Who would have thought that a bank -- that capitalist economic icon -- and the poorest residents of the world's most impoverished country could create an idea that changed the world? And yet this is the story of microcredit -- a concept that began in Bangladesh and spread across the globe.
While businesspeople may tend to ignore grand ideas for world peace, an end to poverty or discrimination, they are often scorned as purely "profit-motivated," looking out for their own interests and disinterested in society's larger issues.
While there's nothing wrong with pursuing profit or articulating large-scale goals for social betterment, neither mode can create significant societal change.
Luckily our world has a few individuals who combine care of their fellows with a tough, business-minded drive to get things done. Mohammad Yunus -- the Nobel Peace Prize winner in 2006 -- is one such person.
Yunus started Grameen Bank in Bangladesh in 1976 with $27 of his own money. Specializing in small, unsecured business loans to the poor, the bank has loaned $5.95 billion to 12 million borrowers. These unsecured loans -- with no punishment for default -- have been repaid at a 99 percent recovery rate, and 59 percent of borrowers have risen above the poverty line in their areas. The bank also has been profitable almost every year since 1983 and has used those profits to give scholarships to more than 34,000 children, and fund housing and college loans, life insurance, pensions and other programs. And 89,000 beggars have participated in a Grameen-run job program.
The bank is now primarily owned by its borrowers -- mostly women -- and the microcredit concept spread worldwide, helping an estimated 80 million of the world's 1 billion people who live on less than $1 per day.
From Yunus' genius comes bright ideas such as the Village Phone. A small loan allows someone to buy a cell phone in a region with no wired telecommunications service. The village phone owner charges others a small fee to make phone calls; the owner repays the loan and makes a profit. The village for the first time has telecommunications service, and other businesses spring up around that new technology. By the late 1990s, 60,000 "telephone ladies" were providing telecommunications services in 80 percent of Bangladesh's villages. In addition to the phone program, Grameen has also funded fish farms, knitwear factories and other traditional enterprises.
While Yunus hasn't yet -- as he says -- "put poverty in a museum," he has a plan and it's working. And the microcredit concept has broader implications for governments, the private sector and nongovernmental organizations. None alone can obliterate all of society's problems, but with an entrepreneurial spirit like Yunus', something can be done.
In his article, Social Business Entrepreneurs Are the Solution,
Yunus says when things go wrong, it is often not "market failure" but "conceptualization failure."
"When we presented the Village Phone Project to the professional people," said Yunus in a 1998 speech, "they expressed serious doubt about the capacity of the illiterate women to understand this state-of-the-art telecommunication technology. They argued that the poor women are good only for handling traditional activities, such as raising chicken and cow, making baskets, selling vegetables. 'It is ridiculous to think about telecommunication business for people who have never seen a telephone, or even electricity.'" But Yunus had no conceptualization failure. "We remained thoroughly convinced that while people may be poor and illiterate, they are not stupid. Potentially they are as smart as anybody else in the world."
That bodes well for the developing world, and also for the public sector as it learns to govern using a digital platform. As the telephone ladies bring infrastructure to the remotest villages, governments -- and their partners -- have more options to deliver services electronically. And the more people government can serve, the more chances exist for citizens to receive critical services, such as education and health care.
Yunus saw potential where others saw only poverty, and invested in it. As a result, millions worldwide have begun to climb the economic ladder.