Picture: Nobel Peace Prize Laureate Prof. Muhammad Yunus.
With the Euro tethering with collapse, UBS and JPMorgan banks producing massive trading losses and shareholder voting against high bonuses in banking, one wonders how to fix all this. Nobel peace prize laureate Prof. Muhammad Yunus proposed a simple solution at the first Social Business Conference in Zurich: do everything opposite what banks do. Here is what he proposed.
When Prof. Yunus started 35 years ago with his micro-credit idea he had one important drawback : he didn’t know anything about banking. But this helped him creating a micro-lending bank that today has 8.6m borrowers in small villages in Bangladesh and lends out USD 1.5bn. He did this in stark contrast to how normal banks do business: no collaterals, no papers, no lawyers and no male clients. The success he achieved, he puts it down to a few principles. First and foremost, use entrepreneurship to help people. Second, business has to be profitable but the profit should not not only be monopolized by the shareholders but shared by everyone. And thirdly that Grameen Bank only lends to the poor, not to the rich as the normal banks do. Clients of Grameen bank first and foremost have to have a bank account and pay in small sums every month. The funds for lending are therefore created by the clients and not by outside investors. Grameen Bank is actually the borrower, not the lender.
Another rule for Grameen clients is that they have to send their children to school. 100% of all the bank’s clients’ children go to school. However, the problem then was to find a job as most students would come from very poor backgrounds and wouldn’t have the money to pay the mandatory bribe in Bangladesh to get a job. The solution to that problem according to Prof. Yunus was instead of looking everywhere else for a role model, every student should use his/her mom as the role model. The students should actually themselves be employers, and not just aspire to be an employee. In fact, according to Prof. Yunus, everyone is an entrepreneur, everyone.
For Prof. Yunus, a business should be there to solve problems, not to create them. So far he has started more than 50 businesses like selling affordable solar panels to villagers in Bangladesh so that they can have light in the evening. Though initially skeptical, the people are slowly beginning to buy into the idea.
In order to counter criticism that micro-credit only works in third world countries but not in the developed world, he started micro-credit in New York in 2008. Today Grameen Bank operates three NGOs in New York with a repayment rate of 99,8% and average starting loans of USD 1’500.
Prof. Yunus stressed that social businesses do not pay dividends. However, in contrast to charities the money is comes back and can be used again. He thinks that the fundamental flaw is mankind’s urge to make money but nothing else. For him making money is a means, not an aim. Whereas for-profit business is usually selfish, making other people happy is not. So making money in order to help other people is the aim of social business. Again and again Prof. Yunus stressed that poverty is not created by poor people but by the system. He likened the poor to Bonsai trees. They have proper seeds but are restrained from growing up because of the small pots they are nurtured in. Prof. Yunus emphasized that social businesses should solve real problems. And if they do that themselves, the government does not have to do this and therefore subsidies are would not be required. In that sense Prof. Yunus has found a way to make the world a freer place, quite close actually to the core liberal ideas of the Western world.
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