Transforming banking, ending poverty : Nobel Peace Prize winner Muhammad Yunus to speak at the Arlington

TED MILLS, NEWS-PRESS CORRESPONDENT
January 9, 2008 12:53 PM
“The intention was to fight the moneylenders, not become one.”
Muhammad Yunus, the man behind the Grameen bank and the 2006 winner of the Nobel Peace Prize, has helped fight poverty in his native Bangladesh, not through overturning an economic system, but by changing it from the inside. His idea was radical: a small loan of $20 to $100 to the poorest woman would not just be paid back on time, but would bring a desperate person out of a cycle of poverty by helping her become productive. While the major banks ignored and sometimes ridiculed him, over the course of 30 years, this faith in humanity and in doing a good turn beyond just that of charity has transformed his country. His ideas about microcredit, as it is called, have been adopted by many other developing countries as well as the first world. Mr. Yunus is scheduled to speak at UCSB on Jan. 16 to promote his new book, “Creating a World Without Poverty — Social Business and the Future of Capitalism.”
Mr. Yunus was interviewed by phone while he was in Shanghai. The conversation turned to the success of microcredit and his recent acceptance into the Global Elders, a group of public figures set up by Richard Branson that includes Kofi Annan, Archbishop Desmond Tutu, Jimmy Carter, and others, to serve as a moral think tank for world problems.
NEWS-PRESS: What are the concepts of microcredit that work in all countries? Are there any features that are different depending on the culture?
MUHAMMAD YUNUS: No, I would say the basic features remain the same. Conventional banks are based on collateral. We threw (that idea) out. Microcredit is based on trust with no collateral, no guarantee, and no lawyers. All microcredit has focused on the poorest people, particularly on women. The loans are all about helping you to generate your own income. The other constant is making a small installment payment mostly weekly, sometimes fortnightly. Right from the beginning the idea was that people should not go to the bank, banks should go to the people. Our bank staff go to the borrowers at their doorstep.
NP: You say a lot of the success of microcredit depends on trust and peer pressure.
MR. YUNUS: It’s not peer pressure as such — it’s more peer support. You help each other to succeed. Pressure is a negative, whereas we discuss with borrowers before (the loan) what they will you do when somebody cannot pay back. Some say, well, we’ll force her to pay it back. But that’s not what friends are for, friends help each other. Maybe her husband took the money and ran away, so what’s the use of getting angry with her. You should be focusing on a solution, rather then aggravating the problem.
NP: Have you seen the roles of women change in Bangladesh since this started?
MR. YUNUS: Yes, women are now in a better situation within family than they used to be. Now that they have the economic power and are contributing to the family income, her decision-making contribution to the family also goes up. Now her voice matters in the family, unlike when the husband was the only income earner.
NP: How else has that affected the society?
MR. YUNUS: In the 25-30 years since the empowerment of women, the population growth has declined very sharply. The average mother used to have 6.3 children–today it’s less than three. Despite Bangladesh being a Muslim country, its population growth is one of the lowest in the whole of Southeast Asia. In terms of children’s education, it has been very helpful. All children attend primary school, and that was quite an achievement for Bangladesh. Also in secondary school, our fear was that boys would stay in secondary school, and girls would drop out, but the reality is the other way around.
NP: Tell me a little about the Global Elders.
MR. YUNUS: The concept of elders is basically that of the African village. When there’s a crisis, they go and seek their advice and intervention, so they can protect themselves from the difficulties that they face. So now the world is a global village, maybe the world could do better by using world elders. They are a moral authority. They will be helpful in mobilizing public opinion, because people will look up to the elders and see that they have no axe to grind. So what they are saying probably is the right position. It is about bringing the trust back into the picture so people can take it seriously and move ahead.
NP: Is the problem of poverty more complex or simpler than we think?
MR. YUNUS: It’s simpler, because poverty is not created by people; it’s a creation of the system. So if we can fix the system, poverty will disappear. The banking system decided it cannot do business with more that one-half to two-thirds of world’s population, and so that became a cause of making people suffer. But if we can open up and create an inclusive financial system, maybe we can increase the chance of everybody getting out of poverty. Why do we assume all humans are moneymaking machines, while in reality we know very well they aren’t? So there should be two kinds of business: one to make money, and one to do good, without any personal benefit out of it. Those social businesses could then affect the profit-margin businesses and compete with them. There’s absolutely nothing wrong with human beings — they are as capable, creative and powerful as anybody else. Society never gave them the scope to unleash the potential inside of them.
NP: Do these solutions require a government that believes in the common good?
MR. YUNUS: No, all government has to do is create an enabling environment by making the appropriate legislation. It’s not a question of common good. All I’m doing is lending money to people I’d like to do business with. If in doing so the law stands up and says I can’t do that, the government response is to remove that law. Government shouldn’t lend money to poor — that is a bad policy. If poor people know it’s coming from government, and it’s your own money, so why should you pay it back?
NP: Do certain economic systems like capitalism or socialism result in more or less poverty?
MR. YUNUS: In the United States, you have 42 million people who don’t have medical insurance, who live in mortal terror when something happens. So in the very citadel of capitalism you cannot solve the problem of poverty. Today I’m talking to you from China, which is socialist. Their economic advance is the fastest in world, but it’s not happening to the people at the bottom. Once you agree that it’s the system, then we can go in and change that. The Millennium Development Goals set by the United Nations say we can reduce poverty by half by 2015. We have to make sure we achieve that goal, for this will then give us the confidence to take the next step and reduce it to zero.
IF YOU GO
Muhammad Yunus speaks Jan. 16, 8 p.m. at the Arlington Theatre, 1317 State Street.
The event is free.
©2008 Santa Barbara News-Press