On January 16 I was able to see Muhammed Yunus speak in Santa Barbara about how he changed the world through his development of micro-credit loans at the Grameen Bank. Originally from Bangladesh, he earned his PHd in Economics from Vanderbilt University and became a professor in Bangladesh. While in the country, he felt that the way “conventional banking” was designed was not conducive to helping out the poor people. He explained that it takes money to make money, and 1/3 of the world’s population does not have even $1 to make $1.
Thus began his quest to create a “social business”, not to be confused with charity or non-profit. His banking system of micro-credit loans has turned the conventional system of banking upside down. He explained that rather than having the people come to you, Grameen Bank goes to the people (women). Instead of penalizing the poor, the poorer the person, the more money she will receive. Also, conventional banks do not give out money to those who have no idea what to do with. Grameen Bank, on the other hand, typically hands out money to those who have never touched money in their life, and have no idea what to do with it.
It sounds like it would never work. As previously stated, the money given out is not charity money. It is a loan the same way I would take a loan for school or you would take a loan to start a business. It must be paid back. And because it is a social business, those who invest will get exactly what they invested back. Most importantly, this is a system based on trust, a concept that seems to be completely lacking in America.
But somehow, this system has surpassed our conventional banking system. Over 98% of the loans given out are paid back monthly. That far exceeds any repayment rate of any bank here. In doing so, he has allowed thousands of women to gain a life. He explained that if a woman dies with no opportunity, she dies unblossomed and leaves the world as a huge loss to herself and to human society. Grameen Bank has provided the opportunity for women who would have previously never have been given a chance, allowing them to develop, learn, and create better lives for themselves.
One way he has expanded the idea of Grameen Bank is through creating sustainable companies that both enhance the “social business” aspect while also providing jobs to these women. His greatest example was through Grameen cell phone company. The women in Bangladesh fell in love with cell phones when they were first introduced. So, now many of them have their own cell phone and stand on the streets selling them. This has given thousands of women jobs while also increasing Grameen as a business, to what is now the largest cell phone service in Bangladesh.
Those familiar with this development economic type system understand that eradicating poverty is just one facet of the world’s problem. Notably, education and health care also need to be addressed as they are all strongly linked. So, once Grameen was stable, Yunus moved forward to attack another component of what he felt was unjust: education. For the women who took the loans, Grameen Bank encouraged their children to go to school, to which he would provide scholarships. Mostly illiterate, these children quickly ended up at the top of their class. Last year, 51,000 children of those who take out microcredit loans received scholarships to go to school. Today, more than 21,000 kids are now in medical schools and universities thanks to what Grameen Bank has been able to provide to the children and their mothers.
I can’t wait to see what he comes up with when he starts moving into healthcare.
It was really inspiring to see all of the great things Yunus has done for those who previously never stood a chance. To me, he fully embodies what I feel is true love, and man’s true calling to mankind. Furthermore, his work will remain long after he is gone, as he created a system that is independent of his existence at this point.
This type of system is not so far removed that we could not implement it here in America. As Yunus explained, the poor are more credit worthy in many ways than the wealthiest in the nation, as the statistics show. If we set it up right, I think a system like this could help the largely unnecessary unemployed, uneducated, and poor Americans that live right around the corner from all of us. Oh, and one more tip from Yunus to create a functional system? No lawyers.
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