Dr. Muhammad Yunus kicked-off the Commonwealth Club’s series of talks on social entrepreneurship today in a speech at the Fairmont Hotel. The event doubled as a book signing for his new work, “Building Social Business—The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs.” Dr. Yunus and Grameen Bank, the institution he founded in 1976 to provide credit to poor women in Bangladesh, were co-recipients of the Nobel Peace Prize in 2006 for their work in developing microfinance.
In his speech Dr. Yunus traced the evolution of his thinking from the founding of Grameen Bank to his present passion for promoting social businesses that serve the poor. In 1974, while teaching economics in Chittagong University, he observed first hand the effects of a devastating famine on the poor of Bangladesh. He realized the elegant economic theories he had studied were next to useless for these people.
Venturing outside the gates of the university he began to learn of the underlying problems afflicting the poor, locking them in a cycle of poverty. Principally, he realized their lack of access to reasonable credit kept them in the clutches of the money lenders. With the equivalent of a mere $27 he was able to break this cycle of exploitation for 42 women. If he could do so much for so little Dr. Yunus wondered why banks shouldn’t be able to do much more for the poor?
Unable to convince the established banks that the poor were indeed “credit worthy” and would not only pay back their loans but also use them to lift themselves and their families out of extreme poverty, he founded Grameen Bank. Today the bank has over 8 million clients, 97% of whom are women, 2,600 branches and over 20,000 employees. The bank lends more that $100 million per month and experiences a 98% repayment rate on its loans. “Compare this performance to that of the big banks during the current economic crisis and tell me who is credit worthy,” Dr. Yunus said.
Lack of credit was not the only problem he uncovered. Lack of sanitation, health care, access to information, education, nutrition were among the many issues Dr. Yunus saw affecting the poor. “When I see a problem I create a business to address it” he stated. But the form of the businesses he creates is different from the normal for-profit companies. Social enterprises are enterprises either owned by the poor or have been funded by social entrepreneurs willing to forgo a monetary return on their investments.
As discussed in his new book, social business have dual “bottom lines” one social and the other economic. They operate as for-profit businesses to ensure their sustainability, but forego an economic return in order to achieve a social impact. He cited Grameen’s collaboration with the French company Danone to produce a special yogurt product for malnourished children in Bangladesh as an example of such a social business.
And now Dr. Yunus brings his poverty fighting philosophy to the United States. Since January of 2008, Grameen America has opened three branches in New York and one in Omaha, Nebraska, to serve the needs of poor entrepreneurs. Employing the same group lending methodology pioneered by Grameen Bank in Bangladesh, Grameen America has already lent to more than 3,000 low income small business owners in the United States with the same 98% repayment record. He announced that Grameen America will open a branch in San Francisco this summer.
The poor did not create the conditions that trap them in a cycle of poverty, nor are they to blame for the many crises, financial, environmental and social that threaten the world today. That is the fault of systems predicated on economic theories that view humankind as motivated purely by profit and self interest. There is, according to Dr. Yunus, another side to human nature, a selfless side that rushes to help when disaster strikes. Build businesses that appeal to the selfless side of human nature and he believes we will find solutions to the problems that keep more than 2 billion people in extreme poverty.