Last night Muhammad Yunus spoke to a sold-out crowd of 1400 at George Washington University. Earlier in the day he visited visited with the Federal Reserve Chairman Ben Bernanke and the International Monetary Fund. He spoke about those visits as well as his recent trip to the World Economic Forum at Davos.
Yunus spoke for about 30 minutes then took questions from the audience. The event was hosted by the university and Hooks Books. Yunus' newest book,
Creating a World Without Poverty: Social Business and the Future of Capitalism, was just republished in paperback with new material and he stayed to sign copies.
The following are my notes from his speech and the question and answer period which followed. It is not an exact transcript. I paraphrased some and couldn't hear everything, but this should give you a pretty good idea of the tone and content of his message.
Good evening.
I didn’t think there would be such a big audience here.
I thought everyone in this town was busy doing the bailout package. (laughter)
They wouldn’t have time to come here.
I had a good day today. I spent the whole day today here starting out with a meeting with Fed Chairman Bernake. I did that to update him about the work we have been doing in this country.
This is my second visit with him. I met him in October 2007 and at that time I was trying to explain the importance of microcredit to him in the USA. He knew all about microcredit. I thought we should start a microcredit program in this country – a prototype which could be expanded later. And he gave all his support. Go right ahead. Any support you need from us we will give it to you. We talked about creating a legal home so that we can use that legal home to create an organization. It is important that we have the legal ability to take deposits. If we can take deposits then it becomes easy to raise money.
We created a program in Queens last January. [see Jessica's recent report about
Grameen America] At the inauguration of the program there were lots of journalists. One journalist asked why we chose New York City instead of the villages like in Bangladesh. My answer was we deliberately choose New York City because it is the capital of world banking. New York City does not, however, bank with its neighbors. The people that live there do not have access to financial services. It is important to have a small example to break fear. We follow the same principles – five women forming a group, weekly meetings. The average loan size is $2200. Repayment is 99.3%. This provides an interesting contrast. The women in New York take loans, without collateral, without any lawyers and they pay back every week. For one year they have been doing it.
Then the big banks. (laughter)
I remember my first encounter in 1976 with the bank manager. He kept trying to convince me the bank couldn’t loan money to the poor because they were not credit worthy. Now I think it is a good time to ask the question – who is credit worthy? (applause)
And then I went to IMF [after visiting with Ben Bernake today]. I also recently went to [the World Economic Forum] at Davos…I took the same message to IMF. The deep [economic] crisis is also exciting. It is an exciting opportunity to create a new normalcy. When we get out of this crisis what kind of normalcy will we have – the old normalcy or something new? Please make sure, today, right now, that we create a new normalcy. People wonder what this new normalcy will be. The financial system will be built in such a way that in this country there will be no payday loans. (applause) People can go to the bank and borrow money without paying 500%, 700%, 1000% interest. It is such a disgrace to see payday loans all over the cities in the United States. What a gaping hole the banking system has left behind.
The new normalcy will be that everyone in this country will have the right to open a bank account. There are millions of people without a banking account. To get a check cashed you have to go to a checking company which takes a large percentage of the check…nobody should be denied service.
There will no longer be a financial apartheid where people are denied service. You cannot say anymore that it cannot be done. Why not create a financial system that works for everyone?
We deliberately created a system that is focused on the beggars. [
More on the Grameen beggar program.] We have 100,000 beggars in the program. It is not complicated. All we do is go to the beggars, talk to them, and see how they make their livelihood. We suggest to them –as you go from house to house will you carry some merchandise with you? Some food, candy or toys for the kids. Give people options – let them buy from you. We make it sound very easy – you are going there anyway. They immediately see the point. And we started giving money to them. We started four years ago. In those 4 years more than 11,000 have stopped begging. (applause) They are now successful door-to-door salesman. Some are personal shoppers…the other 90,000 are part-time beggars mixing begging and sales. They are very smart. When you talk to them they explain which houses are good for selling and which are good for begging. They never went to business school but they understand market segmentation. (laughter and applause)
Everyone has an ability. It doesn’t matter if you are a beggar or a big businessman – everyone has an ability. The one who starts at the bottom struggles and cannot move up. Some do not even know they have ability. Everyone carries such wonderful gifts inside of them – gift of creativity, gift of innovation, gift of entrepreneurship…
I talk about this when I see the differences in the families of Grameen members. We give them loans to continue with higher education. We have students in medical and engineering schools. Students whose parents never went to school…
Who creates poverty? The poor do not create poverty. Poverty is created by the system. The system we designed. The system we work with. That’s what creates poverty. It is not nature. It is the exact opposite. It is artificial. People have unlimited potential but we don’t go that way. All these policies and concepts that we promote [create poverty].
Why should financial institutions make up their mind they cannot do business with you? It doesn’t make sense. Let us now decide who is creditworthy.
One concept I try to explain in the book is the concept of business. One interpretation of business is profit maximization. We interpret human beings in such a narrow way, as if human beings are money making robots. Human beings are so much more than that. There is selfishness in us but we also have selflessness.
…Why cannot we create another kind of business? A social business. A business where our goal is to change the world, not to make money. If we give money to charity the money goes and never comes back. With a social business the money recycles and with each iteration produces more benefit at every turn.
We have created several social businesses. We created a plan to create yogurt – a social business. We put the nutrients children need in the yogurt and make it very cheap so everyone can buy it. Experts say if a child eats two cups of yogurt each week for 8-9 months a malnourished child will become a healthy child. In a profit making yogurt company, the CEO would ask how much money we made this year and how we can make more money next year. In a social business the CEO will ask how many children got out of malnutrition this year and how many more children can get out of malnutrition next year.
Another social business [we created is] a water company. Bangladesh has a serious water problem. Almost half the water is poison. We created a company to create safe bottled water. It costs one penny for four liters so everyone can afford it and everyone has safe water. The social objective is to bring safe water to the people.
We recently had a discussion with a major shoe company about how to create a social business. You create a motto. And you believe in it. That motto is that nobody in the world should go without shoes. And make it happen. Yes, you can make shoes for the poorest at a low price. Keep the cost under a dollar with your brand name. That would send a big message. And continue to go down [in price] and never come up again. And make it a green shoe so that no material in the shoe will make any kind of pollution problem.
And another company [that came to us] is a car company. They want to do a social business. We gave them a challenge – why don’t you make a very cheap car. And not only that – base it on a green engine. It will be a multi-purpose engine. You can take it off and use it for irrigation or to generate electricity or to use for a boat. They are working with designers and engineers to see if they can do that.
Health is a big problem – not only in this country but in every country. The bottom half do not have access to health care – private or public. Medical science can be applied to help people have good health. A health care social business could be created to give everyone access to health care.
So, if you change your concepts there is no reason people should be poor. If we block that road it cannot come. Then, no poor.
Poverty does not belong in human society. Poverty belongs in a museum. And that is where we should put it and it will stay there. (applause)
Questions: Is it harder to implement microcredit in the United States than in Bangladesh?It is harder in the United States due to the legal structure. Welfare laws require the poor to report each dollar they earn so it can be deducted from their check. It does not make sense. If you make a dollar the government should match you with a dollar.
How do you approach poor women who are reluctant to become involved in microcredit because they do not believe they have the skills or potential to become entrepreneurs?The real trick is to create an example. You cannot change their mind right away. If you can create one example to break the fear then the others see that. Then everyone becomes curious – how did she do it? I can do better than her.
What advice would you give to a group of George Washington students here who are trying to create a social business?Young people like you can start a business. If you cannot start one, then design one. Look at the problems and decide which one you want to solve. For example, set a goal to bring 100 people out of welfare. And design a solution to the problem. At first it may seem impossible but you can do it. Microcredit seemed impossible but now it looks easy. If you can get 100 people out of poverty then you can get millions out of poverty by planting that seed.
What abuses do you see in the microfinance system?You can say microfinance and not do microfinance. Some require collateral. Some due not target the poor. Some microfinance organizations charge exorbitant interest rates – rates similar to loan sharks. Loans should be for income generating activity. Some give loans for consumer goods such as refrigerators and televisions. This is not microfinance.
In your book you propose a rating system to determine which ones help the poor and which ones don’t. In the year since you wrote the book has anyone come up with such a system? [note: this is my question]Oh yes. A big organization is coming up with that very system. It will tell you exactly what interest rate is charged, conditional fees and so on. Yes, we will start seeing the results of that from this organization.
What is the best way right now to determine the best organizations to contribute money? [my follow-up question]One way would be to contact that organization to choose which one you want and they will give you the results and then you decide which ones you want to give your money to.
I run a microfinance organization here in DC. It seems the lack of transparency is one of the biggest challenges in our financial industry and particularity in microfinance. I understand Grameen has a very high repayment rate. How does Grameen calculate repayment rate?If you do not pay back your loan in the period in which it is due then you are overdue. This is all explained on our website. The definition which we use to define overdue is explained there.
What are the edges between commerce and the ecosystem?We need to figure out how much of our resources are for our generation and how much is for future generations. We need to spread our resources over as many generations as possible.
The real objective is to make the world safer than we found it. And the next generation will make it safer.
Grameen Dannon is a small company. The total investment is less than $500,000. We designed it as a social business. When we started I asked what kind of container we would be using. They showed me. It was plastic. I told them we did not want plastic in a social business. They were surprised. They told me they use plastic all over the world. I told them we want a biodegradable material. They said they did not have a biodegradable material. I told them they better find it. (laughter and applause)
So, about three months later they came back. They were very happy they found a biodegradable material to use in the cups. I asked what it was. They said it was cornstarch and they found it in China. It looks beautiful. I asked if I could eat it. They said why would you want to eat it? I said because poor people are spending money on it. They don’t want to waste money. Why can’t you make edible cups? And put nutrition in it? People will eat the yogurt and then eat the cup. And they could not figure out how that could be. I told them when I get ice cream I get an ice cream cone. I eat the cone. They said this is not ice cream. I told them the scientists need to work on it. They told me it will take a year. I told them they have six months. So, they are working on it.
You have to raise the question. The scientists in Paris are very happy to have the challenge.
Additional coverage: The GW Hatchet
Grameen Bank and its founder, Muhammad Yunus, won the Nobel Peace Prize in 2006 for their work making small loans to poor people with big dreams. Prosper is a website that tries to extend the microcredit idea via the web to all people, including but not just limited to the very poor. It's been called the eBay of Loans by Forbes Magazine, the #1 website of the year by Time Magazine and has received plenty of other rave reviews. Prosper describes their service here:
Some people choose to lend money to people with poor and high risk ratings. Although the average interest rates can be as high as 26%, the default rates are also quite high for E and HR. Prosper reports defaults to the credit agencies and hires a collection agency, just like a normal bank or credit card company would.
