Those who stood out (4): Muhammad Yunus

The entrepreneur

Yunus was born in June 1940 within a Muslim family, in the village of Bathua, which today is part of modern Bangladesh (INDIA).

In 1944, his family moved to the city of Chittagong, and he attended Lamabazar Primary School. In 1957, he enrolled at the Department of Economics at Dhaka University and completed his Bachelor’s degree in 1960 and his Master’s degree in 1961.

He started working as a lecturer in economics in Chittagong College just after his graduation and he was able to start up a profitable packaging factory at the same time.

In 1965, he received a Fulbright scholarship to study in the United States that allowed him to obtain his PhD in Economic Development from the Vanderbilt University in Nashville, TN, in 1971.

When he returned to India he observed the devastating effects of the famine of 1974. He became involved in poverty reduction at that time and established a rural economic program as a research project. He discovered that very small loans could make a tremendous difference to a poor person. He envisioned a new business model based on tiny loans with a reasonable interest rate for poor people. Ultimately the model became extremely successful proving that the microcredit concept is able to help poor people to create a better future for themselves and their families.

In October 1983, the pilot project grew into a fully operational bank for poor Bangladeshis. It was renamed Grameen Bank, (meaning “Village Bank”). The bank has demonstrated to be a useful instrument to provide opportunities for the poor people in India.

Muhammad Yunus was awarded the 2006 Nobel Peace Prize, along with Grameen Bank, for their efforts to create economic and social development.

The Company: GRAMEEN BANK

The Grameen Bank is a microfinance organization and community development bank founded in Bangladesh. It offers small loans (known as “microcredit”) to the impoverished.

Grameen’s objective has been to promote financial independence among the poor. Yunus encourages all borrowers to become savers, so that their local capital can be converted into new loans for others. Since 1995, Grameen has funded 90 percent of its loans with interest income and collected deposits. Grameen converts the deposits made in the villages into loans for other people in the same villages.

Grameen has diversified the types of loans it offers. It supports hand-powered wells and loans to support the projects of Grameen members' immediate relatives. It has also expanded into seasonal agricultural loans and lease-to-own agreements for equipment and livestock.

The bank has set a new goal: to make each of its branch locations free of poverty, as defined by benchmarks such as having adequate food and access to clean water and latrines.

Grameen Bank is best known for its solidarity lending system. Each borrower must belong to a five-member group. The group is not required to give any guarantee for a loan to its members. Repayment responsibility rests solely on the individual borrower. The group oversees that everyone behaves responsibly and no one gets into a repayment problem. There is no default liability therefore the group members are not obliged to pay on behalf of a defaulting member. In practice the group members often contribute the defaulted amount with the confidence of collecting the money from the defaulted member at a later time. Such behavior is encouraged by the bank as it does not extend further credit to a group that has a member in default. The system has expanded quickly and now is used in more than 43 countries.

As of October 2007, the total number of borrowers reached 7.34 million; the Bank had a staff of more than 24,703 employees; its 2,468 branches provided services to 80,257 villages; the bank distributed $11.35 billion USD in loans, The global number of potential micro-borrowers is estimated to be 1 billion, with a total loan demand of $250 billion. The present microfinance model is serving 100 million people with $25 billion of loans.

Key takeaways

Yunus was not the first one that came up with the idea of small loans to the poor, but he was the first one who showed to the world that it could work on a large scale.

Let me list the principles that Yunus has embraced during his career and which today are source of inspiration for most of his followers:

1. Set forth an inspiring vision and stick with it.

2. Innovate. Challenge the prevailing wisdom.

3. Build a team that owns the dream.

4. Communicate. Relentlessly communicate within and beyond the organization.

5. Be Flexible. Change strategies, goals, and tactics as needed.

6. Be patient and persevere. Sometimes you have to wait.

7. Embed your values into the organizational culture.

8. Brand yourself and your organization.

Yunus continues actively launching new initiatives. You can check his last one following this link:

Yunus center Social Business. http://www.muhammadyunus.org/

This man has truly made an impact on our world.