Muhammad Yunus offers the world revolutionary ideas, while government forces hostile takeover of Grameen Bank
by Holly Mosher (Sept 2012)
When Muhammad Yunus and the Grameen Bank won the 2006 Nobel Peace Prize, I was fascinated about how they were providing small loans, known as microcredit, to 6.5 million women – one out of every thousand people on the planet. I was also curious because they had chosen to give an economist and a bank the prize for peace instead of the prize for economics. As a documentary filmmaker, I knew immediately that I had to go to Bangladesh and see the work for myself. When I got there, I was blown away, as he was doing far more than I’d ever imagined was possible. And after five long years, I was finally was able to complete Bonsai People – The Vision of Muhammad Yunus.
Unfortunately, when there is still so much to be learned from Yunus’ work, the Bangladeshi government is taking control of his creation. Last year he was forced out for being too old, and the government would not allow him to be on the team to search for his replacement. The first week of August, Prime Minister Hasina’s administration removed control from the Grameen Bank’s board of directors and gave it to a government appointed managing director.
When I was shopping my film in Bangladesh last year I spoke with four television station managers who said that because of severe government censorship they faced, it was unlikely they could air the film during this administration. Here in the US, you can find the film on American Public Television. So that is why I am writing this now; I feel it is necessary to speak out and let people know what is going on. There are a few lessons I’ve learned that I think the world could benefit from during our world financial crisis.
Yunus’s revolutionary idea was born out of a deep crisis. It was 1974, not long after Bangladesh had declared independence from Pakistan, that the new country had hundreds of thousands of people starving to death. The world rallied to help — you may recall The Concert for Bangladesh with George Harrison and Ravi Shankar.
But that crisis wasn’t different from our present financial crisis, because both involve a crisis of distribution – in 1974, it was a distribution of food. It was later discovered there had been enough food in the country, but it wasn’t getting to those in need. So during our own crisis, it’s important for us to look at the revolutionary idea that was born with Yunus and that has quietly been transforming a country.
Grameen Bank means Village Bank, and first off, it’s no ordinary bank. Yunus never worked at a bank, he was professor and the head of a university economics department when this started. So he didn’t operate the way other banks did. He says he looked at how conventional banks operate and began doing the opposite. They lend to the rich, Yunus lends to the poor. They lend to the men, he lends to the women. They work in cities, he goes to the rural areas. Another difference is that Grameen borrowers all buy a share of the bank, so they are the owners with over 90% of the company, while Yunus doesn’t own a single share.
Grameen Banks has 97% return rate, which is unheard of for a bank, but that is because they are forgiving with their customer/owners. If borrowers struggle to pay back their loans, Grameen creates a new payment structure by adjusting the length of the loan. We could have used this model when our housing crisis started. The Grameen Bank charges a fee of 10% for their basic loan, but as it is over 44 weeks, that equals just under 18% APR. Some may think this is high, but this is a business loan, not for use on consumer goods and not charity. The same borrowers are also earning interest of over 8% on their savings accounts. The beauty of Grameen’s model is that these rates allow the bank to be completely sustainable. They haven’t had to take outside funding since the early 90s. With the small profit margin they are able to expand and help more people. Most new bank branches are able to cover their costs within a year of setting up shop.
Unfortunately, the prime minister continues to mislead people about the interest rate of Grameen Bank, such as in an interview where she said: “Tell me one thing. If I give you $20,000 can you pay 40 percent interest every week?” She repeats this misinformation in another interview with the BBC last week, if you go to 12 min and 15 seconds into the show.
Grameen Bank’s model works for most people because it is easy for them to pay back tiny increments each week. And when studies were conducted to learn why defaulters couldn’t repay their loans, they discovered the same thing we did in the US – that most bankruptcies are due to health issues. So Yunus decided to start offering health services. Yunus opened separate company called Grameen Kalyan with over 54 clinics in rural Bangladesh.
So as he continued his work, Yunus realized that just as the poor lacked access to financial services, they also lacked access to so many other things that we take for granted. So as he says, whenever he sees a problem, he starts a business. He is now running over 50 companies all aimed at helping the poor.
As Yunus went about creating business solutions to the problems he saw around him, what he didn’t initially notice was that he was practicing a new business model which he’s proven can work. He’s coined this business model “social business,” which is a non-loss, non-dividend company. Any profits stay with the company to expand their work.
He feels the current way we are doing business is flawed: right now it is one-dimensional because it is only tapping into our selfishness. After all, every human being has a selfless side that we are not tapping into. So social business incorporates selflessness into our business world. All of his companies have a mission: provide something that the poor lack access to, but at a price that they can afford and in a sustainable way. Investors are allowed to reclaim their initial investment, but they agree to not take any profits.
The beauty of this is that it is like a non-profit, but that it makes money with the work aligning with the mission. Grameen Companies have the efficiency of business, so that human capital and resources are not wasted in time consuming efforts of fundraising. So the staff puts all their efforts into fulfilling their mission of helping people.
This idea of not wasting people’s potential is also seen through Grameen borrowers. What Yunus has realized over time is that the money Grameen Bank lends is a tool that unleashes each borrowers’ potential. With our current unemployment crisis, the most valuable resources that we are wasting are human resources. Every person has something to offer the world, but that goes to waste when they are un- or under-employed. When people are given chances they love to participate and contribute.
So social businesses can fill the important role of job creation. The Grameen Bank employs 26,000 people and has created 8 million entrepreneurs (the number of borrowers is now 8 million instead of 6.5 million). Their solar company, Grameen Shakti is the fastest growing solar company in the world, employing 12,000. They should reach their goal of installing 1 million solar units by the end of this year and they only opened their doors in 1996.
Grameen Phone is the largest company in Bangladesh. It was the first company to bring cell phones to the country, and it became successful by modeling itself after the bank; by getting a phone in each village and having a bank borrower create a business out of selling phone minutes. So in a matter of years, the entire country was connected.
The amazing thing to come out of this is that by providing access to both cell phones and solar panels, Grameen Companies have actually saved lives. In the 1970s half a million people died during a cyclone, and in the early 90s 150,000 died during one. When I was there in 2007, one of the worst cyclones in decades occured but less than 10,000 died because the combination of solar panels and cell phones in remote areas, that would not be connected otherwise, gave people enough warning to get to shelters.
Another factor worth considering is how Grameen Bank function in times of crisis. Bangladesh is a country constantly devastated by natural disasters because it is below sea-level, like the Netherlands, situated on a river delta like New Orleans and deeply affected by global climate change. When natural disasters hit, Grameen Companies immediately act to provide aid in the form of clothing and alum tablets for clean drinking water. But the bank also provides new loans to get back people back on their feet. After all, a healthy company depends on healthy clients.
Finally I want to share Grameen’s innovative use of technology. Yunus is continually searching for the latest technologies to help poor people. He has had mobile devices created for healthcare so technicians can check on pregnant women so important medical information can be transmitted to city doctors with more resources. They even have mobile ultrasound equipment, where the image is sent digitally to the doctor. The women then go to the clinic if there is a problem. The women and technicians don’t see the image of the baby because they want to prevent female infanticide.
Yunus is using all of these revolutionary ideas to unleash human potential. That’s why I called the film Bonsai People – The Vision of Muhammad Yunus. Yunus refers to poor people as bonsai people: There is nothing wrong with their seed, it’s just that society has never allowed them the space to grow. If you take the seed of the tallest tree in the forest and put it in a pot, its growth will be stunted. So I believe it is time for us to come together to use this new business model to unleash potential of people around the globe.
On August 5, 2012 the United States State Department released a statement about their concern for the Grameen Bank. Remember, Yunus’ bank alone has worked with over one out of every thousand people on earth and it is life-changing for so many, as you will see in this clip of the women who are on the Grameen Bank Board of Directors.
So please stand with me in learning from and honoring this world leader and also please take a moment to sign some petitions for Muhammad Yunus.
Holly Mosher is an award-winning filmmaker who brings socially-conscious films to the public. She graduated with honors from New York University’s Tisch School of the Arts. In a producing role she’s taken on a variety of topics from the pharmaceutical industry with Side Effects, starring Katherine Heigl and Money Talks: Profits Before Patient Safety, environmental issues with Vanishing of the Bees and issues of democracy with Free For All! and Pay 2 Play. As a director she likes messages of women’s rights and human empowerment. Her debut was Hummingbird, which focused on two non-profits getting kids off the street in Brazil. Her latest film is Bonsai People – The Vision of Muhammad Yunus, which follows Muhammad Yunus’ work from microcredit to social business and is currently airing on American Public Television.