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Making Money is Happiness, Making Other People Happy is Super Happiness

'Rock star' Economist Muhammad Yunus Dazzles University of Toronto Audience!
 
(University of Toronto invited Professor Muhammad Yunus at Munk School of Global Affairs on May 30, 2014. Professor Yunus shared his ideas and global experiences on microcredit and Social Business. The huge audience was thrilled and amazed to hear from the global icon. University of Toronto expressed the event as “'Rock star' economist Mohammed Yunus dazzles U of T audience at Munk School discussion”!)
 
Introductory Remarks by Professor Janice Stein
 
“A very special afternoon at theMunk School of Global Affairs and University of Toronto! We areprivileged to have a graduate of the University of Toronto with us today.Dr. Muhammad Yunus is one of the honorary degree recipients. After he got the University of Toronto degree,he became – Dr. Yunus and will always be a graduate!
 
Dr. Yunus needs no introduction, he is of course the father of microfinance, the founder of Grameen Bank and the winner of Nobel Peace Prize in 2006 for the outstanding work he has done the institution he created to fight against global poverty. He has already brought extraordinary changes through dialogue in global conversation on poverty. We have the opportunity to talk briefly this afternoon,about his initiatives focused on fixing the efficiency of the market for social good and social purposes as that is the original inspiration which led to estabilishment of the Grameen Bank. Thousands of companies around the world are now implementing Dr. Yunus’ principles to accelerate sustainable development.
 
Dr. Yunus is also pioneering the concept of Social Business which is thecontinuation of his earlier work on micro credit. When I look at recent Grameen Bank data, there are 8 and half million borrowers of Grameen Bank, 97% of whoare women. This is an extraordinary result in creating opportunities for the poorest women around the world. Dr. Yunus is also a Professor and Chairman of the Yunus Centre in Bangladesh and he is board member of many international organizations in the world that have struggled and grappled with the question of global poverty.
 
Welcome back to the University of Toronto and welcome to the Munk School of Global Affairs. Now we will be in Conversation with Professor Yunus and John Stackhouse. John is the formerly Editor of Globe and Mail and now Senior Fellow at Munk School of Global Affairs.”  
 
Professor Muhammad Yunus in Conversation with John Stackhouse
 
John: Dr Yunus Welcome back to Toronto, It’s good to see you again
 
Yunus: Delighted to be here.
 
John: Thank you for making the time for all of us. Let’s talk a bit about micro finance, social business, what you see in Bangladesh and also globally, and turn to west and our part of the world -what we can learn and what we should be startingto think about in these areas? Let me kick off with microfinance, a raising debatefor about a decade on its effectiveness in terms of addressing/ reducing poverty and for social mobility. If I can start on the poverty question – there still seems to be lot of academic researches that suggest ambiguous results – in terms of micro finance’s impact on poverty. Do you accept that ambiguity?
 
Yunus: I can talk about Grameen Bank, I don’t know which microcredit you are talking about when you say micro credit. So I make it easy for me by always talking  about Grameen Bank.
 
John: Some should see the amount of research done on Grameen Bank
 
Yunus: Grameen Bank is the moststudied bank in the whole world. It’s owned by the borrowers. The bank has been making profit every year and profit goes back to the eight and half million borrowers that you mentioned . They get the loan from Grameen Bank -something that is well known; but less known is the fact that they save money in the bank. It’s an obligatory function ofevery borrower to have a savings account right from day one. Every week she must put some money in her savings account, no matter how small the amount may be,it is a must. So they keep on saving that money. Now we lend out over 1.5 billion dollars in loan to these women and all the money comes from this system. Grameen Bank doesn’t take any money from the government or from anyinternational donors or from any bank. it is all internally generated money; theyused to be mostly depositors’ money, deposited in the bank. Gradually borrowers’savings became so big that today their total savings balance is over 1.5 billiondollars. Practically it is their money that changed their lives. Even if you forget theloan amount, the fact is - this institution helped them save all these money. If somebody says, nothing happened through micro credit, he must be fooling everybody. The borrowers sent their children to school and Grameen Bank gave them scholarships and educational loans. Now you go to these families,  there are thousands of young people with professional degrees. They have become engineers, doctors and so on. These were all completely illiterate families where education never entered. But they made a breakthrough; now you meet the second generation and they are completely different generation.
 
One of the things that Grameen Bank did right from the beginning is to develop the habit of the sanitation  – because people just go out in the open, they didn’t have the sense of sanitation. So we made a rule after we saw that we couldn’t persuade them to use toilets, because they are not habituated with it. They  made lots of excuses – “we are poor people, we cannot afford toilet”. We made a simple rule, if you want to join Grameen Bank you have to dig a hole and use it. In the beginning there was lot of reluctance to do it, we said “its okay that’s fine. But if you want to join Grameen Bank you have to use it.” So this is how we did it. “You dig a hole and start using this and then we do business.” That was the beginning. It worked well.  Later we started giving loans to build up toilets. Soon everybody started converting into proper sanitary latrines. Anybody  who wants to join Grameen Bank had to do it, use it, and only then we talk business and then we introduce loans for toilets, and every family converted those holes into water sealed latrine. Today 8.5 million families have sanitary latrines. Again if you ask what is the impact of Grameen Bank, whether Grameen Bank made any difference to them, why keep on arguing, just visit these families.
 
Another problem that we are facing currently, when the young people became graduate they say “we don’t have any jobs – why did you send us to schools? Why did you give us loans? We don’t have jobs.” I saw this as a big problem. I changed the conversation – I asked them, “who told you that you that you have to find for a job? Was it somewhere written that you have to get a job? You have a wrong idea.  Change your mind and start saying to yourself, you are not a job seeker, you are job giver. Behave like a job giver. Your mother is a borrower of  Grameen Bank. This bank has unlimited money. Why are you worrying about finding a job? Why you want to work for somebody else? Why not create jobs for somebody else instead! You should be focusing on creating jobs.” Now they are in business of creating jobs. We created social business fund and we asked them to come up with business ideas. Once they can get through the business idea approval process, immediately all the needed investment is done as equity by the Fund. The Fund becomes his partner. Since it is equity participation the Fund becomes a partner. It plays an active role in making the business a success.  
 
John: This is a conclusion from number of academic studies; one was done forGrameen Foundation that finds out few companies did good while others not so good. Are there any contextual factors well beyond Grameen influence or control?What is your opinion on the direct impact of micro finance on poverty level?
 
Yunus: My insights come from my own work.  I gave you some of the examples. The borrowers are the owners, shareholders, they are the decision makers, they sit in the board, it’s their bank and they get the money from the bank , they get the dividends. Grameen Bank earns a profit. It gives 20% to 30% dividend every year. All these money goes back to them. It’s an income for them. If  micro credit didn’t work well for some organizations, I would say they didn’t do it right. It is the fault of the organization.
 
John: In terms of social mobility, one of the most extraordinary influences byGrameen Bank in early years is its impact on gender parity in communities and on the mobility. Not only for women but also for their children, especially their daughters. Communities accepted sending their kids to school. Is that still the casetoday? Has it changed in the 21st century since the 80s and 90s?
 
Yunus: First generation of Grameen Bank were the women who took loans to start their tiny businesses.  In 21st century we are looking at second generation which is completely a new generation. Grameen Bank for the first time shown how to lend money to women in massive numbers. The bank not only addressed women, it addressed the most neglected segment of them, the extremely poor and illiterate women. The bank dared to do so when the  conventional banks were reluctant to go even to the wealthy women.  So if you say micro credit didn’t do any good job, just look at that. If anybody had visited Bangladesh 30 years back and he revisits now, immediately he will conclude that the  greatest thing that happened in Bangladesh is the empowerment of women. Women are completely changed all over the country. This came  from the gras-root – the very bottom-most layer of the society, and spread through the rest of the layers. That's not how it happens in any society.  The women of Grameen Bank  are very different people today. Women of the second generation are becoming nurses,  doctors, engineers, and professionals. You will be surprised how many of those Grameen Bank borrowers’ daughters and sons are studying in American and Canadian universities. If you do a survey you will find many. I see them in US universities while I am speaking in these campuses.  Every time I talk about Grameen students now studying abroad I find hands raised in the audience from a student or faculty saying, “yes I am from Grameen Bank family”. This number could have been several times larger only if Grameen bank decided to give loans to students who are qualified to study abroad.  Once you demolish the barrier, break the wall, there is no difference of quality between children of the people who are in this room, and their children.  They are same.
 
John: When I last visited you in Bangladesh in the late 90s, you were just launching Grameen telephone with mobile phone. It seemed like a crazy new phenomenon and getting these phones not only into the hands of the poor but alsoto the women who can buy or borrow these phones and rent to the people who will talk with their relatives in Houston or Toronto. It’s a remarkable business, instantsuccesses. Now you are pushing all sorts of businesses. I wonder if you can share some insights about social business and your view as per the opportunities outthere.
 
Yunus: Sure, for example I think it’s interesting to know every Grameen Bank borrower has a pension fund of her own, so at old age she is not at the mercy  of anybody else. She can depend on the income from her pension fund. It is quite a substantial amount for her. She built it up through a very innovative financial engineering of Grameen Bank.

John: The Premier of Ontario might like that.She is implementing that in herprovince.
 
Yunus: We love to share our experience with everybody. While I was doing microcredit  I saw many other problems of the poor women besides finance, and credit. I gradually got involved with them in my own way,  like you mentioned the telephone (mobile phone). We set up Grameenphone, a mobile telephone company in 1996, and  brought mobile  telephone in the hands of the poor women by giving loans to them to buy mobile phones to  sell the service of the phones and earn money. In about four to five years we had  about half a million“telephone ladies” all over Bangladesh.You go to telephone ladies to make a phone call. She earned a substantial income by providing the service,  because nobody else had a phone. Today there are six telephone (mobile) operators in Bangladesh. Grameenphone  is the largest telephone operator in Bangladesh and has almost half the market share. The company is the largest tax payer in the country. So what started as just bringing the phone revolutionized the whole country and brought telephone into the villages. Out of 160 million people in Bangladesh there are 120 million telephone subscribers. Irrespective of the income level of the family  - every family has at least one phone. Then the internet  services spread in the rural areas through the mobile phones.Today you can access internet from anywhere in Bangladesh. Internet access is not something that you dream about, it’s already in your hand, wherever you are. It has opened up doors for many exciting possibilities in future.  In future, all medical services and health services can be provided through mobile phones. To begin with, all the diagnostic services could be provided with mobile phones. You only need the Apps in the phone, that’s all. As of today many Apps have already been created, you hold your telephone in your hands and you can see graphs- that’s your echo cardiogram, you can send all those images to your doctor, file them up or  send it every day, every hour. It’s a cost-less operation. You can do eye scanning. You can do blood testing for malaria with the mobile phone. So these are all known, done. Question is who would like to do it in a way, that its available to all people. Some people are worried that  the whole medical infrastructure will collapse. Why not? Why not provide diagnostic services at home, not in the clinic, not in the hospital.
 
So this is what we call Social Business - bringing the service to the people. Social Business is a business to solve problem, not to make money for you. Because what we have in the world today is only one kind of business - that is  business to make money. It is single minded pursuit of money. It is all about chasing money.  Money has become a habit, and money has become an addiction. I keep pointing out that we interpreted human being very narrowly in designing the economic theory. Human being is much bigger than what the economists made us believe. A giant human being is presented in the a narrow role of making money-maker for himself.  As a result economics has become a playground of selfish people. But human being is a multidimensional being, not a single-minded money chaser.  There is selfless dimension in him. Why not build businesses on selfless dimension of human being?  That's what I did and called it  Social Business. It is a non-dividend company to solve social problems, such as, poverty, healthcare, unemployment, climate, energy, etc. All these problems can be overcome. One of the millennium development goals is to reduce poverty by half by 2015. Bangladesh has achieved that goal last year, two and half years before the terminal date. By the end of the year 2015 we hope Bangladesh will be achieving 6 of the 8 MDGs.
 

John: How do you differentiate between social enterprise and Social Business?
 
Yunus: 'Social enterprise' covers a  very broad group of enterprises, varieties of enterprises can call themselves as 'social enterprise' because they play some social roles. Social enterprises most often are for-profit enterprises where owners take profit. The difference between any social enterprise and social business as I define it is – social business is a non-dividend company where owners can take back their investment money, but not more than what they have invested, and that the business is created with the objective of solving some social problem. You want to solve the unemployment problem, you create a business. Suppose I create a business with my investment that solves the unemployment problem of five people. It worked. Five unemployed people got employed, business is financially sustainable, I am happy with that. I get my money back and the company keeps running because it is a sustainable business. Now the profit is ploughed back into the business so that it can create 6th job, 7th job and so on. So it’s a kind of organic structure, it has its own life. It doesn’t need refueling from outside, it fuels itself. That is the beauty of Social Business; that’s all.


Social enterprise on the other hand is like a conventional business but it has clear positive impact in people's life. For example, a business which employs five unemployed people where the owner keeps the profit for himself.
 
Distinction between charity and Social Business is that the money which goes into charity does wonderful work in solving people's problem but it doesn’t come back; money has only one time use.  But the moment you make investment into Social Business your money goes out, does the work and comes back to you. So you can recycle it to do another round of impact. You can go on doing it again and again - use the same money endlessly to do more for people and the planet. This, briefly,  is the difference among  social business, charity, and transitional business.
 
John: People putting the money into social business are only getting back theoriginal capital, no adjustment for inflation, or return on capital. Over the very long time, doesn’t that diminish road for their capital that they are not getting the return? If I put $100 in your enterprise, 20 years after I get back $100. Its purchasing power goes down to $50, therefore, I am poor. So that’s a charitable or donation gesture from my side, I am diminished.
 
Yunus: Possible, if you look into that way. But the question is what do you want to do with your money. You want to pile it up into a mountain of money, and then die leaving it behind, or you want to do something with it and make things happen in the world. So it’s your choice. You have to figure out what is the purpose of your life. That’s what is missing in the present day economics. No education system teaches us what the purpose of your life is. They teach you math,they teach you chemistry, physics and everything. But they don't  teach you what the purpose of your life is. I think it is very important to figure out what is the purpose of your life. Present  educational system is busy creating  workforce for the companies.  That’s again a big miss-interpretation of the role of human being.
 
John: The Danone experience is fascinating, may be you can share your experiences and challenges.
 
Yunus: Yes, they are the first one; then we did a series of joint-venture social businesses. Danone became very interested in our work, and wanted to know whether they can get involved in our social business. After  long discussions we identified that they may start social business to eradicate malnutrition. Malnutrition is a massive problem in Bangladesh.
 
John: Why they came to you first.  We have this kind of problem in Canada.
 
Yunus: It was because of a deep interest from Franck Riboud, the Chairman of Danone. I never knew there was a company named Danone. I just got an email from him showing interest in social business, he asked me how we can meet; I was going to Paris. I said I am not going to Paris; I am going to Dauville . He said you have to pass through Paris. We met in paris on the way to Dauvile, and the discussion began. He became very interested in the subject of social business. At the end of the discussion  he said why don’t we do social business with you in Bangladesh. As a follow-up we had a detail discussions on this and created a company to address the problem of malnutrition. We created a social business company to  produce a very special yogurt which included all the nutrients – vitamin, iron, zinc, iodine, all that the malnourished children  need. We made it very delicious and very cheap so that even the children from poorest families can eat it. Now it is in the market, and children love it! They gain required nutrients and become healthy. As a social business we wrote it in our company article that owners will never take any dividend out of it, except the money invested. However, at the very beginning we were confronted with a big problem. We finalized the investment plan. Total investment would be 1 million Euro; half a million will be provided from our side and other half will be from Danone side. We put in our money quickly but Danone couldn’t provide their money. So we were waiting and waiting, finally we asked: What happened? Aren’t you interested in it? Do you want to withdraw from the project? They said “We are interested, but we have a problem with our lawyers. Our lawyers are not allowing us to put our money in this company because this is a social business which declares upfront that it will not give any dividends, after it returns the investment money. They say that we cannot do it because the shareholders gave us the money to make money. We would be violating the mandate of the shareholders.” So I asked  "Does it mean we stop here?" They said –“No! We will figure it out!” They did figure it out in a bold way. Theycirculated a letter to all the shareholders of Danone, which is more than 300,000, where they narrated the success of the company, dividends to be declared this year, etc. and at the end  they said we are setting up a company in Bangladesh – “Grameen-Danone Company”, and this is what it will achieve, this is what is our hope. They also wrote to the shareholders: ”We can address this malnutrition problem this company, we are looking for half a million euro. If you want to invest part of your dividend that you would be receiving from us, please sign up and tell us what percentage of dividend money you wish to invest in this company.” Ninety eight percent of the shareholders signed up in a positive way, that they want to participate; which generated 35 million euro, where they only needed half a million. But the Danone  employees became upset. They said “Do you think we are second class citizens in the company? You asked the shareholders to participate in the new company but didn’t ask us”; then the company realized that they didn’t do the right job. They circulated another letter to the employees. It brought another 30 million euro. So they got 65 million euro and they created a social business fund called “Danone Community Fund”. Now that social business fund has invested in social businesses in 8 countries, and continue to expand. So that’s the story of Danone's involvement in Social Business.
 
John: Is there some other joint venture projects?
 
Yunus: There are lots of different kinds of projects. Drinking water is one of the major areas where social business can be a great approach, specially in Bangladesh. Surface water in Bangladesh is polluted and underground water is contaminated with arsenic. People are caught between the two. We tried to find  a solution through  social business. We have a social business joint venture with “Veolia” another French company. Veolia came to Bangladesh to see me to talk about the social business and learn how to establish it. At the end we created a company to produce treated water in villages and solve the drinking water issue in a social business way.
 
John: What other social businesses are successful under Grameen?
 
Yunus: One interesting one is from Canada, so I should mention that. Its a joint venture. McCain became very interested in the idea of social business. They started attending conferences, meetings wherever I am speaking.  Then they wanted to talk to me; they said they would be very happy to participate in my social business. So we discussed and searched for an opportunity where we can use their creativity in a social business. Opportunity came about in Colombia. We were invited to Colombia to solve many of their problems, primarily the problem of coffee farmers. Colombia lost it market for famous Colombian coffee.  Colombian coffee is no longer the king of coffee as Asian producers took over the market and the Columbian producers don’t have any work to do. They didn’t know what to do. So we thought this would be a good opportunity to address that with a joint venture with McCain to let them grow best quality potatoes with best yield. McCain enthusiastically picked that up and we have a joint venture office in Colombia now. This is our first season of potato in Columbia; we are beginning to harvest the first round of potato crop. This is an interesting thing, as I am here we will be meeting with the McCain to discuss other possibilities because they are now so excited about their initiative and experience that they want to replicate the business in Lille, France. They are organizing a big conference in Lille in October and they will be discussing the social business for The Northern region of France.  Many other social businesses will be discussed. So this is another one. We also have a joint venture with BASF of Germany, Uniqlo of Japan, Intel corporation of the USA, and other big companies are becoming interested.
 
All this is very impactful, but at the center of our current attention are the unemployed people. They are creating their businesses and the exciting thing is that you don’t have to sit around saying I have nothing to do. I kept saying that unemployment is a totally artificial creation of the conceptual structure which we built for ourselves. Unemployment  is not built-in feature of a  human being. Human beings are built as entrepreneurs and doers. They are creative beings, and energetic beings,  but the system that we created put a chain around  them.  It does not make sense why any person should be unemployed. He can work and do things himself, he can express his creative power, all the unlimited potential as a human being that he has inside himself can express itself. But there is a billion people who sit idle because nobody is hiring them. They have been made to believe that they have to depend in the mercy of employers. System made them believe so. System doesn’t have the right to punish human beings; it is the right of human beings to punish the system. We'll have to create a system which allows us to function as a human being, not as mindless robots who need to be made functional by their masters.
 
John: There is crisis globally but certainly acute in much of the west – the youth unemployment or under-employment; do you see any opportunity through Social Business here addressing the unemployment of youth to create employment opportunities for that generation?
 
Yunus: Yes very much for this generation. Look at Europe, they were the most prosperous region of the world, now in some countries    they have unacceptable situation having nearly 50% of unemployment among youth for years and years. In Greece,  it is 70% youth unemployment. Even Sewden is a bit worried about their youth unemployment among the income level which is below the median income. It is about 20%. I tell unemployed young people “forget about jobs, let us create jobs". All human beings are entrepreneurs. We should focus on unleashing our natural gift.

 
John: How do you start that in a slow growth economy like Europe? Lets say if we look at Spain for example?
 
Yunus: If you get started then it is no longer slow, you start doing things. You start producing. I produce - you produce; I buy your staff - you buy mine; that is the original economics. If we produce then we can exchange, if we don’t produce then we sit idle.
 
Question from audience: Can you share some of the challenges and successes of transferring models of poverty alleviation from Bangladesh to North America?
 
Yunus: Microfinance has spread all over the world. For example Canada has lots of microfinance programs. Canada has annual convention of microfinance organizations. So there is a substantial number of people involved here and similarly in every other countries. In 2007 we were invited to launch a microcredit program in the USA. We started Grameen America. Now we have six branches in New York City. They have  than 20,000 borrowers and all are women. Grameen America operation has  expanded in many other US cities– Los Angeles, SanFrancisco, Indianapolis, Houston, Boston, Charlotte, North Carolina and many other places.We run our program exactly the same way we do it in Bangladesh. Average loan is  $1,500, repayment is 99.4%.

John: Was the experience significantly different in African countries than in Bangladesh?
 
Yunus: So far we are concerned it is exactly the same how we do in Bangladesh.We haven’t changed anything, not even in New York City. Not even a single piece, everything is exactly the same. But many people adopt this to their likings. They change the concept here and there according to their likings. Some changes are totally unacceptable in our eyes, like for example we created Grameen Bank offering microcredit for social benefit, not to make money out of it. We gave billions of dollars but not for making money for me or anybody. We made it for the underpriviledged people all the time. Some people took the idea of microcredit as a tool or opportunity to make money out of poor people. So I say there is two kind of microcredit today. One is “right microcredit” and the other is “ wrong microcredit”. Wrong micro credit sees the opportunity to take the money out of poor people. Right micro credit sees an opportunity to help the poor people to get out of poverty.
 
John: But you said people adopt microcredit to their own cultures and economy, what have been some of the interesting adaptation in some of the countries in Africa?
 
Yunus: Not only in Africa, I would say globally most of the adoptions are in the wrong side. Example – many people in Africa, Latin America, and USA started giving loans for consumer products, to buy consumer products. That is totally unacceptable to us. That’s not the purpose of microcredit. But they do it as a means for financing the sale of consumer products. Some people do it as a consumption loan. We created it to provide loans to start businesses. It has to be always a productive purpose, so that you can create an income and pay back. Some moved it into a higher level of income.  Some started taking collateral which again is not acceptable to us. Most interesting part of microcredit is to create system which does not rely on any collateral what soever. It’s a trust based banking and it works. It has never faltered and never faced any problem anywhere.  
 
John: And you remain out of collateral?
 
Yunus: Absolutely. But again some people took collateral, took other things - they came up with all kinds of deviation.
 
Question from audience: Interesting question about the digital revolution of microfinance platform like Kiva, I don’t know how much you have studied, do you have insights about its effectiveness, and how it can be improved?
 
Yunus: These are young students who visited Grameen Bank at their early age, and I am very impressed by how great they are doing. While talking to me they discussed the problem of micro financing in other countries. And the issue came that there is no money available to give loans to poor people. People want to do things but they remain limited to their tiny little programs since they don’t get the money to expand. So it got into their head why don’t they raise the money for them. And they capitalized on the internet as this is the internet generation. That’s internet platform to raise money person by person, $25, $30 and so on. So that’s a good idea and a very good intention. It can’t solve all the problems but it is good intention for young people. Then when we started social business they came back and asked: “can we do raising investment for social business”? I said that would be great if they do that. One of the projects they tried out was in Albania. This was a marketing social business. Albanian women make very tasty jam, jelly and honey in the mountains of Albania. But if you looked at those products, they were sold in water bottles or in ugly throw away containers. So this young person came up and said “I will do the social business, I will give them the standard containers to each of them, have labeling and everything. Let them continue to produce and my job is to sell these products in the market where they will get the best price and get the money for them. Because I am in social business I don’t want to make money for myself. My job is to give them the best possible price.” That project needed $25,000 investment, that’s the project cost of this marketing company. Kiva said let’s try this one, so they put that into their platform. Within less than 24 hours they got the $25,000 finance. So they got very excited and we were surprised that it can happen like that. Next they took a $65,000 project. It took 4 days to raise $65,000. Now they are preparing for $125,000 project by the Kiva crowd funding mechanism. All in these projects are in Albania.   Since it works this mechanism can be used anywhereSpeech Deliver on: May 30, 2014

Speech Deliver at: Audince of University of Toronto
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