Last Updated: Friday - 09/24/2010

Nobel winner offers way out of poverty

Microcredit pioneer makes loans to go out, do the job, come back

CNS FILE PHOTO | PAUL JEFFREY A woman taking part in a microcredit program in India as described by Mohammad Yunus displays her savings book.

OTTAWA - The pioneer of the microcredit movement has set his sights on creating "social business" to lift people out of poverty.

Mohammad Yunus, the founder of the Grameen Bank in Bangladesh, told a recent gathering sponsored by IDRC (International Development Research Centre) his social business model could help transform Haiti, still reeling from the aftermath of a devastating earthquake.

Yunus, who with his bank won the 2006 Nobel Peace Prize, said the more money he saw pouring into Haiti, "the more I got worried." "Haiti doesn't have a system" that will ensure the money is used wisely to generate employment, create housing and provide adequate housing.

He has asked that donors contribute 10 per cent to a social business fund for Haiti that will pursue a problem-solving rather than a profit-making model for social change.

"You won't make any money at it, but you solve the problem." If money is donated, "the money never comes back," he said. "If you create social business, the money goes out, it does the job and it comes back."

Yunus and the Grameen Bank won the 2006 Nobel Peace Prize for the dramatic impact the microcredit has had in empowering women, unleashing their entrepreneurial skills and helping lift them out of poverty.

He founded the bank in 1983 to provide a way for the poor, who were excluded from normal banks because they could not read contracts or provide collateral, to borrow small amounts of money.

He lent the money on trust. The poor paid him back and got the opportunity to get bigger loans.

Mohammad Yunus

"The whole thing relies on the money coming back," he said. "Otherwise it is not banking."

The bank serves 8.3 million borrowers, mostly women. It's owned by the women, who started out with initial loans of $30 or $40. Now some of them sit on the board.

It was an amazing experience for women who have never handled money to have that $30 in their hands, he said. They were often in tears, not believing it was true, but it awakened a desire in them to work hard to attain a better life and to make sure they paid back every penny, he said.

This had a powerful impact on women who had many fears in their minds based on their historical treatment, he said. They had already been told, "you are no good, you brought misery to the family, you should have been a boy."

The transformation was not overnight, he said. "It takes time for a person to realize they can do something."

"Women are so different in Bangladesh than they were 25 years ago," he said, noting the birthrate has dropped sharply to 1.4 children per woman, one of the lowest in South Asia. The massive use of microcredit has been part of this transformation, because of how it has empowered women.

RICH OR POOR

The Grameen model works not only in poor countries, but rich ones. The microcredit movement has spread even to the United States, with several bank branches in the boroughs of New York City, serving women who could not get ordinary credit. They have nearly 5,000 borrowers, Yunus said, who can get loans without collateral or a legal contract.

Microcredit banking bypasses the exploitation of the loan sharks and the payday lending services that charge the poor exorbitant interest rates. He noted two-thirds of the world cannot access loans through normal banks.

"We pride ourselves on the beautiful banking system that we have," he said. "What kind is it if people have to go to loan sharks or pawn shops?"

He said a sign of success for his movement will be the demise of pawn shops and payday loans.

"Poverty is not created by the poor people," Yunus said. "It is artificially imposed on them."

He blasted the profit-making business model as well as the destructive effects of welfare.

"Human beings are not robots," he said, noting that human beings are not only selfish, money-making machines. While they can be selfish, they can also be selfless, he stressed.

He encouraged people to think in new ways, to become entrepreneurs instead of slaves to the concept of "slaving for shareholders."

CAGED BIRDS

But those who remain charity recipients will only get worse, he warned. He compared the poor people who have been on the dole for generations as similar to caged birds who forget how to fly and find food for themselves.

He urged creative approaches where instead of the profit motive, people would think of social businesses to solve problems. If someone designed a business that could take 10 people off welfare, give them a renewed self-respect through meaningful work, it would plant "a miracle seed" that could be planted all over, so "nobody would be on welfare anywhere."

Yunus spoke of social business now using Danone yoghurt to help treat nutritional deficiencies; businesses to make cheap malaria bed nets or affordable shoes by brand name companies.

The Canadian Catholic Organization for Development and Peace (CCODP) also supports the use of microcredit, but usually within a project that is doing other things as well, said CCODP communications officer Francois Gloutnay in an interview.

A project for the establishment of some kind of cooperative might include running workshops, helping them get their product to market and a microcredit component to help them get started, Gloutnay said.

Microcredit has been "an important way to get economic power for poor people," he said.

Copyright © 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009 -- Western Catholic Reporter