Recently, someone remarked to Muhammad Yunus, the Bangladeshi banker/ economist/ crusader against poverty, that he must be a very rich man.
“I said, why would I be a rich man?” he tells an attentive audience. “Well, you have all those companies; you must be rich to have all those companies.” Yunus scratches his chin and smiles the beguiling smile that makes you want to be a believer. “Oh. I start these companies, but I would never own them.” You are now a believer.
Yunus was in San Francisco Monday, at a social entrepreneurship program sponsored by the Commonwealth Club. He is winding up a U.S. tour promoting his new book, Building Social Business: The New Kind of Capitalism That Serves Humanity’s Most Pressing Needs. In the process, he is promoting a theory that social business — business operated for the benefit of society (such as the poor who are commonly the beneficiaries and owners of Yunus’ companies) — can and should be a viable segment of the global economy.
Grameen Bank, which was begun in 1976 with $27 out of Yunus’ pocket and now provides loans to more than 8,100,000 borrowers — no collateral, just good faith and trust — would seem to prove his point. Defaults on Grameen micro loans are so few as to make Fannie Mae weep.
From micro loans, Yunus expanded into business ventures on the same basic principle: to achieve one or more social objectives through the operation of the company. The investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point.
There are now Grameen (the word refers to a rural village) companies in banking, agriculture, healthcare, telecommunications and other areas. Yunus gave one as an example of why he believes the principle works:
Grameen and Group Danone went into a joint venture to create a yogurt fortified with micro-nutrients to decrease malnutrition for the children of Bangladesh. The yogurt is produced with solar and bio gas energy and is served in environmentally friendly packaging. The first plant started production in Late 2006. The 10-year plan is to establish 50+ plants, create several hundred distribution jobs and self-degradable packaging.
The environment is protected, children get healthy, grow up to create businesses. Yunus spoke of one skeptic saying, “where will I get a job?” and said he explained, “You don’t look for a job, you create a job.”
Grameen Bank has more than 2500 branches — now including three in New York (where Yunus would like to see payday loan and check-cashing operations go out of business), one in Omaha, and in the near future: one in San Francisco. If Yunus is enjoying the proving out of his theories and the lifting of vast numbers of people out of poverty, he may be enjoying most of all the reminiscences about those who scoffed at his notions in the 1970s.
“They said the poor were not credit worthy,” he smiles. “I was told, about non-collateralized loans, ‘You can’t do that!’ After 2008, I wanted to ask, ‘Who is credit-worthy?'”