Micro-credit: a road towards a world without poverty

Professor Dr. Muhammad YUNUS Micro-credit: a road towards a world without poverty INTRODUCTION - Docteur Yunus, HEC is extremely proud to host you tonight and the way this room is filled shows the enthusiasm for your presence here. On behalf of all HEC students and alumni, thank you very much for giving us some of your time and sharing your knowledge with us. The conference will be articulated in two parts: the first one focusing on the birth of micro-credit and the history of the Grameen Bank and the second part emphasizing the perspectives for micro-credit in the future. Professor Yunus, you created the Grameen Bank project almost thirty years ago in 1976. Since then, the bank has been profitable almost every year and today the bank serves almost five millions borrowers, with ten thousand families escaping poverty every month. Could you please explain us how you created and developed an organization which is financially profitable and at the same time dedicated to support poor people? Well, I m very delighted to be here and I m very happy to see so many young people coming in this evening to listen to our dialogue. I m happy because I feel inspired when I talk to young people, because a lot of the things that I do make immediate sense to young people much faster than the people of my own age. Something is wrong, we can t communicate. 69

1- The micro-credit The birth of the micro-credit You asked me: "All did it all begin?" I was teaching in one of the universities in Bangladesh. Bangladesh became independent in 1971. It separated out of Pakistan through a lot of blood shed, a civil war and so on. So in 1971, it was a devastated country. I was teaching economics in one of the American universities, Tennessee State University, and I came back to Bangladesh, because I thought this would be a good time to go back to Bangladesh to rebuild the country after so much devastation. And I did. But instead of the country moving forward, it was sliding down very quickly. The economy started sliding down very quickly. In 1974, we had a terrible famine in the country. People were dying of hunger. It is not very pleasant to see people dying of hunger everywhere around. And you as a university teacher teaching beautiful theories of economics, telling everybody that everything you want to know about economics, all the solutions you want to figure out, it s all here! But you walk out and all you see is problems, no solutions at all. So, there is a big distance between what you say in the classroom and what you see outside. So I thought there was something terribly wrong in the things we talked about and there had to be some way to help people who were dying of hunger. So I thought: Let me forget about all those things that I teach. Why don t I go out in the village next door, to the university campus and act just like another human being and try to see if I have anything to offer, if I can be of any use to anybody in the village? So I did this everyday, walking around, talking to people, trying to see if there was something I could do for one individual. I realized that no matter what we talk about - five-year development plan and all those big things- in the classroom, real people are not waiting for those things but just to survive another day. So along the way, I saw how people suffered for not having access to a tiny little amount of money. They had to go to the loan sharks to borrow that. I thought: This is incredible! Why do people have to suffer so much for such a small amount of money? So I wanted to find out how many people like this there were in the village. I sent a student of mine who went around in the village for several days to make a list. When my list was complete, there were 42 people on it. The total money they borrowed from moneylenders was 27 dollars. I couldn t believe that people had to borrow less than a dollar and with exorbitant interest rates and a lot of other conditions. I thought I knew everything about Bangladesh but I had never realized that this was so bad. I never knew. My first instinctive response was to give this money out of my own pocket and to go around with the list to give money to these people telling them: Return the money to the moneylenders. Take it, keep it and continue the work that you do. You don t have to take orders from the moneylenders. Then I thought that would be something that I would then move on from, to something else. But I couldn't, because of the excitement it created in all those 42 families. They thought it was a miracle. People couldn t 70

believe that anybody would do something like that. Looking at it, I thought: If you could make so many people so happy with such a small amount of money, why shouldn t you do more of it? So it was again an instinctive question that came through my mind. I was thinking about how to make more of it and I thought that maybe I should link the people with the bank located in the campus. So I went to the bank to suggest to them: "Why don't you lend money to the people in this village?". The bank immediately said: "It cannot be done. Banks do not lend money to poor people. And it went on and on, arguing for that, and I was trying to convince them that it was a fair thing to do and so on. It didn t work. So it went on for months negotiating with the bank. They would not agree. So I offered myself as a guarantor. I said: I ll become the guarantor, I ll sign all your papers and you ll give the money." After another two months of running around, writing things, finally they agreed, took the money from the bank and gave it to people. And it worked. The bank was saying: "It will never work, you can say goodbye to your money. This money is not going to come back." I said: "I will try. I don't know anything about it. I've never done it." I did it and came up with some simple idea, used it, and it worked. I was very excited, but the bank was not. The bank was totally unimpressed: So what? You have done it in one village. One professor in one village can do all kinds of funny things. So who cares for that?" "Then, how will you be persuaded? At least do it in two villages, it won t work. Let me do two villages." So I did it in two villages. It worked. And then they said: "Well, one village and two villages are the same thing. You should do it at least in five villages." So I did it in five villages. It worked. Every time it worked, the bank raised the number of villages. Each time, I thought maybe this time they would be persuaded so I went ahead and did it. And they changed the number. After I had done it in sixty villages, I realized that even if I did the whole world, the bank would not change its mind. Because it s its mindset; it couldn t get out of its mindset. The creation of Grameen Bank And ever since, I ve been seeing how mindset plays a difficult role in doing things differently. That s why I said it s so much easier for me to talk to the young people, because young people don't have that mindset yet. But for older people like us, the minds are made. It s impossible to unmake them. You come up with argument after argument to change people s mind. Even if you see very clearly in front of you, you don t change your mind, because you are used to what you are used to. Anyway, then I thought maybe I shouldn t try to convince them anymore, because it was not going to work. The new thought that came to my mind was: Why don t I 71

create a bank just for the poor people? Then I started working on that idea and I went to the government to get the permission. The government though it was a crazy idea to have a bank for the poor people: We ve never heard of it. It doesn t exist anywhere in the world. Why should you do it?" I said: "Because it works. Because in the whole world, people don t lend money to the poor people. I argued with them: More than two thirds of the population of the world aren t not even eligible to go to a bank. Forget about any money. This is an unfair banking system, because it doesn t work for the people. I should create a bank like that. After two years, I got the permission and I got the bank in 1983. Everybody said it would collapse. It didn t. Everybody has since then been waiting for it to collapse, because it doesn t make sense to them. But the more we do it, the more successful we become. We became nationwide. The idea started spreading around in the world. And other countries started picking it up. In the beginning, the argument was that it may work in Bangladesh but that it wouldn t work anywhere else. Bangladesh is a very funny country! Any funny thing works there. So I thought: Maybe, because I have no other example. But I was arguing that it would work anywhere in the world, because people need money, banks do not open their door to the people. So we have to have another kind of banking. And then, one country after another started picking it up. Malaysia was the first country that imitated and replicated it and it worked in Malaysia. People said: Ah. It works only in Muslim countries. I couldn t answer to that. Then Philippines did it, and I said: "Now you can't say that anymore, because Philippines is doing it and it's working very well." Then they said: Ah. Maybe in Asia. It's an Asian thing." Then it suddenly spread in the United States, because Governor Bill Clinton, who was in Arkansas, became very fascinated with the idea. He invited me to come and start a program in Arkansas. Out of that came a great program in Arkansas. So I was very happy that it didn t only work in Bangladesh, the poorest country in the world, but also in the richest country in the world. So I thought I could argue more forcefully. But it s still so difficult to convince people to do that because it is almost the reversal of the conventional banks. Conventional banks are based on the principle: the more you have, the more you get. If you have nothing, you get nothing. If you have little, you don t get anything. So we reversed the principle: if you have less, you get our attention, but if you have nothing, you get the highest priority. I think that s the genuine thing to do. People who don t have money are the first one to get the money. So we reversed the principle, and then we eliminated the collateral: no guarantee, no legal papers, nothing. So people say: How do you that? What if they don t pay you back? I said: Why should I worry about it? Every time I give the money, money comes back. So, today, after thirty years, when we give over half a billion dollar worth of Bangladeshi money every year, it comes back: 99%, on time, with over five million borrowers, and people changing their life by investing this in income-generating activities. 72

Focusing on lending to women Ever since, one of the big problems I faced was people saying: Why are you giving money to women? They don t know anything. I said: Yes, that s what they told me. Every time we try to give the money to a woman, we go to talk to her and she literally runs away from us. She thinks something scary is coming to her. She keeps on begging, she keeps on arguing: Please don t give money to me, because I don t know anything. Please don t give me money, because I have never touched money in my life. It s my husband who handles it, why don t you give it to him? I don t want to create trouble for my family by taking money and getting into trouble. So this was the starting point, but we never lost our heart. I started explaining to my colleagues -my students were working with me-: Whatever you hear from them, don t believe what they say. Because they are saying something about their history. They are not talking about themselves, which is buried under history. So you have to peel the history off. Bring out the person. Because it is centuries of believing, centuries of thinking that you are no good, you are useless, you have no capacity, I am the man, I m taking care of it. I know how to handle things. So that s what she believes. That s how tradition created her. So you have to undo this whole thing, it s not an easy process. So if you listen to her I don t know anything, and you walk out, you are submitting to the history. You continue the history, you do not challenge the history, you do not stop the history. I have gone through many sessions of this discussion with women myself trying to convince them that you can do something. I don t want to go on elaborating the kind of nature of discussion that I had to do just to make them believe that they can do something. Just one example, one usual question, I would say: Is there anybody who cook? There are only women sitting in front of me. They all laugh: Of course, we all cook! That s the only thing we do! Then why do you say that you don t know anything? You know how to cook. Oh, no, no, no. We women don t know how to make money. There s nothing that we can do. Well, you can cook and sell. Have you thought about that? Is there anyone who cooks very well? Ah! She cooks very well. Her cakes are so good, this dish is so good Okay, she can take money and make more and sell it. Then, you know what they would say? No, you don t sell food. Food, you give to people to eat. You don t sell it. Does your husband bring any food for your children? Cookies, candies from the market? Yes, some would say. Didn t somebody sell it to your husband and you or your children are eating that? Well, that s from the market. Yes, that s what I m saying. You make it and go It s a strange kind of argument! 73

Why did we have to do it for women? Why are we so involved with women? Very simple reason. Right from the beginning, I ve been saying the banking system is wrong because it denies its services to a large segment of the human population: poor people, low income people. This has to be changed. We can design a bank which can do that. And then my second point is that the banking system is wrong because it denies all women access to the banking system. And our bankers got so mad at me: Why do you say that? We want to give loans, they don t take it. I said: That s not true. If you can show me that at least 1% of the borrowers from all your banks are women, I will withdraw my remarks. I would say you are great guys, you are absolutely super, giving to 1% women They don t have 1%! Even today, they don t have 1% -this was in the seventies that I was arguing. So when I began, I wanted to make sure half the borrowers in my program were women. I thought that was justice, that was evenness. That s it. But then I go to the women. Women say: No, no, no, don t give it to me, give it to my husband. So we worked and worked, for six years, to bring it to the fifty-fifty. Then, we reached 50/50 men and women. We were so excited that we had finally made it. Everybody said it wouldn t work, we did it and now it worked. Then we started noticing that money that goes to the family through women brings so much more benefits to the family same amount of money- than the money going to the family through men. If you lend money to women, immediately children become the beneficiaries, it s absolutely guaranteed. You can compare family by family, you ll see the same thing. You know it s an amazing similarity we have observed over years. In the first place, we thought this was a Bangladeshi phenomenon but later on we saw it was a global phenomenon. Today, when you say micro-credit, nobody has to spell it out. Basically, it s lending money to poor women, that s what the micro-credit is all about. Everybody else forgot about the men, because it worked so well with the women. You get so much more mileage with that money. People ask if there is a real difference; I say: Of course. Did you know that in the whole history of mankind, you go anywhere in the world, it doesn t matter whether you are in Asia, Europe, America, Africa, it s the same story: the man gets his wage money at the end of the week, takes the money and where does he go? He goes to the pub, straight away. Have you ever heard anywhere that a woman gets her check or money packet and goes to the pub to blow her money? Never heard of it! A man gets his money, payments, he goes to prostitutes. A woman, have you ever heard? Nothing. So you go case by case, it s a universal phenomenon. You read story books, novels and everything, same stories. So anyway, we focused on them. We changed our policy of 50/50. We said: No more 50/50. We focus on women because it works so much better. Today, it s 96% women. And it works so much better with them. Focusing on education We have been encouraging them to send their children to school because these are all illiterate women, all illiterate men in the family. They don t read, they don t write. Universal. But we 74

thought if we wanted to change things, maybe we should encourage them to send their children to school. So, right from the beginning we encouraged them to send their children to school, and they have been sending them. Today 100% of the children of these over five million families are in school, and what happened over years is that many of them, many children out of these families graduated from high school, are in colleges. Many are in universities, in medical schools, in engineering schools. Almost in every medical school, in every engineering school in Bangladesh and in universities, there are some Grameen families students enrolled in those and learning there, coming from totally illiterate families. So again, it s quite a sharp break from the tradition, from the continuation of history of the first generation. You make a second generation totally different out of that. This is because it s their own initiatives. People were saying: They are illiterate, they won t do. They won t know how to use the money. I said: All human beings are entrepreneurs. They said: They don t have the risk-taking capacity. I said: These are only what you have written on your books, but the people are different. People are very energetic, very creative. There is limitless potential in every single human being. All you need to do is juts to open that, just to give them a taste of that creativity in them, because never in their history they had a taste of their own creativity. Once they have tasted their own creativity, they will be completely different people. And this is exactly what is happening. This is the new generation coming up. So what we did after seeing the children moving up, we started giving scholarships. Grameen Bank not only lends money to people, it also gives a scholarship to the children of their families and then introduced the student loan. If you are in higher education and you parents may not be able to finance you all through it, don t worry. Your parents own this bank. Grameen Bank is owned by the borrowers, it s not a bank owned by me or anybody else. The bank is owned by all of those five million borrowers that I m talking about. So we give student loans so that you can continue with your education. Now today, they are in different levels. So this is the progression of the Grameen Bank and how it started. Micro-credit for the poorest One more point and I ll stop. One criticism continued with us for a long time. People said, after seeing what we do, the impact it makes, people moving out of poverty with their own efforts and the bank making profit, it s a wonderful thing: it s a you can have the cake and eat it too kind of situation. If poverty is such an unmanageable problem that you cannot attack, here is something which works, doesn t cost anybody any money and it changes your life. What a wonderful solution. Uh,uh. There s some catch to it, it works, they said, only at the top layer of the poor people. If you go to the middle level of the poor people, it won t work. If you go to the bottom layer of the poor people, it won t work. Why? Because they don t have the entrepreneurial capacity, because they don t have the risk-taking capacity, they don t have the skill to use money When you allow educated people to write pages, they write pages. 75

It goes on and on explaining all this. I said: Forget it. We have been lending money to extremely, extremely poor people, it always worked. We have never distinguished between an extremely poor person and a slightly less poor person, they all pay the same. That s why we get 99%. You have been telling us that it wouldn t work with the women, it works with women. So, what is the deal? But the criticism doesn t disappear. They say: Wonderful idea the microcredit, but it works this way, it doesn t work all round. So two, two and a half years back, we thought we must address this issue once for all and get it clear. So we came up with the idea: Why don t we give loans explicitly to beggars? You can t be poorer than beggars. If poor people can take money and pay you back and change their life in the process, isn t that enough of a demonstration that everybody is a creative person? Then we sat down and my colleagues kept asking me: How do we do it? Okay, we ll give loans to the beggars, but what is it? Other people buy cows and sell milk and pay back. What is this beggar going to do? Can you explain it to us? I said: Let s look at it this way: why don t we go and sit down with the beggars and talk to them? Because after all, it s their life. And we went to talk to them: you go from house to house to seek some rice, because rice is the Bangladeshi staple, so if you collect enough rice from house to house for the meals, you come back to cook it and feed your family. And the next day, you go out, collect some rice, come back and cook it. So our message to them, after we listened, after we heard, sympathized, was: Okay, if you go from house to house, would you care to carry some merchandise with you, some cookies, some candies, some toys for the kids? You are going there anyway. This is how you beg. So all you have to do in case you wanted to, is to carry something to sell. In the beginning, people said: What if they don t buy? We said: Well, then, no problem. They don t buy. You still have the product left with you and you can try the next day see if it works. They said: Why not? We can do that. At the beginning, we thought we would have about 3 000, 4 000 beggars in our program, but it became such a popular program that today we have 51 000 beggars in the program. And that, because we put a restriction that is that one staff of Grameen Bank cannot take more than four beggars in his capacity. Initially, it started with a one beggar per staff restriction, but our staff got so excited with the results that they kept pleading to be allowed to take ten. I said: No, no, stay with one. Then we allowed two and finally in the last three month, we allowed four. So we are moving into four times the number of staff. There are 51 000 beggars right now because of the restriction. Why do we put restriction? We said: All we have to show today is that they are paying back and changing their life. And today, many, nearly 1 000 of them who started early, quit completely. We said: If we can demonstrate that 10 000 of them have moved out of begging and are now in a selling business, that will be fantastic. That will show we can do it. But so far, they are doing so good. So anybody can move in and find out, and the loan that the beggars take per person is in the range of about 3, 4, 5 dollars, maximum 12, 15 dollars. That s it, no more than that. If giving a loan of 10 dollars can change a beggar into a dignified salesperson, why aren t we doing that? And the question was: Will they survive? Today, we can say with authority that it s no a question of survival, they are developing the 76

whole thing. What we see now is some of the beggars are not only selling things but also collecting shopping list from the families and come to the market and buy things and deliver it. Because in Bangladesh, for women to go to the market is very difficult. You have to tell your husband to bring something. And husbands are husbands, they forget, all the time. So they found out a new way: new agents of shopping. She gives the list and they bring whatever is on it, so they are happy and they are making a profit. So this is another demonstration of how our thoughts can stop our own actions. If you think differently, things are different. 2- The objectives and perspectives of Grameen Bank These young people going to universities, I occasionally meet with a group of them to discuss about their future and what they want to do about themselves. After we discussed for half a day about lots of different things, they all waited to ask this question: Grameen Bank has been so wonderful to help us go to school, now we are in university, we are in medical school, we ll become doctors, we will become engineers. But where are the jobs? When we come out, will you help us find jobs? Because you have done everything else. So I ve been hearing this so many times that I came up with my answer. I know that in this meeting, this question will come up sooner or later. Whenever that question comes up, my answer is this: Yes, I understand your worries about your future, but as children of Grameen families, I would you like you to consider and to keep in mind this: as a Grameen Bank child, as a Grameen son or daughter, my commitment, my promise to myself, my pledge to myself would be something like this: I shall never work for anybody, never. I will give a job at least to one person. And every morning, you wake up, you say that: I m not going to ask for a job to anybody, I will create a job for at least one person. All the kids in front of me got stuck: No job? What am I going to do? What do I do? So I said: Yes, you are wondering what you are going to do if there aren t any jobs. How do you create a job for somebody else? Look, other kids are waiting for jobs, they probably influenced you, but there is a difference between other kids and you. Your mother owns a bank, other kids mothers don t. That s a big difference. All you have to do is to figure out what is the enterprise that you are going to do, because money is not your problem. The bank has plenty of money to give you. The question is: what is the idea you want to use? Your mother is using money from Grameen Bank and you have seen everyday how she uses that money. You have gone to school. You have learned a lot more things that your mother has ever learnt. What is good about that if you can t do a business better than your mother? Think about that. When you start a business, of course, you will be employing other people and that will be your success. So think about that. This is a challenge so always remember that I m the son of a Grameen Bank family or I m the daughter of a Grameen Bank family. My task 77

is to create a job, not to ask for a job. I ll never work for anybody and that s it. They are not persuaded of course, but I keep on repeating that and I believe in that. The reason I keep repeating that is, if I have talked to thousands of them, I know for sure ten of them will do that, a hundred of them will do that and that will be an instance. I ll say: Look. They did it. Why couldn t you? You are a doctor, you can go and do your own profession. You are an engineer, you are a master in this subject or that subject, you can do something better than anybody else. So be an entrepreneur like your mother rather than being a job-seeker and wait or sending application after application and not get a job, because there are not too many things for jobs. So this is one thing that keeps repeating. The social business model You ask me about the social part or the economic part of it. Let me quickly add that I ve been challenging the very concept of business all round. I m challenging it by saying that the way we have defined and conceptualized the business is I think an extremely narrow interpretation of business. That interpretation of business is the business to make money. The human being is much grander than making money. Making money is only one little piece of human being, not all of it. The way economic theories, economic framework present the human being is they blow up that tiny little bit as if it were the whole human being and say business is always making money. Then, you are not addressing the other parts of human being. The same human being who wants to make money is the same human being who wants to help other people, the same human being who wants to sympathize with other people, empathize with other people and so on. What about those parts? So at least, to begin with, there should be two kinds of businesses. Business to make money, which we are all familiar with, and the other one, business to do good to people. There we are in business, I am in business, not to make money, to do good to people. It can be done. I can address any social issue -any problem that we see can be transformed into a business model- and then try to address it in a business model. So we ll come to our work, Grameen work, micro-credit. Micro-credit can be done in either way: you can turn micro-credit in a money-making proposition, which moneylenders always did. We were not the first one to come, they have always been making money. There are loan sharks in our history, in our books, on our literature, so it always existed. They are the one who want to make money by lending money, but what is the other one? The other one is to lend money to do good to people so people can create their own opportunity to pull themselves out of poverty and move on, bring out their creativity, ingenuity, and their intelligence and so on. And it can be done. And if you look at Grameen Bank, probably Grameen Bank will fit into that social enterprise. It s an enterprise that aims at changing people s life, not making money. It s not designed to make somebody rich. For example, if I created Grameen Bank to be owned by me, I don t think anybody would have objected and we would be making a lot of money. It s a very exciting money-making machine that we built, 78

but that s not how we built it. Right from day one, we decided that this bank would be owned by the borrowers themselves. They don t even know what ownership is. We told them what ownership is, what it means. They sit in the board of the Grameen Bank which lends more than half a billion dollars a year in loans averaging less then 120 dollars. The profit that it makes, all this, is owned by the borrowers themselves. So this is a social business enterprise. We can address any aspect of life in a social business enterprise. So I ve been saying that even business schools, like the one that we have right here, probably in the future when we will have accepted this idea that it can be done that way will have, instead of just a plain MBA, a class producing just social MBAs who will become the future social business entrepreneurs, who will create social businesses to do good to people and leave a signature in the world. This is what I have done. As a young man, I wanted to put my signature to the history and I did it. This piece of the problem, I solved in a business way and it worked. It s possible. And in order to do that, I m arguing that maybe this business environment has to be created differently, because this entire business environment has been created with one idea: to make money. So we have a stock market. We go and buy shares on the stock market. Why do we go to the stock market? We want to make money. That s the whole and sole purpose of going to the stock market, so there is no chance in that stock market for social business enterprises. So why don t we create a social stock market, where all the social businesses will be listed. When people will walk in that social stock market, they will know why they are going there. They are going there to find out which particular social company is doing in particular area, like women empowerment or children out of the street or drug addiction or drinking water or sanitation or health care. Health care is a big issue. It could be very well addressed in a social business way. It s a global issue; it s not just a Bangladeshi issue; it s not just an African issue. People at the bottom don t get health services. Why aren t we doing something about it? We can run this as a social health care service run as a business. So, we need to have that stock market. Then I was even suggesting maybe we should have a social Wall Street Journal, which would be enlisting all those companies and the speculating about who is moving up and who is going down, which new venture is coming up from young men or young women who want to do something and say: Here s a grand idea. And there s a social venture capitalist waiting around to say: Here is my money, go ahead. Do it. If dotcom companies can have venture capitalists sitting around to support them, why not social business enterprises? I m sure there are lots of people that would come up with their money to support these programs. So let s create a completely new structure. Then the harshness of this what we call capitalist world will be torn down, because you have a social business coming. So it s a free market: social business enterprises will be competing with the money-making business enterprises in the same market place, and whoever s the winner will take the booty and move one. And I m sure creativity, on the side of the social businesses, will be much better, much more organized, much more forceful, because people will be supporting this kind of business in a much warmer way than any other kind of business. So it s two kinds of businesses, and the same entrepreneur 79

can play on both sides. The same entrepreneur can have investment in the money-making enterprises and at the same time in the social business enterprises, because that s what he/she loves to do. Grameen is a mixture. It s a business, it makes profit and all that, but profit goes back to the borrowers so that the social aspect is maintained. The Grameen Bank s rating system The objective of Grameen Bank in the future, what we see, just quickly: We have over one thousand six hundred branches in Bangladesh where we work. Our branches are graded with stars, like in hotels: 3-star hotel, 4-star hotel, 5-star hotel so that you immediately know the difference between two hotels. So if you go to our branches, you can ask: How many stars have you got? We got 2 stars How about you? We ve got 5 stars. So you know there is a difference between the 2-star and the 5-star. What are theses stars? Each star is color-coded so by looking at the color of the star, you know what the accomplishment is. 1. If your branch a branch will be about four thousand plus borrowers- has a 100% repayment record for the whole year not 99.9%, 100% repayment record- then you get a blue star. So you know they have a 100% repayment record, that s good. 2. If your branch makes profit, then you get a green star. 3. If your branch just works with its own money, doesn t take any money from anywhere, just mobilizes the deposits and lends money to the local poor people and sends the surplus deposits to head office or to another branch, so if it s a surplus branch in terms of its financial resources, it gets a violet star. The next two are very interesting: 4. If all the children of these four thousand plus families are in school, if not a single child is out, then you get another star, a brown star. If you have a brown star, green star, blue star and a violet star, you know what these are for. 5. If all those four thousand plus families have moved out of poverty completely, if not a single family is left behind, then you get another star, a red star, meaning that all your borrowers are now out of poverty. So imagine a 5-star branch of Grameen Bank. It has accomplished all the missions of Grameen Bank. So if we can have all those one thousand six hundred branches with 5 stars, imagine what it means: all the borrowers are out of poverty, all the children are in school and they run their own branches with their own money, there is a 100% repayment, it makes profit. That s it. Today 56% of our borrowers are out of poverty. How we measure poverty every year, we monitor that- is a very simple thing: there is a ten-point checklist. We go back to the family and see how many of those ten points they have overcome. 80

1. Does the family have a solid roof over their head? So that in the monsoon, there won t be rain coming down into the house. If they have a solid roof, you have a tick mark, they have completed that one. 2. Do all the family members sleep on a bed rather than on a floor? If there are enough beds in the house for all of them, then you ve got the second one done. 3. Do all the family members have warm clothing? This is very unusual. Because in Bangladesh, when winter comes, it s a severe winter, because everything is open and the temperature drops down to as low as 6 Celsius. Nothing but a piece of cotton cloth, nothing else. So we see if you can build up the stock of warm clothing for the children and for everybody. If all the family members have enough warm clothing for the worst winter, then you get another point. 4. Access to drinking water. Do you have access to pure drinking water, to a well or something. If you do, then you have another point. 5. Do you have sanitation for yourself, for the family? Sanitary latrine. If you have sanitary latrine, you get another point. 6. Do you have enough savings in the savings account to meet emergencies? In our terms, it s five thousand takas. It s almost saying five thousand euros to them. So if the family has done all the ten points, then we declare that this family has moved out of poverty. If one of them is missing, then we keep on working so that that can be completed. So that s a tough job, having all those ten conditions fulfilled and getting the family out of poverty. So this is how we do that, and there is 56% done. The millennium development goal is to see half the number of poor people getting out of poverty by 2015 and we keep reminding to ourselves within Grameen families that our task is to make sure before 2015 that a 100% of all the families of the Grameen bank are out of poverty, so that we create an instance: Look, we have done it here. So that people can think that it can be done for the whole world. And I keep saying that poverty is an absolutely unnecessary thing. It doesn t impose on the people. Poverty is not created by the poor people. It s not their fault. Poverty is created by the system that we built, the institutions that we have built, the policies that we pursue ad the concepts that we created for ourselves. They are the ones that created poverty. I even defined a poor person as a bonsai; you know the Japanese word bonsai, the little tree? You pick the best seed in the forest for the tallest tree and plant it in a flower pot, you get a tiny little tree. It looks exactly like the tree you saw in the forest, but far far shorter than the one that you saw. What s wrong? Is the seed different? Is there something wrong with it? No, we collected the best seed. Then what went wrong? The pot. We planted in a small pot, it needed a bigger base to grow. Poor people are bonsai people: nothing wrong with the seed. Simply, society has not allowed them to grow on the real soil. They were given a small pot. So they grew short, and everybody is saying: Look, it s their fault. It s not their fault. It s because they have been denied 81

the opportunities that is available to everybody else. So I m saying: Just open up. Why close the door to the bank? What is the excuse? You have been saying that poor people were not credit-worthy. I say the real question is whether the banks are people-worthy. Why don t we change the banks instead of trying to change the people. I say: change the bank to fit them. And it can be done, because that is what Grameen has done. It demonstrates that it can be done. Grameen Bank's diversification All the borrowers of the Grameen Bank have their own pension fund, so that when they grow old, they don t have to worry about who is going to support them. We have an insurance program. We have a loan insurance: if somebody dies, the family doesn t have to pay anything because it s part of the insurance. We have started a mutual fund so that we can buy the shares of big companies on the stock market for the poor people. We created a mobile phone company called Grameenphone, which is the largest mobile phone company in the country. And then we started selling these mobile phones to the borrowers of Grameen Bank. She takes a loan, buys herself a cell phone and starts a telephone business, sells the service of her phone in the villages, and she makes a lot of money by selling the service of her telephone. Today, there are more than 170 000 telephones that are available in villages but Bangladesh is a country where 70% of the population does not have access to electricity. So how do you take telephones to the villages where there is no electricity? We solved that quickly and created another company called Grameen Energy. We use solar energy, we implanted solar panel. It works. We don t need big energy, nothing. So now solar energy has become very popular. We are selling more than one thousand five hundred solar plant systems for lighting, for everything, every month. So this leads to another question of looking at demanders, look, see what their needs are and look common, create it for them. Grameenphone out of nothing is today the largest phone company as I mentioned. Not only that, it s also the largest company in the country, among all our countries. So it works. This is how you have to take the issue and fit it to your social needs. And it works. Thank you. Professor Muhammad Yunus, thank you very much and welcome to our faculty as Professor honoris causa. 12 octobre 2005 82