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Microcredit is a business; business to help people

Professor Muhammad Yunus is the father of microcredit and the founder of Grameen Bank. A determination to help create a world free of poverty inspired Professor Muhammad Yunus to experiment with providing collateral free loans to the poor in his native Bangladesh in the 1970s. The experiment was a success and led to the development of the Grameen Bank, to provide microfinance to the poor. In 2006, Prof. Yunus and the Grameen Bank were jointly awarded the Nobel Peace Prize “for their efforts through microcredit to create economic and social development from below”.  Prof Yunus was in Yangon last month to present a session at the International Press Institute world congress entitled: “A conversation with the man who’s ending poverty”.  Mizzima Weekly’s Theresa Henne had a conversation with Prof. Yunus on the sidelines of the IPI event.

 
It is nearly 40 years since you conceived the idea of microfinance, to help poor people gain access to small loans. How is microfinance performing as a banking system and what do you say to criticism of it?

It is doing well. All over the world micro financing is spreading. In almost every single country, micro financing is working. The criticism is that it might not be helping the poor people as much as is claimed. Either way, if it is not as much, it is doing something. But that's one idea. My starting point was that banking is not extended to the poor people at the bottom. Banking stops way above. The rest of the people have no access to banking facilities. Their explanation was that it doesn't work. You cannot lend money to the poor people or to people even in the middle. Then we demonstrated that you can do banking even with the poorest of the poor, especially the poorest women.

We lent money to the beggars. It works with the beggars. Now, there was really no excuse left in the book. The real issue is to extend the banking services. Whether you have solved the problem of this or the problem of that is not the issue to address. It should be an inclusive banking system. And what a wonderful thing it is, when you get the money to transform your whole life. We see it every day, everywhere! We see people changing their own lives. If some people don't see it, it's not their fault. They probably just need to open up their eyes to see this.

Besides providing access to microfinance, what else should be done to help empower the poor?

Everything that everyone needs. Right to food; right to shelter; right to speech. All basic human rights have to be established, so that people can do their own thing in life. Along with that, I am saying as I always have, right to credit should also be a human right. If you establish right to food, you do not question whether you have good and nutritious food  and other such questions. You simply have to make sure that people have enough to eat. At the same time you have to make sure that the financial institutions are open to everyone and not only to the privileged people. So all the people should be able to work and take advantage of the banking service that is available. It is not  charity.

Credit is a business. You don't ask a grocery shop, why they are selling food to people? Do they get healthy; do they get sick from purchasing the products from the shop? This is a service: if you need it, you pay for it, you buy it. So there is really no question of asking all these other questions. Somehow some people think it's a charity. They are giving it away. That's not what microcredit is all about. Microcredit is a business; business to help people. But not business to make money for somebody else to be rich. That also needs to be distinguished. When we say microcredit, we always think it's for a social purpose, but running on a business principle. You have to cover your cost, you have to be  sustainable. It is not for commercial purpose, to make money by lending money to the poor people. When you do that, you call them loan sharks. You are exploiting the poor people, take advantage of their situation.

Please tell us about the Yunus Social Business Global Initiatives.
 
We have been working on social business for a while now. There are many other businesses we created to solve problems rather than making personal profit. And that's what we now know as social business. Social business can be addressed to any kind of problem. Problems of healthcare, education, training, housing, waste management, and environment. You name it! Every day we see problems around us, problem of unemployment, problem of old age, problem of drug-addiction. It is possible to come up with creative ideas to create businesses to solve the problems. In that business, you should delink yourself from making personal profit. That's the basic condition. No link with personal profit and yet it runs as a business. Business makes money and the money is rolled back into the business. Investors can only take back the investment money. Whatever I have invested, I can get  back over a number of years, but I don't take anything extra from that. That's what social business is. We created a lot of social businesses in Bangladesh. A young woman from Germany thought, we can do it by expanding it to other countries. Then they created, in collaboration with the Yunus Centre in Bangladesh, an organization called Yunus Social Business. This is based in Frankfurt but now they have started social business in many countries including Brazil, Columbia, Haiti, Albania, Uganda, Tunisia and India.

All these countries have their country offices where they invite young people to come up with business ideas to solve problems they see and they invest in it. They ask investors to come and join them to create funds. And out of these funds, they invest into social businesses. Many universities also get interested and help by providing courses and materials to help young people learn about this. This whole movement is run by Yunus Social Businesses.

Please provide examples of successful social businesses.
 
We have done various kinds of social business. In Bangladesh we have created a company to bring solar home systems. It started very small but over time it has grown. Through the company, we have brought solar home systems to one and a half million homes now. It took us eighteen years to get there. But it will probably take the next three or four years to get to the next one and a half million. And it also encouraged other NGOs and even private businesses to take up  similar solar home system business. So today, Bangladesh has become quite an attractive place for solar home systems and this continues to grow. Now people don't have to use kerosene lamps and can use mobile phones and charge them in their homes. They get connected with television and other modern technologies because they have their own electricity. Technology is helping to bring down panel costs also. At the same time, bulb costs are coming down too. Bulbs consume less for the same wattage. It consumes much less with LED-lamps and LED-bulbs. So all this together has been very helpful. This is one example of social business. We didn't want to create this business to make money. We created it to solve the problem of power in rural households in Bangladesh. And we created many other enterprises. For example in Haiti we are doing a very interesting project. Haiti lost all its forests. It has become completely deforested. Only two percent is left in Haiti and that too may disappear in the coming years. Now we created a social business to reforest Haiti. We got amazing response from many important people around the world who joined us and invested in us. Apart from Richard Branson and Bill Clinton, we also have some German investors investing in it. We have an amazing force of energy to make it all happen.

What is the difference between a social business and social entrepreneurship?

Social entrepreneurship is a much broader concept; Anybody who takes an initiative to help the society in some way or the other is a social entrepreneur. The initiative is the social entrepreneurship. And a social entrepreneur might not be in business at all. He doesn't have to be in business. It's simply helping other people in some way, so you become a social entrepreneur. Or  social entrepreneurhip can be in business. So if you are in business, you are making money. You are making money but you are also benefiting society. That's also social entrepreneurship. We talk about social business, which is different from social entrepreneurship. Social entrepreneurship includes everything, many different things. And in social business we only do specific thing, which is to do good to people, to solve people's problem. So social business is a smaller part of the other broader idea of social entrepreneurship. Social business is a very specific thing.

What is your situation following the controversies involving the Grameen Bank?

I am no longer with Grameen Bank, but I carry on my activities in many other areas that I 'm involved in.

What caused the problems at Grameen Bank? Was it politics?

Yes, they are entirely politically motivated problems.
 
How have you responded to that situation?

I keep busy with my other work, but I feel sorry for what is happening to Grameen Bank. Particularly, I tried to create Grameen Bank as a bank owned by the poor people, as a private bank. Now government is saying it should be a government bank. I didn't have any intention of making it a government bank.

Grameen Bank was a social enterprise. But are you concerned that some other microfinance ventures, in India, for example, are trying to profit from the poor?

There are many cases like that where microcredit is used in the wrong way, abusing its core concept. We created microcredit to help people, so  it's with a social objective. Microcredit is one of the first forms of social business. Sadly, some people have been, and still take the idea and make it as commercial business. They want to make money for themselves. I say that's an absolutely wrong use of the concept of microcredit. They want to make money for themselves. I say that's in the direction of loan sharking. So it is important that people are able to distinguish between social microcredit and commercial microcredit and make sure they don't get drawn into commercial microcredit. We are promoting social microcredit. And commercial microcredit is an abuse of its concept.

Who needs to take the initiative in Myanmar to reduce poverty? The government?Foreign investors?The people themselves?

Everyone. Why should anybody sit around? Even the poor can take the initiative. I say that the major initiative comes from their side. The government's and the overall society's role is to create opportunities for them. Create, for example, financial systems, so one can take money and start doing things for themselves. And the legal system has to be clear also. If it is unclear, even if you have the money, you cannot start the business, because regulatory authorities will step in to dictate your steps. Therefore, we need everybody's contribution. The government has to get active; Individuals have to get active; Civil society has to get active, so that poor people get the freedom to tackle all kinds of problems. The government, plus the civil society and of course the people have to work together.

What motivates you to want to help the poor?

One has to feel the problem and come up with ideas on what to be done. In my case, I have done it by creating businesses that become self-sustaining. I don't have to worry about funding it every day, every month, every year, because it is a business and it runs with its own money, its own income.

I am confident that all the problems we see around us can be addressed by creating businesses that can solve the problems. Some of the things that I have done have grown bigger over time. So I can confidently say that you can start small and eventually you can make it big.

What must the government do to ensure microfinance in Myanmar is successful?

Firstly, define microcredit very clearly, so that people don't have any confusion. A very clear definition of microcredit is required.

Secondly, create a legal framework. Create a legal home for microfinance. Create microfinance banks, so that you can take deposits and lend money, wherever you are. This way, you don't have to wait for Nay Pyi Taw or Yangon or any other city to get the money. In your own neighborhood, in your own village, you can create a microfinance bank. People can take the deposit and can lend money. So you don't have to bring money from outside. This particular legal framework should be a very strong one. It should be clear and transparent. Anybody should be able to move in and start microfinance. And this should be social microfinance. Law should make it very clear that this license is not for people to make money out of it, nor is it for the rich to create a bank and make money for themselves. It is done to help improve the lives of the poor people.

Next, there will be the need to set up a regulatory authority. Since you are creating a bank, there should be some regulatory authority to make sure that you follow the rules and procedures.

Then, you must focus on women in microcredit. And that's the best and one of the most important things to do. The impact will be tremendous if you enter the families through women.

So, these are the steps that are vital to follow.

‘Microcredit is a business; business to help people’
By: Theresa Henne
Published Date: April, 2015
Published by: Mizzima News: a Burmese multimedia news organization
Source: www.mizzimaburmese.com/