Archive for November, 2009

Simple idea which really makes a difference

Saturday, November 28th, 2009

“From Dr. Yunus’ personal loan of small amounts of money to destitute basketweavers in Bangladesh in the mid-70s, the Grameen Bank has advanced to the forefront of a burgeoning world movement toward eradicating poverty through micro-lending. Replicas of the Grameen Bank model operate in more than 100 countries worldwide.”

The above excerpt is from Nobel Prize Committee’s website about Muhammad Yunus, the winner of Nobel Peace Prize 2006, Bangladeshi banker and economist. The idea that catches Nobel Committee and many governments’ attention is the concept of micro credit.

muhammadyunusThe concept of micro-credit? “One thing that led me to what I do now was a woman making bamboo stool. She told me she made two pennies a day. I couldn’t believe why she made two pennies a day. She made beautiful bamboo stools. The woman told me that the rest of her profit went to the local moneylender who bought the bamboo stool from her at a fixed price. I went around the village and found 42 people in need of just $27”, Muhammad Yunus says on his website.

His idea was that the world’s poorest people could transform the conditions of their own lives if given appropriate financial support. From this belief came the idea of ‘micro-credit’ – bank loans offered to the poor without asking them for guarantees or security in return.

The concept and then implementation of Micro-credit has successfully enabled people at the very bottom of the economic ladder to engage in self-employment projects that allow those people to get an income and then begin to build wealth and exit poverty. There is no need to explain financial details of the concept of micro-credit here. Instead, we can ask a simple question: why has the concept of micro-credit succeed so much?

Significance of this concept comes from its simplicity and social effect. While all people, governments and international institutions like United Nations talk of lofty ways to crush poverty, Muhammad Yunus is credited with down-to-earth and simple solutions to make people self-sufficient. Besides crushing poverty, it is a social transformer to help society (specifically poorest layer of the society) change women’s traditional role. Most of the people getting financial support are women because of that poverty affects women more than men in a traditional society.

Moreover, when transforming the society, giving appropriate financial support to poorest people with low interest rate, banks or firms can make profit and sustain their business. until the success of the concept of micro-credit, traditional banks had believed that poorest people were not one of their focus groups. They completely ignored them. But Muhammad Yunus has changed the view.

Thinking with stereotyped view, as most of the finance organizations did, can not provide us different or new ideas. Thinking unthinkable, not restricting our mind with stereotyped views and taking social effect into account can provide more benefits to society, to firms, to us. Muhammad Yunus has shown this simple fact to all of us.