics. On July 4 , over 300 microeconomists are joining Dr Yunus in a debate in Glasgow which will also be slightly late opportunity for the UK to catch up on 70th birthday pledges. If you can’t be there but have a pledge I can make sure the hosts know of your wish to link in. Through history the auld alliance axis of Paris ( 1800 home of entrepreneur and now over 50000 youth microcentrepreneurs of danonecommunities) and Glasgow (Adam Smith, James Wilson) have stood up for microeconomics -of course anyway to connect all collaboration cities and social business citizens is something I always love to hear about chris.macrae @yahoo.co.uk http://erworld.tv - going micro and collaboration are the 2 great innovations that free market youth & economists can celebrate and interaction now. The editor of The Economist has suggested a London remembrance party for dad in the fall - great to see Yunus and microeconomics networkers there
413-ScariestProfession.doc (369 KB)

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Comment written by Malcolm Harper, Steering Group of the Microfinance Club of the UK:

What have Muhammad Yunus and his work meant for me personally ? I first met him in 1987 when I was briefly in Dhaka for the Ford Foundation. The Foundation was supporting Grameen Bank; as so often, their rather modest interventions in the early years of new initiatives have led to great things. I also visited one or two other initiatives which had been started by foreigners, and I remember thinking, not for the first time, that donors do much better when they identify and support good local people rather than sending in their own ‘experts’ (of whom I suppose I was one, much as I hate the term !).

Then a year or so later we happened to sit next to one another at some fatuous World Bank or similar dinner in Washington. I asked Yunus why he was not at home ‘minding the store’. He replied that the only way to develop good successors was to keep out of their way, and meetings in Washington were a relatively harmless way of doing that. Would that all ‘charismatic leaders’ took the same view.

In 1991 when we were living in Orissa my wife and I spent a few days in a Grameen Bank branch. On our way home through Dhaka Yunus asked us how we had fared. My wife, being German and fiercely anti-military, asked him why the Centre meetings had all the saluting and standing in rows. Yunus replied by quoting General Booth of the Salvation Army: ‘Why should the devil have all the best tunes ?’.

We have met on a few occasions since then, in Bangladesh and in London, and as always I have been amazed at Yunus’ ability to be the quintessential ‘nice guy’, one of the nicest I have ever met, although I cannot claim to know him at all well, and also to have a core of steel, a set of beliefs which cannot be shaken.

Great pioneers, and Yunus is one of the greatest, sometimes find it hard to accept it when others take their ideas and modify and change then as they ‘roll them out’ across the world. Schumacher of ‘Small is Beautiful’, Revans of ‘Action Learning’, are two examples; they perhaps failed to recognise that the changes others made were also improvements. Yunus is different, at least in my opinion; he is right to question the way in which his ‘baby’ has been turned into a tool whereby international investors can make millions by exploiting the poor.

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Comment written by Geof Wood, Professor of International Development, University of Bath:

I had the pleasure of meeting with Yunus Bhai on the campus of the Chittagong University where he was a professor of economics, before he founded the Grameen Bank. We were discussing ideas for social mobilisation among the poor, sharing perceptions about the limitations of the Comilla cooperative approach which focussed upon landholding farmers. Yunus used his action research in the villages around the campus to evolve his unique approach to development which emphasised the enablement of aspirations rather than the imposition of them. The trigger was enhanced financial security to reduce the dependency upon patron-moneylenders and facilitate a degree of planning for the future. Thus he was intent upon changing poor people’s discount rates as well as contributing to their autonomy—2 key development principles. The outcome of these early experiments has been a global banking model initially understood as microcredit, but becoming microfinance with a broader set of financial products needed by the poor and addressing the 2 principles of security and autonomy.

There have, of course, been critics. And originality has been questioned given longer histories of mutual assurance societies. However Yunus shines because he has been a risk taking entrepreneur, taking theory (e.g. about social collateral, shared liabilities, and asymmetrical information between principals and agents) and converting it into large scale practice. He also instigated a diversification process, with high ‘Grameen’ branding whether cloth or telephones. Many other organisations in Bangladesh followed elements of his example.

The central criticism refers to the ‘developmental’ claim for microfinance, whereas its greater impact has been on the ‘welfare’ of women within poor families. The scale of finance required to lift the poor structurally out of poverty in a sustainable way is better described as meso finance rather than micro. The danger of availability of only small amounts for investment is that the poor are encouraged into high turnover, saturated, self-exploitative activity like petty trading in paddy/rice which has a low and therefore easy entry price in terms of capital and skills. The outcome of this is to reduce everyone’s margins on such activity. However this criticism was stronger when villages were more isolated and local markets more easily saturated. Now, improved rural infrastructure, communications (to which Grameen Phone has contributed), greater mobility and rurbanisation have widened market and trading opportunities. However the jump into more capital intensive forms of productivity still requires more substantial finance, and, in a patriarchal society, more involvement of men in the use of that money. I believe that is the next quantum leap required in Bangladesh and amongst the poor elsewhere in the poor world. Yunus has shown the way, and has developed the penetrative infrastructure. A younger generation of visionaries now need to run with the ball.

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Comment written by Andrew Mitchell MP, Secretary of State for International Development, UK:

It is thanks in no small part to the extraordinary and unstinting efforts of innovators such as Muhammad Yunus, with whom I spent time in Bangladesh, that microfinance has, over the past 30 years, proved to be such a powerful tool in providing formal, reliable and secure financial services to the poor in developing countries.

There is little doubt that, for poor households, access to financial services such as savings, credit and insurance are vital tools for poverty reduction.

Access to financial services enables people to better withstand shocks, build assets to improve their livelihoods and pay for basic services such as health care and education. DFID has been a longstanding advocate of microfinance and has been supporting microfinance and financial sector development in many of its country programmes across the world for many years.

However, an estimated 2.7 billion people in developing countries still do not have access to formal financial services. It is vitally important that the key challenge of how to reach such an enormous number of people as quickly as possible is tackled with due urgency.

To take the pioneering work of Mohammad Yunus forward we must start to investigate approaches to new frontiers in banking, working beyond traditional models to reach the poor.

Branchless banking is the provision of banking services without relying on a building to host the services. It is still only at an early stage of development but it has the power to transform banking for the good of the poor.

For that reason developing country governments, policy makers, banks and technology service providers agree that the delivery of branchless banking using information and communication technologies and non-bank retail agents, through mobile phones or card-based networks must be extended.

This is an exciting agenda, which DFID is supporting through the Consultative Group to Assist the Poor’s Technology Programme for Branchless Banking, and through our country programmes. However the challenges are large and real breakthroughs require the joint efforts of government, the private sector, civil society and regulation bodies.

The G20 Summit agreed at the weekend to a set of Principles for Innovative Financial Inclusion, to remove policy and regulatory blockages to the expansion of branchless banking to vastly increase numbers of low-income clients. We have called on G20 countries to agree a concrete action plan at the next Summit in Seoul to achieve this.

This will be of real benefit to the economic security and prospects of many vulnerable people across the world.

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Microfinance has indeed been a revolutionary response to poverty alleviation and economic enpowerment, but it was a first step. Perhaps this a juncture to think about what the next big steps needs to be. What can build on the pillars of microfinance and prove to be another revolutionary BoP strategy. While microfinance continues to have impact, it is starting to increase saturated markets of the poor. Loans are given to people to enter into the same types of businesses in the same markets. This sort of saturation will not eliminate poverty. Rather at this juncture, is it not timely to start considering developing the infrastructure that needs to support the growing of people’s business acumen and supports them venturing into or building markets.

The private sector can continue to play a fundamental role in this - one concept that can be nuanced to become a key tool in the fight against poverty is ‘supplier diversity’, in a BoP context it could be supplier inclusion. Here we look to build the capacity of BoP demographics to supply to large purchasing organisations be they multinational or local, at the same time we look at how new technologies and other platforms can support these same demographics to provide products and services straight to market.

Governments can also play a key role in encouraging this by putting in place market access frameworks that encourage the inclusion of BoP demographics in supply chains of the aforementioned businesses.

Muhammad Yunus was and continues to be a revolutionary thinker of his time, and i wish him a happy birthday, he is an inspiration, but let’s not sit on our laurels, we have to evolve the responses to poverty eliviation and the economic empowerment of the poor.

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I have very little knowledge of the subject of discussion but I take the liberty to express my views on the matter because I feel I should express my views through this powerful medium. So please consider my little understanding in mind while you read it.
I think there is no harm in giving loan to poor to enter the same market because currently there is no other way to help them. The situation of market saturation may be dealt with the organized marketing and selling of all the products produced by stakeholders of microfinance institutions. Arrangement of storage can be made from small settlement to big cities in hierarchical manner and products can be made available to all markets. New markets have to be found out, which obviously local level individual stakeholder cannot do. The parent institution (who gives loan) should take the responsibility to purchase the finished product and marketing or the parent institution can engage some other party who is in the business of marketing selling. This arrangement may be done at large scale and I hope it can be a profitable proposition for all stakeholders.
Prof Yunus has shown us the way specially the people of Indian Sub-Continents where reach of the formal financial institutions is limited and majority of people are not able to access the loaning facilities provided by Banks. Poor people can not avail loan because of two main reasons
1.The big banks do not have any interest in making poor people as their customer and
2.Poor people do not fulfill the requirement of collateral security among the many other documents required to avail loan.
In India banks touch the untouchable (poor) people only through the compulsory Governmental Schemes where people access loan facilities for livelihood options. Very few real beneficiaries of these government schemes are able to access loan or aid because of many obvious reasons.

To have the security and safety, health and general insurance for the informal market in case of Indian sub-continent (specially India and I believe through literature reading that it is applicable to whole sub-continent) can be dealt considering the simple structure of society in the form of ‘Family’-‘Immediate-Neighborhood’, ‘Neighborhood’-‘Village/Colony’ (rough hierarchy and name which can be refined):

• 4-6 members= I Family
• 5-15 families=1 Immediate Neighborhood
• 2-4 Immediate Neighborhood= 1 Neighborhood
• 5-10 Neighborhood= 1 Village (rural)/ Colony or Locality (urban)
In rural areas people are closely related to each other and are living in cohesiveness socially, but in small urban area and slums/ informal settlement/ unauthorized settlements (potential beneficiaries) of big towns also people are very close to each other. This social structure and bonding can be used as a positive and major aspect while entering the informal markets.
Informal market/ poor people may not be worth for big health and general insurance companies and also individual family cannot pay the high premium of insurance cover. But consider the community (immediate neighborhood, neighborhood or village/colony) as one unit and fix the upper cap of benefit in terms of quantity to avail facilities. Minimum required premium can be fixed per family taking the size of family into account and community level collected total premium can be used as a premium for whole unit (community). Families where earning hands are limited or members are too old/handicapped/ unable to work can be easily included into the whole community unit with lesser or no premium and as per my limited understanding of Indian society, no one will protest to this arrangement. People are good at lower strata of society. India has a tradition of collective community responsibility at the time of individual need.
This demarcation of community unit (Family- Immediate Neighborhood, Neighborhood, Village/colony) can be done easily with some basic survey and it may vary (size) from place to place. (People working in these areas can corroborate this fact). In some cases the community unit can the whole village/colony where people are more close to each other and it also could be the immediate neighborhood where socially people in the village or colony are not so close to each other.

I am not a finance specialist but this is my firm belief that considering huge number, unavailability of service and in most of big towns people have relatively higher paying capacity; it can be a big profit making business venture with service to humanity. And it can be easily linked with microfinance mechanism where people become part of the formal system.

Thanks for your kind attention

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The contribution of the Microfinance sector in the overall global development agenda is immensely valuable and we thank Dr. Yunus for inspring this phenomenon. Part of the agenda of the debate on the Principles for Innovative Financial Inclusion, should be an item on Public Private Partnerships and Microfinance. Governments in the developing countries have adopted PPPs as a developmental strategy in procuring public infrastructure and provision of services. Even though PPPs are largely seen as to be suitable for large infrastructure projects, the policy can also be used to procure infrastructure and deliver services at community levels for certian types of infrastructure and services that are very vital but may not be economically attractive to large industry players. For example provision of water services to arid and semi arid areas. This can be effectively achieved through the involvement of microfinance enterprises and such institutions. In this way, these efforts can have a direct impact on people by improving their lives during their life time.

It is my sincere hope and I believe that of my collegues in the developing world that the G20 will make such considerations.

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I am inspired by Yunus’s philosophy and model he successfully tested in the field of Micro finance. As a development practitioner especially on local economic development through the Value Chain approach, I had an opportunity to pilot the model in number of initiatives. His model dose not help only for business development at small holders it equally build the trustworthiness with in community and make hold them accountable each other. His innovative way of this practical solution has been a revolutionary response to poverty alleviation and economic empowerment particularly poor, Ultra poor and rest of the entrepreneurial community at grass root level. ‘I wish him a happy and very inspiring birthday’

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I can still recall clearly when I first heard about Professor Yunus and the Grameen Bank. As a young student, I found the story incredibly uplifting, and being part-Bangladeshi myself, I found it inspiring in a very personal way.

It’s one of those stories that makes you overturn orthodox thinking for the better. Even then, it was way ahead of it’s time - in the way it viewed poor people with dignity, in the way it focused on creating opportunities not charity, and in the way that it emphasised the powerfully positive role of women entrepreneurs in society. I was lucky enough to be in the audience of an event at which Yunus spoke a few years ago, and he came across with immense grace and wisdom - a true leader and elder of our time.

Taking his lead, many others are now actively transforming opportunities for poor people, in ways that I’m sure Yunus could not even have imagined. Technology is taking microfinance to a whole new level of scale - from www.kiva.org to the rise of mobile-phone-based, branchless banking.

The hardest nut to crack, and for me a priority issue going forward, is the huge gap in finance for the “missing middle” - small, growing businesses - too big to get access to microfinance, and too small for the traditional banking model. Yet it is these SMEs that will create jobs and ultimately lift people out of poverty. Our aim must be to help those who currently run near-subsistence micro-enterprises, to either grow these into larger more sustainable businesses, or to find jobs in others. What is required is someone to bring the same energy and drive that Yunus brought to microfinance, to transforming financial access for small, growth entrepreneurs across the developing world.

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I appreciate Andrew Mitchell’s observations on Yunus’ approach and wonder if ‘simply listening’ might be applied in other contexts as well, such as finding solutions to health issues with distinct, cultural roots - like obesity in Mississippi. Listening to and identifying with those who need help seems a powerful approach that may hold great efficiencies.

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Dr Yunus has been a great inspiration to me since my wife and I had the privilege to visit him and the Grameen Bank in 1995. As a financial economist I find microfinance to be an exciting financial innovation. But more inspiring is the potential that Dr Yunus has so clearly demonstrated that microfinance is a tool that can help people leave poverty.

Many in microfinance have demonstrated that microfinance can be a powerful extension to global finance to reach billions of poor people ignored by mainstream banks and mainstream finance. This is great work. Some have followed Dr. Yunus lead to use microfinance as a tool to focus on the poorest people and increase their opportunity to leave poverty.

A greater focus on extreme poverty is the greatest untapped opportunity for microfinance in the future. While billions struggle with poverty (at least 4 billion living on less than about $4/day) most aren’t dying by the millions every year. The Bottom Billion are. Profit and the financial incentives that drive business will assure the growth of microfinance for the middle 50% of the developing world–those living between $1/day and $4/day. Only those like Dr Yunus, deeply committed to ending poverty, tend to actively include the poorest billion living on less than $1/day–the Bottom Billion. Perhaps not all of this segment can be served best by microfinance or credit, but millions of this group have been helped and hundreds of millions more could be.
This is the great challenge of microfinance today and going forward–to help end extreme poverty along with other vital solutions that work and keep a client focus on the poorest.

Tom Coleman, President and CEO
Bottom Billion Fund–a non-profit microfinance investment fund to invest in that part of microfinance that serves larger numbers of the Bottom Billion effectively