Muhammad Yunus – How to Create Sustainable Businesses

  • Post Written by Jai Kai on June 27, 2009
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The Video above briefly shows the success of Muhammad Yunus in his attempts to end poverty throughout the world. I recently had the opportunity to listen to this incredible man speak in a fascinating interview. I will share with you his reasons why charity is not a solution for the poor. But first, for those of you who want some clarity on how Muhammad created the Grameen Bank in 1983 and established successful micro-financing for the poor which earned him the 2006 Noble Peace Prize, here is his brief success story.

In 1974 there was a terrible famine in Bangladesh where people were dying of hunger everywhere. Muhammad was teaching in a classroom and was feeling frustrated because he was teaching elegant theories of economics that had no meaning in the face of the calamity that surrounded him. What he really wanted to do was to leave the class room and help the people in the village next door who were facing these atrocities…

Muhammad saw how villages were being ruthlessly tortured by the loan sharks. He made a list of the people who were borrowing from the loan sharks and how much money they borrowed from them. He wrote it down and there were 42 names on his list. The total money they borrowed was $27. He was shocked because the people had to suffer so much for so little. So, What Muhammad did was give $27 to the 42 people to repay the money to the loan sharks and be free. As a result, he went to the local bank branch to see the bank manager about lending money to the people in the village instead of the loan sharks. The bank manager said, “No, the bank cannot lend money to the poor people.” Muhammad became very agitated, and wanted to make sure it was done. He started a big campaign against the banks to persuade them to give loans to the poor people. After months of running around, he finally realized that he could do that by offering himself as guarantor. He signed all the papers, took the money from the bank, gave it to people, and it worked. That was the beginning of microcredit and the Grameen bank. Now, he lends money to thousands of people without collateral, without any lawyers, and it works. Repayment is near 100%; it’s 98% or 99%. As of July 2007, Grameen Bank has issued US$ 6.38 billion to 7.4 million borrowers and these small collateral-free loans have been provided to 100 million people world-wide. The success of the Grameen model of micro-financing has inspired similar efforts in a hundred countries throughout the developing world and even in industrialized nations, including Canada and the United States.

So, how does micro-financing differ from charity and why is it a better solution for the poor. It is actually very simple and yet remarkable. What Muhammad has done with the Grameen Bank is lent money to women to start their own businesses so they can grow their way out of poverty. Rather than just giving them the money to feed them for a day, he has taught them how to fish for a lifetime by having them create their own sustainable business. Through micro-financing money becomes available allowing the poor people to tap into their creativities and innovations. It gives them the ability and incentive to do something that they enjoy while learning and providing a service to others.

Muhammad says that sometimes charities are counter-productive because they take away initiative from people. The charities are saying that they will take care of it, “You don’t have to worry,” so people don’t have to use their own creativity and their energy to fight for their benefit. With micro-crediting people take the money and start tiny, little businesses with $30 or $40. They’re so small people feel reluctant to call them businesses but just because the size is small doesn’t make it less of a business. The people then move from one level of business to the next level of business to the next level of business, until they finally get out of poverty. It’s about creating entrepreneurs out of people, even the poor. If everybody’s looking for jobs, who is giving them the jobs? Somebody has to be giving the jobs and creating more jobs by expanding their businesses.

Interest free loans are even to beggars. Grameen bank now has more than 100,000 beggars in their program and more than 11,000 beggars stopped begging completely. More and more people are coming out of begging to discover their own creativity by becoming a businessperson. They don’t even train the beggars. They simply say “this is a way to not be always begging.” With a loan you can get some merchandise such as cookies, candy or toys for the kids, which they can sell and make money. Muhammad states that Micro-financing doesn’t teach the poor how to sell things or how to make profit because these ideas are already embedded in human minds and doing these simple kinds of things come naturally. He says that sometimes training becomes a kind of a detriment. People get scared, and think “I’m so stupid” or “I don’t know anything” and they start feeling that way. The more you encourage them the better. Tell them, “you know everything, you are smart, you can do it, go ahead, do it.” Each human being has tremendous potential locked inside. Today millions of people live in poverty world- wide. We need to give these people freedom and the chance to create and become successful entrepreneurs just like the rest of us who have businesses and achieve abundance. It doesn’t matter what level we are at. Micro-financing or micro-credit allows others to discover themselves, tap into their creative abilities, rid themselves of poverty and realize their own level of success!

For more information on Muhammad’s remarkable ideas systems and philosophies you can read his books Banker to the Poor and Creating a World without Poverty.

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