Thursday, February 21, 2013



“I would describe myself as stubborn. As an entrepreneur and as a leader, I have always believed in starting small business enterprise, creating a strong foothold and growing gradually to meet the evolving needs of the people living in rural areas. Frankly, I do not believe in starting big business enterprises and reach a stage where I am not able to manage even one efficiently the way I want to.” – Muhammad Yunus, January 12, 2013, in an interview with my office

Prof. Muhammad Yunus, whose brainchild Grameen Bank won the Nobel Peace Prize
in 2006 for its attempt to uplift the poor economically and socially, through his idea
of microcredit and microfi nance
It was fifteen years ago when I met Muhammad Yunus for the first time in New Delhi. We had decided to have lunch together with a few of my colleagues after an education seminar in the morning. During our conversation, the blue kurta pajama-clad gentleman didn’t come across to me as a madefor- profit-making businessman. He was just another nice individual, pleasant to talk to. Yet, he wasn’t conservative either in his approach. Everything he spoke to me to explain his entrepreneurial work and motive of travel kept resonating with two words – poverty and unemployment. Clearly, at that time, I had quite a shallow understanding of what Yunus’ model for mitigating poverty and unemployment could do globally. And then again, Yunus wasn’t a celebrity star people, or I, would wish to know deeply about.

The world during those times centred around Fioravanti adorning alphamale CEOs, hyperactive about profits, cash flows and growth. Why would this commonly dressed man chatting with me matter anyway? And why would anyone wish to discuss poverty and unemployment over a nice, sunny lunch? Yet, there clearly were signs even then... signs which I should have seen, but missed.

Then, his fifteen year-old Grameen Bank-tagged microcredit facility had spread to 21 nations including India, China and others across Asia and Africa. The Grameen Bank he had founded employed 12,628 people. It had disbursed loans amounting to $2.22 billion to 2.3 million borrowers. And the number of branches had already crossed the 1,100 mark. But, the world still didn’t know him well. I didn’t know him... actually, not well enough.

Much had changed when we connected again ten years later in the fall of 2008 for a formal interview I wished to take of him. By then, Prof. Muhammad Yunus had become a Nobel laureate, and replicas of the Grameen Bank model had started operating in more than 100 countries. His Grameen Bank had grown into a time-tested model, with 2,500 branches spread around the world (including US, where the first Grameen Bank branch opened in New York), having disbursed loans amounting to $7.6 billion to 7.7 million individuals! And to talk of his limitless vision as a social entrepreneur, by 2008, his brainchild had grown from being a tool for those in need of personal financial credit to a not-for-profit family of enterprises that included entities like Grameen Trust, Grameen Fund, Grameen Communications, Grameen Energy (Shakti), Grameen Education (Shikkha), Grameen Telecom, Grameen Knitwear and Grameen Cybernet. Not hard to imagine, if the forprofit business tycoon Li Ka-shing Li had found a match in Asia, it was Muhammad Yunus. What the Hutchison Whampoa Group was to Hong Kong, the Grameen Group had become to Bangladesh. [To quote two examples: Grameen Cybernet is Bangladesh’s largest Internet Service Provider (ISP) and Grameen Telecom has over 100 million subscribers across 68,000 villages in Bangladesh therefore reaching out to over 66% of the country’s population!]

But by January 2013, when he again gave an interview to my office, he was no longer the operational head of Grameen Bank. He had been forced to resign as the CEO by the government of Bangladesh in March 2011, which did not even grant him the position of a non-executive Chairman (as Yunus had requested). He however continues to carry on work as a social entrepreneur, and is an active participant in Grameen ventures around the world.

The legal battle that led to the ousting of Yunus isn’t important. Knowing why eleven years back, at the age of 60, when Yunus had volunteered to resign as CEO of Grameen Bank, the government asked him to stay on isn’t too. What is important is what makes Yunus a cult entrepreneur, which he will always be. He may not be a common name in the corporate rumour mill. He does not command a strong identity amongst stock traders. And he may not have raked in millions of dollars as most entrepreneurs deservedly have over the decades. But you could take his name in the same breath as of those successful entrepreneurs who have changed the lives of millions of underprivileged individuals. And it all began on a humid summer morning of 1976...

After receiving his PhD in Economics from Vanderbilt University in 1969, Yunus started teaching at the Middle Tennessee State University. In 1972, when Bangladesh was declared an independent state, Yunus decided it was time to fly 10,000 miles eastwards and rebuild what was a nation torn by revolution and starving for education. Within months of his homecoming, he found himself heading the faculty of economics at Chittagong University. The struggle that led to his becoming a social entrepreneur is well documented in his book Banker to the Poor. In 1974, during a time when he was teaching advanced lessons in economics, he found that his paper theories had not a single solution to alleviate the pain and sufferings gifted to thousands by the famine that struck Bangladesh. Economics gave him no answer to why thousands starved to death. He tried to ignore the emaciated people who moved about on the streets of Dhaka, but the more he did, the more their numbers grew. And the famine worsened, making him feel all the more hopeless about what he taught within the four walls of the university!

“Old people looked like children, and children looked like old people. Nothing in the economic theories I taught reflected the life around me. How could I go on telling my students make believe stories in the name of economics? I needed to run away from these theories and from my textbooks and discover the real-life economics of a poor person’s existence,” he writes in his book. Mismatch between economics and poverty grew over time, and in 1976, it called for the first move from Yunus that kindled the fire of social entrepreneurship in Bangladesh. Call it divine intervention or whatever, but that famine actually brought good news for 40 million people (the count of Grameen’s microcredit borrowers today) at the cost of a few thousand lives. It gave birth to the Muhammad Yunus I write about.

In the summer of 1976, Yunus started visiting villages near the university to understand more about poverty, and how he could actually use economics to help the underprivileged. During one of his visits, he came by Sufia Khatun (who shared her name with Yunus’ deceased mother), a poor widow who had two little daughters. She sold baskets that she weaved during the day. To buy raw materials for the bamboo baskets, she had to borrow money at interest rates that were as high as 45% a month! And what was her daily average earnings after selling all her produce? 5 taka, equal to 2 cents ($0.02). Yunus lent her $4, enough for her to pay back the moneylenders and buy some material for a day’s produce. Her daily earnings immediately rose to $2, and her manufacturing business became selfsustainable. Yunus identified 41 other such villagers in Jobra and lent them $27. All of their earnings increased many times over. Even better – all borrowers returned the sums they owed to Yunus. This surprised the man. It encouraged him too. He continued lending more money to other needy villagers – mostly women – and yet, after months of having begun the practice, got back every penny that he had lent out to the poor. Confident of his pilot tests, Yunus appealed to the local banks to make similar loans to the poor. The suggestion was rejected time and again, because for those bank managers – whose jaws would drop each time Yunus advocated his social plan – those with no collateral were not in their list of creditworthy customers. Finally, a branch manager of Janata Bank lent Yunus to be distributed to the poor on personal guarantee.

Yunus’ story is about a Bangladeshi boy, educated in a village primary school,
but one who earned respect and fame for being an entrepreneur
who has saved millions of underprivileged lives
The loans were distributed and the poor maintained their zero default record. Yunus went back to the banks with the proof, and they put forward a challenge before him. They claimed that his zero bad loan record in Jabra village was due to the fact that he was a lecturer at the nearby Chittagong University and therefore was influential. They asked him to show them that his model of microcredit would work in the Tangali district (north of Dhaka) where he was a stranger. He replicated his Grameen Project in Tangali, worked in that district for a couple of years and returned to the bankers with success on record. The bankers were not moved. So wasn’t Yunus. He next threw up a very difficult challenge for himself to take one last shot at his effort to help the poor and convince the banks. He asked them to choose five different districts. He started the Grameen Project in all five areas with great success. The banks still had their excuses. While on the verge of giving up, an idea struck him. He decided to start his own bank!

He approached the Central Bank of Bangladesh in 1982, and within a year, received the permission to launch the Grameen Bank. He was allowed to serve in rural areas, distributing loans and collecting savings in areas outside Dhaka. But that was only the beginning of new challenges for this social entrepreneur. Setting up of new Grameen Bank centres, procuring hardware and developing training centres, deciding on borrower groups, procuring capital for faster growth from agencies like the International Fund for Agricultural Development (IFAD), the Norwegian Agency for Development Cooperation (NORAD), the Canadian International Development Agency (CIDA) and others, keeping a check on repayment rates (that has remained at around 97% at Grameen Bank, as per a Stanford Graduate School of Business paper), handling pressures from political groups, averting negative impacts of unionisation within the bank, creating a cushion to cater to the unseen troubles that borrowers might face (that ultimately led to formation of the Grameen Disaster Relief Program), were some of the unique challenges Yunus faced. But what made him successful was his strategy of being shockingly transparent about his operations, effective handling of conflicts within the organisation, and most critically, of doing things different as compared to the large banks, despite popular disbelief and many-a-failure in the initial stages of his entrepreneurial career. Talking about failures during his attempt to kickstart the Grameen Project, Yunus says, “Every entrepreneur learns lessons from his failures and I am no different. When my company faced difficult situations in terms of project failures, I worked and reworked on the plans. I began with small goals, small projects and small business in the beginning. The moment you start thinking about setting up big enterprises at the very start, you lose focus of your core audience and ability to serve the society.”

Be it his idea of setting up moneychasing entities or the Five Star targets given to each center or even his belief in the community of women being better borrowers (consider how challenging it would have been to give out loans to women in a Muslim country – it took him six years to reach the 50-50 gender mark), each served the entrepreneur well. From setting up the first centre (set up at Jabra village) to over 2600 today, from lending out the first taka to over 684.13 billion taka ($11.35 billion; source: Grameen Bank) as of December 31, 2012, Yunus has come through as a true champion of social causes.

Today, the Grameen group of enterprises has nine businesses – all of which are not-for-profit, and whose working models are replicated across 100 nations. So trusted has his model of social entrepreneurship become that he has succeeded to attract even private capital to fund his social dreams. For instance, GrameenPhone (which is a for-profit business) that works together with the not-for-profit Grameen Telecom is 51% owned by Norway’s Telenor. The two entities today provide low-priced airtime and solar-powered handsets to villagers in Bangladesh.

Out as the operational head of Grameen Bank’s lending and savings business, Yunus is still in there, enjoying his fourth decade as a social entrepreneur. And there are many new projects in the pipeline that will only add to the Grameen conglomerate. The Grameen-Danone Food Company is a new 50-50 partnership with France’s Group Danone that sells low-priced baby food, fortified butter and fresh yoghurt in rural areas across Bangladesh. He is working on several new joint ventures around the world.

In Columbia, work is on to initiate a business enterprise that can supply red pepper in rural areas (and export to US) at low prices while providing for employment to rural dwellers (who have lost their jobs after the collapse of the coffee bean production industry). He wants to make Columbia an export hub for red peppers. In Haiti, work is on to put in place two poultry farms, a bakery and a plantation of jatropha plants that can be utilised for bio-diesel, and in the process provide livelihood to 200 farmers. For this purpose, funds are being mobilised by the Germany-based Yunus Social Business Fund (formerly the Grameen Creative Lab), that opened an office in Haiti after the 2010 earthquake. In another effort, a tie-up of Grameen Krishi Foundation and Yukiguni Maitake of Japan is being worked on to establish a new social business in the field of agriculture, that would produce and supply high quality moong beans in Bangladesh. The beans would be means for both domestic consumption (30- 40% of the produce) and exports to Japan (60-70%). There is another upcoming healthcare project on his list (for which he is still on the lookout for a partner) that includes setting up of lowcost eye care units and rural hospitals with video-conferencing facilities in rural areas around Dhaka. India too is on his map. “For the Indian market, I intend to start a JV with an Indian multinational company to supply sanitary napkins in bulk for Indian village women in the very near future. Besides, I also plan to start a JV with a waste water management company in India to provide clean drinking water and water for farming to villages across the country,” shares Yunus.

Yunus has won many an award from nations around the world – from Estonia to USA, from Sri Lanka to Jordan, from Sweden to Japan and many more. But the proudest moment for Yunus would have come during the winter of 2006. His Grameen Bank was awarded the Nobel Peace Prize in December that year. Taslima Begum, a housewifeturned- entrepreneur from Bangladesh, who had taken a $15 loan from Grameen Bank to buy a goat in 1992 and is today on the Board of Directors of the bank received the award on Yunus’ behalf and said, “My parents gave me birth, but Grameen Bank gave me a life.” This statement holds true for the millions of souls around the world who have been saved by the cult entrepreneur Yunus, and millions more who would be saved going forward.

People credit Yunus for being the father of microfinance. Actually he deserves more credit for being the father of ‘impossible economics’ – one who proved how demand is possible with zero propensity to consume! [Isn’t that the reason why traditional banking outfits refused to fund Yunus’ plan – because the poor had no money or collateral as guarantee for the loans?]

I leave you with a thought from the man who has defined what social entrepreneurship is, and according to me is a true cult entrepreneur. “An entrepreneur should have an urge inside him and a firm belief in terms of taking his business enterprise forward with positive thoughts and imagination. He should possess the quality of being a fighter till the end, no matter how many difficulties he may have to face in the path of achieving his set business targets for the benefit of the society. If an entrepreneur does not give up, and with goodwill continues to work endlessly and tackle difficult situations with maturity and peace of mind, then that entrepreneur will surely achieve his long-term objectives.” May the world see many more kurta clad entrepreneurs for whom poverty and unemployment, rather than profits and turnovers, are the key issues to address. As for me, I’ll wait for our next lunch together Mr. Yuns...

Where the road to social entrepreneurship started for a village boy named Muhammad Yunus

June 1940: Birth of Muhammad Yunus in the village of Bathua in Hathazari, Chittagong (the business centre of what was then East Pakistan). He was the third eldest of 14 children, five of whom died in infancy;

1940-1947: Childhood years spent in the village of Bathua. Since childhood, his mother influenced him greatly. Her name was Sufia Khatun and she would help the poor and needy on a daily basis;

July 1947: Yunus moved to the city of Chittagong with his father Hazi Dula Mia Shoudagar, who being a wealthy goldsmith in the village started a jewellery business in the city. Yunus joined the Lamabazar Primary School;

1955: Yunus passed the matriculation examination from Chittagong Collegiate School and secured the 16th rank amongst 39,000 students in East Pakistan. He was a Boy Scout during school and travelled to West Pakistan, India and Canada;

1961: Yunus completed his M.A. in Economics from Dhaka University. He joined the Bureau of Economics as a research assistant to Professor Islam and Sobhan. He also started delivering lectures in Economics at Chittagong College;

1965: He went to study economics [(a course called graduate program in Economic Development (GPED)] at Vanderbilt University in USA on a Fulbright scholarship;

1969: Yunus received his PhD in Economics from Vanderbilt University. He joined the Middle Tennessee State University (in Murfreesboro, Tennessee) as an Assistant Professor of Economics;

1972: He returned to Bangladesh and joined the government’s Planning Commission headed by Nurul Islam. Finding the job nonexciting, he joined the Chittagong University as the head of the economics department;

1974: After the famine that struck Bangladesh, he became involved with poverty reduction. He started a rural economic program as a research project without government aid;

1976: While on a field trip to the village of Jobra near Chittagong University, Yunus met a poor woman who made bamboo baskets. The woman told him that she had to borrow the equivalent of up to 25 cents to buy raw material for each basket. And after repaying high interests of about 45% a month to moneylenders, she was left with no profit. Yunus decided to give a “loan” of $27 to 42 such poor women. That marked the birth of “microcredit” and a revolution called Muhammad Yunus in the world of social entrepreneurship;

1983: Muhammad Yunus started Grameen Bank, the first microfinance bank in the world.



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