"Banker to the Poor"
The NEWS HOUR with Jim Lehrer
November 22, 2006
Interview with Muhammad Yunus
Paul Solman. It was in the early nineties that Muhammad Yunus introduced the News Hour audience to micro lending, the idea that won him the Nobel Prize last month. [Muhammad Yunus with a group of micro borrowers in Bangladesh.] Micro loans to Bangladeshi women of less than a hundred dollars each to buy straw to weave baskets, flour to bake biscuits [Flatbread going into an oven, Muhammad Yunus eating a biscuit.]
[Exterior, interior of a beauty salon]
We were reporting on an Arkansas microlending program based on Yunus Bangladesh model&endash;lending to the likes of Jesse Pearl Jackson to buy more hair for her hair weaving business and grow the Pine Bluff, Arkansas, economy one small loan at a time.
Jesse Pearl Jackson. I had attitude. Let's just say it, I had an attitude
PS. Was it an attitude about yourself or about business?
JPJ. My attitude was about business.
PS. So every time you have another micro entrepreneur you have a little bit more growth.
Muhammad Yunus. Absolutely. Because once you have a micro enterprise coming up you are allowing a person to show his work, her work.
[Various shots of borrowers and a loan officer.]
PS. And allowing the person to show his or her commitment, responsibility. Yunus' Grameen Bank, born and still based in Bangladesh, had more than a million borrowers in the early nineties and a repayment rate better than 98%. When our Fred De Sam Lazaro actually went to Bangladesh to see Yunus' operation in 2001, the repayment rate was the same, but the number of borrowers had passed two million. And Grameen, owned by its borrowers, had branched out into other business like the country's largest cell phone company, reaching out and touching those long isolated from the larger world.
[City, Grameen cell phone advertisement, cell phone user, woman.]
Woman (translator). We are offering a very good service to the village, and people are very thankful for our phone business.
[Flooded village, arid village, storm, men with rice, Yunus with children.]
PS. Moreover, Yunus and Grameen were arguably transforming poverty-ridden, storm-buffeted Bangladesh. No famines there since Grameen began. The birth rate down by almost half. The borrowers' children, according to Yunus, almost all going to school.
MY. I would say it's about 100% enrollment from Grameen families today, and many of them are in colleges, universities coming all the way, so that is very different.
[Current interview with Paul Solman.]
PS. So now, five years after that sound bite, Muhammad Yunus, Nobel Prize winner. Welcome.
MY. Thank you. Thank you for inviting me.
PS. So how many borrowers now? Are 98% or more still repaying? And is Bangladesh's economy improving?
MY. Right now Grameen bank has seven million borrowers, 97% women, and the repayment rate is 99%. Bangladesh economy is changing, very steadily. Our growth rate had been 6% plus. Our poverty rate is steadily declining very steadily during the decade of the 90s on an average of 1% decline of poverty. So in the decade we had a 10% decline in people under the poverty line, and in the first five years since 2000, now 2% per year decline in our poverty.
PS. How much of that do you attribute to your own efforts and to microlending in general?
MY. Researchers will not let me say that it is because of this. But I'm sure it has played a very important role because during this period 80% of the poor families have been reached with microcredit. Bangladesh has a population of 145 million. Half the population is under the poverty line. So when you say that 45% of the families have been reached by microcredit, it is a giant work.
MY. After reading your book, Banker to the Poor, I wonder if you shouldn't get the Nobel Prize for persistence as well as peace. I mean just to review for people, you went to Vanderbilt University
MY. That's true.
PS. Months after it was desegregated.
MY. That's right.
PS. You were so shy and prudish that you wore a full-length skirt in the shower because it was an open stall.
MY. That's right, yes.
PS. Brought up in an Islamic family, and Islam forbids lending.
MY. That's right. Not lending, interest. Islam forbids interest.
PS. Okay, that would seem to be a problem for someone who is lending. You loaned to poor Islamic women who weren't allowed to be in the same room with a man. She had to stand outside huts. The women you used as a go-between were jeered, even attacked occasionally, for riding bicycles from village to village because that's not allowed, or wasn't allowed in Bangladeshi society. You hired ex-Marxist guerilla fighters as loan officers.
PS. Banks scoffed. Bureaucrats stalled. Thirty years later does this amaze even you?
MY. It's amazing. It's amazing where we began because at that time in 1976 when I began thirty years ago in the village next door to the university campus, I had no blueprint. I was not building something. I had no idea what I was doing. All I wanted to do was to get the people out of the clutches of the money mongers.
PS. How much were they charged?
MY. 10% per day. 10% per week. More than the interest were the other conditionalities, like [the] condition [that] whatever you are producing after you take my money, I will have the first right to buy it, and the price I decide. You can't come and tell me that you can sell it at a higher price because I decide now what price I pay you. So I would say this is simple slave labor rather than a business.
PS. Slave labor
MY. This is slave labor. So that is why I wanted to get rid of it. Then I tried to do it in the next village because it made people so happy. I had no idea that it would grow beyond the borders of Bangladesh and one day to be all over the world.
PS. If I had told you, or someone had told you back then, hey, I think someday you might win the Nobel Peace Prize for this, you would have said?
MY. Oh, forget it. I mean this is something crazy thing. You don't even pay attention to such a statement.
PS. 2005 was the U.N.'s year of microcredit. Now people speak of microfinance evangelism. Are you afraid that microcredit might now be promising too much? You know, the alleviation of poverty. The countries that microcredit operates in, Bangladesh, Kenya, Bolivia are still economic basket cases, by Western standards certainly.
MY. Well, it depends where you stand and what you look at, because Bangladesh is shown as one of the countries where the happiness index, we are in the top. We are better than the United State on the happiness index. What is your poverty? We don't know. You say basket case? We don't consider ourselves [a] basket case. Our growth rate is bigger than the United States&endash;6% per year on average. In the human development index, last year in 2005, China was number one in the human development index, the quality of life as a whole.
MY. Improving. Cape Verde was number two, and Bangladesh was number three in the human development index. Better than India, better than Pakistan, better than Sri Lanka. So it is quite a significant thing happening in Bangladesh.
PS. A critic of the microcredit movement, Thomas Victor in Forbes magazine, quote "The large majority of people in the advanced economies are not entrepreneurs, so why do we assume that in develop[ing] economies the poor are?"
MY. We are all entrepreneurs. When we were in the caves, we were all self-employed. We were finding our food, feeding ourselves. That's where the human history began with. As civilization came, we suppressed it, and made into labor. We are all labor.
PS. And a labor market.
MY. And a labor market. Because you stamped us, we are labor. We forgot that we are all entrepreneurs.
PS. How did you create the level of trust that you did? When you write about your first experiences, farmers cheated you. When you had a guy collecting the repayments, a beetle leaf seller I think it was, people were saying, "Oh, we paid him back already" and lying about that. So it is not as if these were naturally trusting or trustworthy people. How did you turn it around?
MY. Well, people are people everywhere. Natural tendency [is] for people to stay honest. If is the system encourages them to go wrong, then they take the other route, then they say, "If everyone is doing it, I will do it too." We created a system which encourages the natural state of affairs which is to stay honest, because if you pay back the loan, the door remains open to you and you can take more loans and move up. If you don't pay back, all you have done is closed down the door. You don't go mad at them. Then she says, "I made a mistake. Can I come back? I had a lot of difficulty. I couldn't pay you back. Can I now pay and come back?" Of course you can come back. You're welcome.
P.S. They've learned the lessons.
MY. Yes. Within. We know that. That's what we wait for.
PS. So this is the natural state of people. Then why weren't banks doing this before? Why weren't commercial banks doing it? Are they stupid? Prejudiced? Both?
MY. Because they don't trust people. If you look at it in a kind of funny way you will see that the entire banking system is based on distrust. You are assuming this guy is going to run away with my money, because you are bringing in the lawyer, you are bringing the collector. You want to tie him up so he cannot run away with the money. Our system started with trust. We assumed that she is good enough, she is going to pay you back. And in 99% of the cases we are right.
PS. Do you mean to suggest that if Citigroup and I had a trusting relation with each other, it would all work out fine?
MY. No harm in trying. I tried. It worked.
PS. Are you in favor of for profit institutions that aren't owned by their borrowers entering the microlending business, as is now happening. I mean big banks are talking about it. Hedge funds, private pools of big capital, are now talking about investing if they haven't already begun to invest in microfinance institutions. Do you approve of that?
MY. I invite everybody to come into [the] microcredit area. One thing I want to distinguish and also urge them is, don't make it an area to maximize profit because when you maximize profit you minimize the benefit to the people.
PS. Why would you expect me, if I were a hedge fund, to take a lower profit than I could otherwise get by attending to other people's social/economic problems?
MY. Because people are people, human beings. Human beings are a much bigger entity than money-making machines. People have all kinds of feelings, and all kinds of inclinations, all kinds of exciting ideas. That's why we create foundations. We give away our money. You don't say this is a crazy thing to do. But we all do. Big companies have their foundations. Everybody has What is a foundation? You give away your money. What I am saying is, if you can give your money, why don't you invest to do good to people, and get back your investment, and do the same thing over again, so that your money recycles again and again and change the quality of life of people.
PS. So there are enough investors in the world to invest in these funds to make them continue to operate even though they are not as profitable as they could be.
MY. It was not profitable at all. No loss, no dividend companies. That is what the social business is all about. It is a clean idea.
PS. Muhammad Yunus, than you very much.
MY. Thank you.