A CONVERSATION WITH NOBEL PEACE PRIZE LAUREATE MUHAMMAD YUNUS PAGE 1

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1 PAGE 1 JOHN SHATTUCK: Good afternoon, and welcome to the John F. Kennedy Library. Congratulations on your good taste in coming to this event this afternoon in lieu of being outside in a very alluring and beautiful day. We re very honored to have all of you, and above all, to have our guest of honor who I will introduce. I m John Shattuck, CEO of the Kennedy Library Foundation, and on behalf of our Board of Directors and our Library Director, Tom Putnam, it s a very special privilege to have this extraordinary program with our extraordinary guest. Let me first express our thanks to the organizations that make these forums possible, starting with our lead sponsor, Bank of America, and our other generous supporters, Boston Capital, the Lowell Institute, the Corcoran-Jennison Companies, the Boston Foundation, and our media sponsors, the Boston Globe, NECN, and WBUR, which broadcasts these Kennedy Library Forums on Sunday evenings at 8. Although it was delivered almost half a century ago, there are many passages in President Kennedy s famous Inaugural Address that sound as if they might have been spoken yesterday. One of them is this: To those people in the huts and villages of half the globe struggling to break the bonds of mass misery, we pledge our best efforts to help them help themselves... For if a free society cannot help the many who are poor, it cannot save the few who are rich. President Kennedy then goes on to issue one of his famous challenges: Now the trumpet summons us again... as a call to bear the burden of a long twilight struggle... against the common enemies of man: tyranny, poverty, disease, and war itself. Can we forge against these enemies a grand and global alliance, North and South, East and West, that can assure a more fruitful life for all mankind? Will you join in that historic effort? Our speaker today has spent his life forging a global alliance to combat poverty. Muhammad Yunus is an economist who has redefined what it means to be an economist. In 1974, when he was teaching economics at Chittagong University in southern

2 PAGE 2 Bangladesh, his country went through a terrible famine in which hundreds of thousands died. He wrote at the time that nothing in the economic theories I taught reflected the life around me. How could I go on telling my students make-believe stories in the name of economics? And so he began studying the economic realities of the poor, and soon he hit upon a new theory that offering the poorest of the poor very small interest-free loans might be able to stimulate massive employment and economic development. The question Muhammad Yunus was asking was whether it s possible to harness the power of the market to address the problems of hunger, poverty and inequality. His answer was the concept of microcredit, a revolutionary banking program that provides poor people many of them women with small loans they can use to launch businesses and lift their families out of poverty. Based on this concept, he founded Grameen Bank and initiated an extraordinary economic revolution that has done more than any previous effort in history to combat global poverty. Over the past thirty years this revolutionary concept has spread to every continent and has benefited over a hundred million people. And for this extraordinary vision and achievement Muhammad Yunus was awarded the 2006 Nobel Peace Prize. This year he has brought Grameen Bank to the United States. Earlier this spring, in the midst of the subprime mortgage crisis, the Wall Street Journal referred to Grameen as the champion of sub sub subprime and said that it has the potential for changing the way we should think about credit. Muhammad Yunus has challenged the banking world to remember that credit means trust, and that someone who has credit is someone who can be trusted. But bankers have taken the word credit and built a whole edifice of institutions entirely based on distrust. Grameen Bank is based on the original meaning of credit, and 98% of its millions of small interest-free microcredits are repaid. This year Muhammad Yunus has gone beyond the concept of microcredit to pioneer another revolutionary idea the idea of social business, a new way to use the creative

3 PAGE 3 discipline of the market to tackle global problems from poverty to pollution to disease to ignorance. And in his new book, Creating A World Without Poverty, which is on sale in our bookstore (and I know he will be pleased to sign after the Forum), he defines a social business as a business that is cause-driven rather than profit-oriented, but a business whose original capital investment can still be recovered in full. He argues that running a social business is a far more efficient way to bring about change than philanthropy. In philanthropy, he says, the dollar has only one life -- you can use it only once -- but the social business dollar has an endless life because it can be recyled. These are some of the extraordinary ideas that have made Muhammad Yunus the world s leading social thinker and activist. Over the years, he has been showered with international awards for his work, and he has served many international institutions dedicated to eradicating global poverty and promoting sustainable development. We are deeply grateful for your visit, Dr. Yunus, and we welcome you to the stage of the Kennedy Library. [applause] I would also like to introduce someone who will be coming to the stage of the Kennedy Library following Dr. Yunus remarks, who will provide the expertise of moderator, and that s Dr. Lincoln Chen. Dr. Chen is an expert on global health and poverty, and spent nearly a decade in Bangladesh in the 1970s as a representative of the Ford Foundation when Muhammad Yunus was starting the Grameen Bank. He recently chaired the board of the world s largest private relief agency, CARE USA. And he s currently president of the China Medical Board of New York, an independent foundation dedicated to advancing public health in China. Earlier he founded and directed the Global Health Equity Initiative at Harvard s Asia Center, served as Executive Vice President of the Rockefeller Foundation, and held the Takemi Professorship of International Health at the Harvard School of Public Health. Three years ago Lincoln moderated an outstanding Kennedy Library forum on global poverty, and this afternoon he joins us for this extraordinary conversation on the same subject with Muhammad Yunus.

4 PAGE 4 Please join me in welcoming to the stage of the Kennedy Library Muhammad Yunus and Lincoln Chen. [applause] PROFESSOR : Thank you. What a great occasion. It s a beautiful day, and I should be grateful to you because you have sacrificed a beautiful afternoon to come here, indoors. I m honored and I m privileged to share our experiences and the questions that that prompted in our minds and the solutions that we want to find of those questions. And as you just mentioned -- that about subprime crisis and referred to our work as a sub sub subprime -- and that kind of puts us in the context of a big crisis. Because here we are -- while we have had the satisfaction almost that we have developed the banking system in the world in a way, it s almost looked at as is a perfect system -- nothing can go wrong, very sophisticated, very efficient -- but suddenly shows up with the subprime crisis. And in order to tackle this crisis, we have to go to a write-off process for a trillion dollars. And we don t seem to get very upset about it. We never raise the questions, why it happened, who are responsible for this, how to avoid it in future. And a trillion dollars? Something that we can t even fathom what that money is, with the food crisis at the same time, and suddenly prices of all food items jumping up everywhere around the world, almost to hundred percent rising food prices. So when we have to run our bank with the poor people -- and these are the people who spend the bulk of their income in food -- so today with all this income they make, they can t get the food plate that they used to get. They get half the plate for the same money. And we re talking about international efforts of several billion dollars, $15 billion to $20 billion dollars to address this food crisis. And such a big discussion where this money

5 PAGE 5 will come from. So it puts, again, side by side by with the trillion dollar write-off. Didn t have to go through any congressional decision making on that one, very quietly done, not much publicized. But the other one becomes a big issue, where this money is coming from. So it shows the kind of two different ways that we handle things in our lives. And this is also significant. This is 2008: just the midpoint of the millennium development goal period from 2000 to 2015 when those goals were adopted in 2000 in the Millennium Summit, the whole world was very excited. Finally, we re doing something which was never done before in human history, made a very clear decision that we want to reduce poverty by half by How much you want to reduce, that was very well defined. By when we were to do it, is a very specific date, and so were the other seven millennium development goals, very clearly enunciated. But soon we were derailed. The world, instead of fighting poverty and fighting diseases, we went in the other direction, fighting terrorism. So while we are getting back to the issue of millennium development goals and checking back how far we are and feeling excited that some of us, some of those countries around the world are actually coming to the level that they are going to make it, reach those millennium development goals -- Bangladesh is one of those countries which is set right there to achieve all the eight millennium development goals. It is a fantastic experience for a country like Bangladesh and similar other countries who are going to make it, and a feeling of success coming in. Now with the food price going up, with the oil price going up, we don t know where we ll end up. So this is the context in which we ll be looking at the issue of poverty and how it appears to us, how we got involved in this issue in the first place. I m not a banker or I m not someone who had any experience in lending money to anybody. But I was pushed into the situation because the circumstances in Bangladesh at the time where I was teaching in one of the universities in Bangladesh, famine situation. And I was trying

6 PAGE 6 to see if there is anything I can do as a person -- not as an economist, because I felt that as an economist I don t have anything extra which could be of any assistance to anybody; but I thought maybe as a person, as a human being, I can go out to the people and stand next to another human being and see if I can be of any help, even for a day. So that s what I was trying to do. I was not trying to make any big plans or big projects, anything of that sort. But while I was trying to do that every day, I learned something, learned lots of little things, but one kind of came to my face again and again and hit me the loan sharking in the village. So I wanted to understand that loan sharking, how much money they borrowed, what kind of loans they took, what is the impact on the person, just curiosity, not in those academic terms, just to understand. When I made the list, there were 42 names on the list and the total money they needed was $27 dollars. That s what they borrowed from the loan sharks. And for that $27 dollars, the lives of 42 families were totally ruined. And I looked at it and I was trying to understand how people have to suffer so much for so little. And I was trying to kind of grasp the situation and trying to see what needs to be done in a situation like that. Suddenly it occurred to me the problem is really an intricate problem, but the solution is so simple. All I have to do is to give this $27 dollars to all these 42 people and they can return the money to the loan sharks, and they will be free. I was thrilled by the idea that it can be resolved so simply. And I was trying to figure out, am I making some mistake? I said, eh, there s no mistake. They will be free. So I did that and that s what led me to all these things. At that point, I thought this was done and I ll move on to something else. But I couldn t. People were so happy to have that $27 dollars. They thought I have done some kind of a miracle for them. Then the next thought that came to my mind, that if you can make so many people so happy, why

7 PAGE 7 shouldn t you do more of it? And I had no idea what I will do next. But I wanted to do more. So among several ideas that I toyed around in my mind, one idea kind of looked good. Again, I thought it is a very simple, sensible solution. I thought of the bank which is located on the campus. All I have to do is to go and explain to the bank manager that he can lend the money to these people in the village, and the loan sharks will not get a chance. And money s so small, he will never miss it. And in exchange, everybody will admire him, what a great job he has done. See how innocent I was about banking? [laughter] And he reacted very strongly. He said, No way. And that kind of disappointed me. I said, Why? Such a simple idea. I thought he would be jumping on this. Anyway, it became a big kind of debate between me and him. I couldn t persuade him; he couldn t persuade me. So the whole thing went to the higher officials in the banking sector. I tried to convince them. I couldn t. After months of running around, finally I came up with another idea. I said, Why don t you accept me as a guarantor? I sign all your papers, and you ll save your rules because you are worried about your rules. That way, you save your rules and give the money. It took another two months to persuade on that one. But finally, they accepted it -- not because they were satisfied with the whole arrangement, but probably they wanted to just get rid of me. Their idea was, if they gave you some money, this money will never come back. So I m not going to come back to them, because the money didn t come back. But I was very happy. I was happy that I could take the money and bring it to the people. And that was the beginning in And I wanted to find the ways, how to do these things so that people are encouraged to pay back the money. Because I want to make sure money comes back. And it worked. And that was the happiest moment that everybody

8 PAGE 8 said, It won t work. This time I found out it worked. And I kept on expanding. And there s a long story in between. And the more it became successful, the more reluctant the bank manager became. Because he was hoping the whole thing would disappear. It didn t disappear. It was growing. So I -- seeing the reluctance, seeing the kind of complications he was introducing into it -- I thought instead of trying to go to him every time, why don t I create a separate bank? So the idea of creating a separate bank came to my mind. And then another struggle began, to have a separate bank for the poor people. Everybody said, Are you crazy? Having a bank for the poor people? Nobody heard of it. But I didn t give up. Finally made it happen in We became a formal bank of our own. And we are very happy, wanted to expand it as far as we can go. And we continued to do that, and still our repayment stayed on a very high level, near 100%. And people asked me, Why you concentrate on women? Now if they ask me after 31 years the same question, Why do you have so many women?, particularly when the press asks me, I come back and ask the counter-question, Have you asked any bank why so many men? [laughter] [applause] Because that s how it all began. I was asking the question, Why so many men? You refuse to lend money to the poor people, which is unjust. And you refuse to lend money to women. Not even one percent of their borrowers in Bangladesh happened to be women. Ninety-nine percent plus are men. So that is a separate story of battle between me and the banks. When I began finally with me as a guarantor, starting it, I made a first decision. Half the borrowers in my program must be women, because this is what I ve been debating about. So I must show that it can be done. So with all my enthusiasm, I went out to the women to persuade them to take money from Grameen program. And women said, Don t give it to me. I don't know anything about money. Give it to my husband.

9 PAGE 9 Here we go again, I said. I m trying to give the money to you and you re telling me to give it to your husband. They said, We don t handle money. My students were with me. They were very upset because I was insisting on women and women are not coming into the program. They tried to persuade me, Why don t you abandon this, because they are saying very clearly, they don t know what to do with money. So I tried to explain to them what I had in my mind. I said when a woman says, I cannot take money because I don t know what to do with money, this is not her voice. It is the voice of history, the history of neglect and the history of fear that has generated in them. She is always told she is nobody; she doesn t know anything; she cannot handle anything; and that s how she grew up, but that doesn t mean that in reality she doesn t know anything. So our job is to be patient and peel off the layers and layers of fear that the history has built around her. And we don t have to be successful in every single case. All we need to be successful is one case. If one woman finally can come out of it and say, Let me try, and if she tries and if she s successful, every one of her friends in the neighborhood will look at her and say, Oh my god, I can do better than that. [laughter] The new kind of awakening will come. All you need to show, a demonstration, and they will change their mind, because somebody has done it. An almost similar thing happened -- that first desperate woman got into it. She was very nervous, but she did it and others became curious. And some more came out to dare such a thing and did it, and it gradually snowballed. But what really happened, it took six years to bring it to the 50/50 level. Then we saw money going to the family through women, brought so much more benefit to the family than compared to the same amount of money going to the family through men. So again, that s a whole range of differences that we saw. At the end we ask ourselves, what is so good about 50/50? Why must we stick to this 50/50 policy? If it is better served, if the family s better served by entering the family

10 PAGE 10 through woman, why don t we do it? So we started focusing on women. And we started encouraging everybody to focus on women. As a result, we moved from 50% to 60, 70, 90 percent. Today, we have seven and a half million borrowers in Bangladesh in Grameen Bank, 97% women. [applause] It s an amazing kind of situation where you take the poorest women into the bank and give her little loans, and she starts earning money by selling eggs or selling milk from milk shop, or making baskets and selling basket, or whatever she knows. And suddenly she looks different. She looks at you in a very confident way. She s no longer the shy woman, scary woman that you used to see in the village running away from you. Now, she s all smiles. She wants to show you what she has done. She s a very confident woman. She took a $40 dollar loan. She took a $50 dollar loan. She s now negotiating next time, You have to give me $60 dollars. She s ahead of the time. She s preparing you so that you re not shocked. So we go into kind of a battle with her: No, no, no, $60 is too much for you, until she explains why she needs the $60 dollars. It s an amazing experience. You feel the confidence she feels. Only a few years back, she s the one saying, No, no. We never handle money. I can t touch money. I never touched money in my life. So a transformation takes place. So the microcredit, as the work that we do became known as, it s not about lending money. It s about transforming human beings in the way she looks at it, in the way she can transform herself, and gradually touches every member of the family. We started doing something so that they can bring all of their problems together, discuss among themselves and look for the solutions to those problems. And out of those intensive discussions among themselves was created something that became known as Sixteen Decisions. One of the Sixteen Decision is, we shall send our children to school and make sure they remain in school.

11 PAGE 11 We encourage their decisions to be implemented. And in the beginning, we re not sure whether this would be possible, but we didn t give up. We say, Let s try at least. These are all illiterate families, absolutely illiterate. So we thought, this will be a kind of a break if we can bring the children to school. And we were successful. Children came to school. They send their children to school. Then we see many of the children who come for the first time coming to school. Some of them came out of the top of the class in performance. So it s an amazing experience to see for the first time in the whole history of their family a child, a little girl, a little boy coming to school, and soon she s at the top of the class, the school where all the children of the village are attending. So we were thrilled things like this can happen. So we wanted to recognize it, celebrate it. So we immediately introduced the scholarships for those kids who are at the top of the class. And since then we have been giving these scholarships. Last year we gave about 64,000 student scholarships from Grameen Bank. Each year the number increases. Then many of these children went to the higher education because they graduate, continue. They didn t abandon it. Our idea is we will consider ourself absolutely successful if we can make them complete primary education, because for the first time a generation will complete their primary education out of these poor families. We came out wrong. Not only did they complete their primary education, they continued. As a result, thousands and thousands of students came at the level of higher education. So we introduced an education loan. Right now there are more than 23,000 students in medical schools, engineering schools, universities -- all with student loans. So entire financing is done by the Grameen loans. Some of them completed their Ph.Ds. So we have a completely new generation coming from those illiterate families. Then you go to the village and you see this Grameen borrower with a very happy face. You are visiting her. She s happy that you came to meet her. She s showing off all the things she has done over the last 15 years, 12 years, the house that she has built, the cows

12 PAGE 12 that she have bought, and all the other successes along the way, bank account that she has. And she has a young girl with her. She s also very happy looking. And she introduces her with pride. She says, My daughter. And she has just finished her medical school. She s a doctor now. And you look at the mother and you look at the daughter. You feel happy that out of this illiterate family you now have medical doctor. Then you come, your mind, you re faced with a question. Her mother could have been a doctor, too. But she never had a chance. She never went to school. But the daughter got a little chance so she went to school. And she got the scholarship. She got those education loans. She became a doctor. So seeing these examples again and again, you cannot escape the conclusion: there s nothing wrong with the poor people. They have the same quality as any human being. Simply, society never gave them the space, never gave them the opportunity to unleash their capacity. So that s why mother could never go to school. She could have been an engineer. She could have been a professor. She could have been anything. In one generation, what a difference can be made, just a tiny little chance. Then the question is, who made the poverty then if it is not inside the person? Where does it come from? Obvious answer is it comes from outside. It s imposed on the person. It is not natural to the person. It is imposed on the person. How is it imposed? Imposed by the system. And I gave the example of a bonsai tree. I said, if you take the seed of a tall tree and put it in flower pot, it grows only this big. The fault is not on the seed, because the seed was a perfect seed. The problem was it was planted in a flower pot, so it s not given enough space to grow. So the poor people are the bonsai people. There s nothing wrong with their seeds, simply society never gave them an opportunity.

13 PAGE 13 So poverty s created by the system that we have developed for ourselves, made of the institutions that we have built like different financial institutions that we just began talking about, and also by the concepts. And I particularly focus on the concept of business. I said, this was something played a very critical role in deciding what kind of society we ll have. And the economic theory that we have built, we made it very clear that business means business to make money. Profit maximization is the mission of business. So since theory says so, we try to fit into that role, in the profit maximizer s role. The moment we sit in the business chair, we become profit maximizers. We cannot see right. We cannot see left. All we do is maximize profit. It s a very uncomfortable kind of concept because it creates a human being in this theory which is one-dimensionally human being. All it does is make money. Human being is portrayed as a money making machine. And what I try to draw attention to, real human being that we are, we are multidimensional beings. We are not single dimensional beings. We want to make money. We want to make a difference. We want to help others. We get touched by other people's problems. We want to go out and help people out. We have all kinds of dimensions in us. But that is not reflected in the business world. So I m suggesting that, why don t we create a different kind of structure of the theory? We take account of the multidimensionality of human beings and to justify that multidimensionality, we create two different kinds of business: one business that we already know, make money, other business is kind of opposite to that. This is a business to do good rather than benefiting personally. The first type of business is all about me: I want to have everything for myself and I don t pay attention to who gets hurt by that. But the second business is all about others, nothing for me. So I deny everything for myself. All I m doing is dedicating everything for others. And that second category, I m

14 PAGE 14 calling it social business, business to do good to others, non-loss, non-dividend company. We can create that space, create that concept, then people have a choice how much of their investment should go into the social business, how much of their investment will go into profit maximizing business. I m not saying that you have to close down, do other. No. You do anything you want. You have options. And that s what human beings are all about. So if nobody takes the door to social business, then we say that doesn t have much of esteem in it, so forget about it. But if people choose that one, why not? Let them do it. And we created some of these social businesses to demonstrate how it is done. And one company that we created is a Grameen, the loan company, which is in collaboration with Dannon France. It produces yogurt. The objective of this company is to address the malnourished children of Bangladesh. There are millions of malnourished children in Bangladesh. So what we have done, we put all the micronutrients which are missing in the children into this yogurt vitamin, iron, zinc, iodine, whatever and then sell this yogurt at a very cheap price without losing money. We made sure we can bring down the cost absolutely minimal, no fancy packaging, no fancy marketing. Once you put your mind into it, you are amazed by how many ways you drastically reduce the cost. In a profit-maximizing business, you don t do that. You spend a lot of money to attract more customers, clients. So you spend a lot of money in marketing -- maybe a dollar worth of product -- but you spend five dollars in marketing and make people pay for it so that you can sell more. So we reduced the price and sell it to the poor children, malnourished children. An expert tells us that if a child eats two cups of this yogurt per week and continues to do so for 15 to 18 months, they regain their health.

15 PAGE 15 So the purpose of this company is to see how many children they can bring out from malnutrition, not how much money you made during the year. So that s a different kind of bottom line. We can create many, many such social businesses. Then when you have lots of social businesses, anybody can invest in social business. I may not create a social business, but I can invest in a social business. Where do I find them? Because the stock market that we have today is about making money. I cannot find a social business where you don t get any money. Nobody reports it. I open The Wall Street Journal; it will not be reported because there is no profit in it. I said, well, there s a simple solution. Why don t we create a new stock market, social stock market. All the social businesses will be listed there and will tell us which company is reducing malnutrition, which company s helping poor people out of poverty, which company s helping the health of the pregnant mothers so that she doesn t die at childbirth and the child doesn t die at its own birth, or such other things: drink pure drinking water, safe drinking water, sanitation, housing, whatever, all the things that we always talk about so that this can be addressed as social business. And those will be listed and we ll go and say, Oh, I like this. This is what I wanted. Here is my money. Go ahead. Do it. I did it not to make money out of that. When I wanted to make money, I go to the other stock market. When I wanted to do good, I come here. I ve invested. That s how we are. We want to do both. And I said, this is a very strange situation. In profit maximizing business, making money is the means. What is the end? aking money is the end. Doesn t make sense. I said, this one makes much sense, at least to me. I make money in the profit maximizing business. That s my means. And I use this money in the social business. That s my end. That s what I wanted to do. So I want to change the world. I want to have a kind of world that I feel proud of. I don t have those problems that I leave behind and say, Oh, let government do it. I don t have anything to do with it. No, I m a citizen here. I can do it. I m a human being. I can run the social business myself. I can create a beautiful design of

16 PAGE 16 a social business to address very specific problem. I can design a social business to get 200 people out of welfare. That s my social business. I can do that. If I can take 200 people out of social business, I repeat this. I take 400 people out of welfare, sorry, as a social business. So I have designed something which works. They say, Ah, this is a very good idea. I would like to do some more. So somebody else picks it up, does it. So there will be nobody on welfare, nobody unemployed. I can create a social business to create employment for them so that nobody will be unemployed. You go on investing those things. And where will we be finding this description of the beautiful new company coming up? Because Wall Street Journal doesn t report it because this is not money making company. So we ll have a social Wall Street Journal which will be reporting all those things that we will get excited: Aha! This is a great company. I would like to support such a company. Because it is in our heart. We want to do that. So we create that social business and do it. Well, once we can do that, then nobody will be a poor person because the system has created poverty. If I pick out the seeds of poverty from the system, nobody will be languishing in poverty because it is not imposed by the system. All human beings are packed with unlimited capacity, unlimited potential. Simply, they don t get the chance to unleash that. One of the things that we did out of our own curiosity and to see how it was done, four years back we introduced within Grameen Bank a new loan product. This time we said, we concentrate on the beggars. Because you cannot be poorer than beggars. That s the last stage. And we want to lend money to the beggars, see what they do. So we came up with this idea and we designed it in a way. We said, there is no interest. So the loan that you take, it will never grow because there s no interest in it. And there is

17 PAGE 17 no time limit, so that you cannot be at default at any time. If there s no time limit, how can you be defaulting? So they re free from the fact that this is not growing money and they are free, there is no chance of ever getting defaulted. And we said, if you can return the money to us, because it s a loan, then you can take another loan, bigger than what you took the last time. You can go on like this until you are capable enough to take the full cost loan. Until then, you ll be free to do that. And we went to the beggars trying to find out how they became beggars in the first place, how they were pushed and pushed and pushed by the society, finally stretched hands for their survival. There s no other means left for them. We wanted to understand how cruel the society can become to push a person to that tipping point. And once you have done that, you couldn t come back again ever since you remain a beggar. And that s your life. You want to feed your children, you had no other means. There s a sad story behind each one of them. And then tell them, as you go from house to house begging, would you carry something with you, some merchandise with you, some cookies, some candies, some toys for the kids, or whatever is interesting the children will find, and give people option? You can give something free, some food, something as you do in the past, or buy something from me. I have some merchandise to sell. Or do both, it s up to you. And there s nothing to lose. And we make it very plain. We tell them, Look you are going there anyway. So this is not extra work for you. And they liked it. And in the beginning, we thought maybe we ll have 3,000, 4,000 beggars, and we ll find out how they behave, how they can really make it happen. Can they pay back one loan, two loans at least? See how it happens. It became a very popular program, popular among the beggars and popular among our staff. Our staff loved it, to serve a beggar. They thought this is a wonderful opportunity for them.

18 PAGE 18 Today, we have more than 100,000 beggars in the program. [applause] In these four years, we have now more than 11,000 beggars who have completely stopped begging. They became door-to-door salesperson. [laughter] [applause] Some of them are pretty smart. They became personal shoppers. You gave the money, you gave the list, she brings it for you. Because women in Bangladesh cannot go to the market, so she found somebody who can do intermediation between the market and her. And sometimes when my colleagues become impatient why other 90,000 are not coming out of begging, I said, Don t rush them. They re now part-time beggars. I said, They re in the process of restructuring their business, and begging was their core business. And closing down core business is always painful. It s not easy. Some of the beggars explained to me (and I m sure they explained to others also) they know which house is good for begging and which house is good for selling. I said, the beautiful market segmentation, they figured out. So people are smart. When you give the opportunity, they took it. Many of them have taken the second loan, third loan. So it s not the question of whether you are a defaulter or not. The fact that they are paying back and taking the second loan, they understand that this is the way to move up. And all the money that we have loaned to them -- a typical loan is about $12 dollars -- with a $12 dollar loan, how can you go wrong? People ask me, Do you think all these beggars will come out of begging? I said, I have no idea. I never did it before. But I m taking a chance. I said, out of these 100,000 if ten beggars come out of begging, I ll be so delighted. They have done it on their own. Now today there are 11,000 who came out of begging. I m so happy. And others are moving in that direction.

19 PAGE 19 And the total money that we lent out for all these 100,000 plus beggars, more than half the money has already been paid back. So that s not an easy thing. I could have given this money to all these 100,000 beggars, $12 dollars as a grant, as a charity, Take it. We can afford it. Grameen Bank is a big bank, lots of money. It will not cause any harm on the bank at all. But would we have received this result? No. They ll be using this $12 dollars, enjoy themselves, few days, and after a week, after two weeks, five weeks, they ll come back: Can you give us some more money? Because that s not how we designed it. They have not organized themselves to fight. So we give them as a loan. This $12 dollar is a loan and explained what are the terms. Now they know the rules of the game. And they took a chance, and this is what they re doing: paying back, taking more, and moving on. They know, If I pay back, you have to give me more. If paid back $12 dollars, I m asking for $20 dollars. You give me $20 dollars. I want to do more. So this is how things can be redesigned, be organized. So once we do that, people can come out of the situation they are in. In Bangladesh, as I said, we ll be reaching that millennium development goal. Hopefully, we can overcome this food crisis and oil crisis. And I am asking the question in Bangladesh, after we reach that halfway point of reducing poverty, shouldn t we get prepared for the next target? When we ll bring Bangladesh at the zero poverty level? Let s set a date. And I have been suggesting a date. I said, Let s put 2030 as the year when Bangladesh will have zero poverty, nobody will be a poor person. And if we can set it up, we can achieve it. And that day, we will advertise in the newspapers, with a big one-page ad, If you can find one poor person in Bangladesh, million dollar reward. And nobody will take it because there isn t any. Then we ll create our poverty museum. The only place you ll see poverty in Bangladesh would be the poverty museum. We can all do it, anywhere in the world. The whole world can be free from poverty. It s all a question of imagining it and taking the right step. Thank you very much.

20 PAGE 20 [applause] DR. LINCOLN CHEN: Good afternoon. My name is Lincoln Chen. It s quite an honor for me to be a moderator with Dr. Yunus. I am here to facilitate questions from you, which we can open in a few minutes. I ll begin with a few questions, following up on his presentation. Dr. Yunus, you ve given us a wonderful journey of microfinance based on trusting poor people, women as a center and the glue of this trust, and now movement onto changing the external institutional environment through social business. Now, the term social business conjures up two other terms social responsibility, usually of companies to behave well, and social investing, which, in the United States is mostly what one would call passive screens: not to put money into war, tobacco, and other aspects. Could you contrast your social business with these other two terms, and also indicate where you think the big opportunities are to break through the institutional environment that s creating so many bonsai trees? DR. : Thank you, Lincoln. We go back a long time. Lincoln was in Bangladesh when we were starting Grameen Bank. He lived there ten years, seven years, something like that. So it s good to see him. Good to see you. On social responsibility, it is something coming from the corporate world. It started with good intention, because when I m in the driver s seat of the company, I cannot pay attention to any other thing except making money. So I have to do something besides making money. We create corporate social responsibility fund where we put money so that we can do the things which we cannot do through the company work.

21 PAGE 21 It was a good intention. But gradually, as good things go into the distortions and wrong directions, it became -- in most of the cases -- sort of a public relations money. You sponsor a soccer team. You sponsor rock music or something and try to get a good image for yourself. It s more publicity than the work itself. So to that extent, to the extent that it s used as public relations work, definitely that s not what we re talking about. I would say if the intention still remains a genuine thing, this money could be easily used as social business. You create a business which aims at a very specific social objective, that what you want to do -- name some: malnutrition or getting people out of unemployment or out of welfare or good housing or sanitation, or whatever, whatever things that you can do with your money -- create a company, a social business company. So I say corporate social responsibility is not equal to social business, because we are talking about a business, not a handout. Most of the time, corporate social responsibility is handout money, whether it s for publicity or for a school or for college or a scholarship, whatever it is. But social business is a business. You have to bring it money back. Even you can make profit, profit stays with the company. So that way it can expand. It can grow and so on. So that s part of the corporate responsibility. Social investment is still, you want to make profit. As long as you want to make profit, your intentions are still not to the extent of clearly social objective. So I would say this is a form where nothing but achieving the social objective matters to me. I don t get involved, Oh, am I going to risk my investment? Am I going to have enough return for me, at least 5% return? I want to avoid certain things through negative(inaudible) tobacco, war, and discriminations, and so on, so forth. So this is fully devoted to that issue.

22 PAGE 22 DR. LINCOLN CHEN: So for you, social responsibility, the normal concept is insufficient. You would like the corporations who exercise social responsibility to go into social [simultaneous conversation] DR. : Social business itself, yes. DR. LINCOLN CHEN: with the funds they have. What about the converse? What about social programs run by charitable government or social organizations DR. : Excellent. DR. LINCOLN CHEN: that begin to introduce market or business practices and incentives? DR. : Excellent. DR. LINCOLN CHEN: There s a program called Progresso in Mexico. And they re giving financial incentives for families to educate their children. There are programs where government workers or non-governmental organization workers might get performance pay. Would you see that as being linked to social business? DR. : Sure. The term that I used for the first time with a clear definition, probably if we take this definition, they will fit exactly the social business, provided they are a business. My question would be are they getting their money back? If they re getting money back, fine. Are they taking any profit? If they re not taking any profit, this is a social business. Today, whatever they re doing, they may come to that level. If they come to this level, then they can go to the market. They can go to the social stock market, raise more money

23 PAGE 23 for this, those who are willing to. So this becomes a wider thing, very clearly understood what this is. The moment you use the word social in many different contexts, you re not sure what you re talking about. So I try to bring specific terms so that it implies a very specific kind of business -- not that others are wrong -- simply to categorize a certain type of thing so that we can go and confidently do investment, do investing in those companies. DR. LINCOLN CHEN: And you ve come to the social business from your trial and error. DR. : Exactly. DR. LINCOLN CHEN: I was looking at all of the Grameen companies. And in addition to Grameen Dannon, there s, you know, Grameen Telecom, Grameen Com, Grameen Software, Grameen Cybernet, Grameen Solution, Grameen Phones, Grameen Trust, Grameen Fund, Grameen Knitwear, Grameen Shikkha. Are they all social businesses [simultaneous conversation]? DR. : No, they re not. They re not. Because social business idea became gradually formulated in a later stage. But we created this company, different places. Grameen Bank is a social business but under a different definition. I also make it clear in the book that any company which is owned by the poor people, if it is a profit maximizing company, that s a social business because it goes directly to the poor people. Grameen Bank is owned by the poor people and it is a profit maximizing company. It s a social business. DR. LINCOLN CHEN: So the stockholders in Grameen Bank are poor people?

24 PAGE 24 DR. : Are poor people. All of them are the stockholders. They re borrowers of the stockholders of the company. So that s one. We created Grameen Phone to make it as a social business. Our idea is the Grameen Phone, which is the largest cell phone company in the country, owned by the poor people of Bangladesh, particularly poor women in Grameen Bank, will have the majority share. That s why we have the Grameen with Telenor. But Telenor today doesn t want to sell their shares to make it We are only 38% shareholders. So that definition still is a profit maximizing company. It s not a social business. But we keep on pressuring them to sell the shares, because we had an agreement with them at the outset of the company. After six years, they will sell majority shares to Grameen Telecom so that we can sell the shares to Grameen borrowers, and they become the majority owners of the largest company in the country. So that s where we still couldn t do that. We have Grameen solar energy company, Grameen Shakti. That could very well become a social business, but we created the company as an NGO because NGO is not owned by anybody, so we cannot say it doesn t give any return to the owners. So to that extent, it s not a social business, because there s not owner where the owners can say, I don t want to take any dividend out of it. So that way, most of these companies are non-stock companies. DR. LINCOLN CHEN: Many of your companies capitalize on the transformation of technology in business. Is that one of your strategic [simultaneous conversation] approaches to social business? DR. : Yes, we wanted to understand how to use technology for transforming the life of the poor people. That s how we got the cell phone company. We wanted to bring cell phones in the hands of the poor people to transform their lives. Also, Grameen Solutions and other things, that we wanted to understand the power (inaudible)

25 PAGE 25 of the information technology, how to bring it down to the poor people. That s why we create a lot of companies based on information technology. DR. LINCOLN CHEN: I think many people know about Grameen phones, and that the fact that a village woman can borrow, and then I actually visited some of the Grameen phone ladies. It s really fantastic thing. You can access a cell phone, pay a little money. And the woman is also generating some profit to return to her. Some of your companies have done, profitability-wise, quite well. In fact, have there been some struggles related to the ownerships of some of the companies? DR. : The Grameen Phone, that s [simultaneous conversation] DR. LINCOLN CHEN: And the other investors? DR. : Yes, there are two partners, Grameen Telecom and Telenor, Telenor of Norway [simultaneous conversation] DR. LINCOLN CHEN:... and they are so valuable that DR. : They don t want to sell their shares. DR. LINCOLN CHEN: They don t want to? So the debate is over whether a for-profit firm that had the technology and the partnership retain their share or whether it goes eventually to you want it to shift to the borrowers. So there are real dynamics of starting a social business. DR. : Now, we don t have this struggle. At that time, we don t have a clear picture of what will emerge. Now, it is very clear. We start with social

26 PAGE 26 business. We don t go to the profit maximizing (inaudible) social business. We started a company, drinking water company, because Bangladesh has a big drinking water problem because of contamination of arsenic in the water. So we have a joint venture with Veolia of France to create a village level water company to treat water in the village and supply this drinking water to all the families at an affordable price. And this is a company as a social business. Veolia will never take any dividend. Grameen will never take any dividend out of it. This whole purpose is to make sure they have -- all the families in the village have -- pure, safe drinking water. So that s another, right from the beginning that is the understanding, that s a business agreement between two of us. DR. LINCOLN CHEN: So with a business, there s obviously to and fro, so to speak. But also with the women in the households with the extra income, there must be a lot of dynamics there. What are some of the things that you ve witnessed in the families, both positive, but also some of the struggles that people go through as they shift through your microfinancing and social organizing programs? DR. : One big problem, because we focused on women. And it brought into conflict with men. The very husband in the same family doesn t like his wife to receive loans. He becomes a kind of leader of the opposition, opposing the loan. So that was a big struggle for us, to make him understand that this is not something that we are doing against his interests. This is a common interest for both. So we have to go through lots of negotiating and diplomatic moves to make sure that tension doesn t generate in the family. And also it created tension in the religious circles -- that they were saying that this is not according to religion, you re doing the right thing. So we have to bring the religious certification that, yes, it is very much a religious thing to do. It s nothing against religion. We give examples in the past that women were very much in business and there was