Banking to Solve Crises, not Cause Crises

Muhammad Yunus, Founder of The Grameen Bank

Muhammad Yunus, Founder of The Grameen Bank

Muhammad Yunus formed the most famous microfinance institution known today: The Grameen Bank. Starting out loaning a mere sum of $27, split between forty people (thus amounting to less than $1 a person), the Bank now collects an average of $1,500,000 in weekly installments. No longer working on his own either, he now has nearly 20,000 members of staff working with him. Initially, no bank would ever work with him until he offered to take on the position of his own guarantor and taking all the risk. Advised by the people around him that his vision would fail, he continued to grow and vowed that as long it never collapsed, he wouldn’t ever stop.

But what was the guiding principle that led to him founding his own method to helping the poor, when all the banks around him were far less than enthusiastic to help him. He described it very simply; he looked at the model conventional banks operated under… and then did the exact opposite. As shocking as it sounds, this is in fact the approach he adopted.

Convention versus Innovation

The conventional banks:

  • Went to the rich and worked in their interests
  • Worked predominantly with men
  • Went to the city centre to work
  • Used experienced lawyers
  • Wanted to know every single detail of a customer’s past


And in opposition, Yunus did the following:

  • He went the very poorest of society, to work for their sake
  • Worked predominantly with women (97% of borrowers are women)
  • He went to rural villages
  • He operates the world’s only lawyer-free bank
  • He is not interested in his clients’ past, but rather their entrepreneurial future

And the result? Over 97% of their loans are repaid, a recovery rate higher than any other banking system. One of the main drives for Yunus’ work is the admission that society is responsible for what the people may have done to warrant their status as ‘non-loanable.’ Once accused of turning the banking sector upside down, he defiantly agrees, stating that the sector had been standing on its head for far too long. By that, he states that banks have been operated in the interests of the few rich people rather than the Grameen Bank’s philosophy: being owned by the poor people.

On being accused of running a ‘woman’s bank’ (as if that were ever a terrible idea), Yunus even agreed to renaming his enterprise to ‘Grameen Women’s Bank’ on the condition that commercial banks would rename their own banks to re-brand themselves as men’s banks. The idea he challenged was that a bank using predominantly men was considered a perfect model, whereas a bank using women for the most part was considered wrong or a perversion. Yet, 97% is a rather successful rate.

“Everyone is an Entrepreneur”

His other controversy-causing claim was stating that everyone is an entrepreneur. In a society where we have television programmes such as The Apprentice and Dragon’s Den, the idea we are all entrepreneurs seems far-fetched. But the idea he applies to the developed world applies to our own society also, as does the idea of society being central in causing poverty and externally imposing the idea of helplessness upon poor people. Society does not give the poor the room to grow and forces other concepts upon them instead.

Despite this, Yunus sees the world in the light that “All human beings are entrepreneurs” and that is how we survive on this planet, by all of us working together. Instead of simply donating money, he was advised to seek out the entrepreneurs of the societies he was attempting to help. Enthusiastically, Yunus agreed, but to most people’s surprise, he sees that all people are able to pioneer their own business. His tenacity extends to encouraging those lacking in self-belief, with the mindset that they believe this self-doubt and other nonsense because society has completely demolished their confidence. By definition, that is exactly what Yunus sees as what the poor are, those whose self-assurance that society has crushed. He even ‘pushed’ his vision onto a woman who had never even used money and didn’t believe she had what it took to be an entrepreneur, but Yunus kept persisting that she was indeed capable.

Beggars Can Be Choosers

To prove his point, Muhammad Yunus lent to, what he describes as, those living in the “lowest form of human survival” – beggars. Encouraging those going door-to-door, to beg for alms, to carry some merchandise with them (“you may as well, you are going there anyway”), he gave beggars loans to give them more options at each house. By that, he meant he increased their clientele’s choices, either the homeowner could donate willingly or to purchase goods offered. Rather comically, the beggars performed ‘market segmentation’ by knowing which homes would donate willingly and which homes required a sales pitch. They became successful door-to-door salesmen. The scheme became so popular that he ended up having over 100,000 beggars in the program. In the last 5 years, 22,000 of that number stopped becoming beggars altogether.

If even beggars could change, why would others not have the capacity to also make a significant change? Yunus even suggested the reason why the success wasn’t even higher – beggars’ primary business was… begging. As a result, they wouldn’t abandon their main cash cow so easily, at least not straight away.

Banks Not Only Cause Crises, But Can Solve Them

Not even speaking from a point of view of Corporate Social Responsibility, where organisations ought to start making their practices more accountable in proportion to their impact on society, Yunus solves his problems by designing businesses. Bangladesh suffered from a severe electricity crisis, so the founder of the Grameen Bank decided to start a solar power business. He wasn’t concerned whether or not it failed, as long as he at least tried. Initially, it was difficult, to the point where even selling five systems a month was a challenge. However, fifteen years later, the same business sells thousands of systems every day as kerosene is no longer good enough.

A New Conceptual Framework

Continuing his innovative practices, Yunus recommends that we need to adopt a new conceptual framework for human beings. We can no longer function as a business-driven populace, operating as if the idea of homo economicus was cold hard truth. We need to incorporate other aspects into a multi-dimensional approach, i.e. businesses centred on human selflessness instead, no longer being so concerned with our selfishness.

Success in these industries ought to be calculated by measuring the impact on the people, that is the value a social business possesses. Any money made is immediately invested back into the company, there are no dividends or ‘losses’. A new phenomenon is needed, one no longer stunted by concepts that we have come to believe, such as that single-minded pursuit of money: greed.

He has expanded on his initial projects to both provide yoghurt with micronutrients to the malnourished (physically and mentally stunted youth); to work with Adidas to take the responsibility to ensure everyone has shoes to wear. The latter is not a fashion statement, but rather a statement for the sake of protection and for the escape from malnutrition. Why? Because going barefoot, especially in tropical climates, causes you to be susceptible to threatening parasitic diseases.

Deki

Deki empowers people living in poverty to create sustainable livelihoods by providing access to ethical microloans and training. Where regional banks and institutions charge an extortionate amount of interest, we see an opportunity to create an incredible difference as a socially-rooted business, providing our loans at a far more agreeable rate. Providing capital to enable the genesis of a business idea, people are offered the opportunity to turn their lives around. Our loans do not generate profits for the lenders, and their loans will be repaid within six to twelve months’ time.

This, in turn, can affect an entire community. Hardworking and honest people, with similar and simple goals to make something of their own life, feed their family and send their children to school, are the people we work with. And through Deki and our lenders, entrepreneurs have an increased ability to access clean water and put more nutritious food on the table. The training we provide gives them the confidence to employ other people in the local community: we create further job opportunities. The increased profits from these businesses are then spent in the local community, boosting the local economy.

Similar to the Grameen Bank, we currently have a 99% repayment rate in the countries we work in: Malawi, Togo and Nepal. In fact, the 1% outlier can be readily explained. Tragically, that one defaulted loan was a result of our entrepreneur passing away due to malaria.

We aim to continue helping improve our fellow human beings’ lives and respect the model that social business represents. If you want to join the cause, start with your very first loan right here.