Dr. Muhammad Yunis: Changing the World One Business at a Time

February 17, 2009

But as students began lining up as early as 5 AM outside of Kenan-Flagler Business School on Wednesday February 4, it was not in hopes of seeing Tyler Hansbrough sink yet another layup. Rather, it was to hear 2006 Nobel Peace Prize winner Dr. Muhammad Yunus discuss his strategy for the daunting task of alleviating poverty around the world.

Dr. Yunus is considered to be the father of the concept of microcredit, the act of providing small-dollar loans to the working poor to fund their own entrepreneurial projects. With loans ranging from as small as $15 to larger sums in the thousands, studies have shown that after a mere 12 to 14 loan cycles, people living below the poverty line are either approaching it or surpassing it, motivated by their own volition. A simple concept in its most basic form, microcredit has proven to be one potential pathway out of poverty.

“It is such a simple idea, but people try to add so much complexity to it,” said Senior Ryan Leatham, General Coordinator for UNC’s own microfinance student organization, Carolina Microfinance Initiative (CMI). “People think that because it is such a big problem, it must have a difficult solution; but microcredit is such a simple idea and yet it has had the biggest impact.”

Dr. Yunus founded the Grameen Bank (or ‘Village’ Bank) in 1976, which began in Bangladesh and has grown exponentially over the past three decades to include more than 2,500 branches worldwide. The concept of microcredit has expanded as well, moving beyond merely small dollar loans to encompass more long-term, multifaceted credit services, such as property insurance and healthcare coverage. These programs comprise the larger umbrella term of microfinance.

Perhaps even more awe-inspiring than the success of microfinance around the world is its payback rate, which has remained at a staggering 98 percent. With statistics such as this to support his cause, Dr. Yunus has spent the past 30 years proving that it may, in fact, be the very population that banks have traditionally neglected, who are the most credit worthy of all.

“We must ask the question: why poverty? Who creates poverty?” Dr. Yunus asked, speaking to an audience of 700 at Koury Auditorium. “The answer is always the same. Poverty is not created by the poor people, it’s not their fault. Poverty is created by the system. It’s created by the institutions that we have built, by the policies that we pursue, by the concepts that we have designed. But today, after 32 years of this work, can anybody say that the poor are not credit worthy?”

The Beginning of the Microfinance Movement and the Grameen Bank

The inspiration for the Grameen Bank came to Dr. Yunus while he was teaching Economics at the University of Chittagong in Bangladesh. Upon observing the incredible poverty of the surrounding villages and the crooked business practices of the local loan sharks, he paid $27 out of his own pocket to free a group of 42 villagers from their credit contracts. It was from that simple transaction that the idea of microcredit was born.

“Entrepreneurship is a part of human beings; it’s not a separate thing that somebody has and somebody else does not have,” said Dr. Yunus. “All human beings are packed with unlimited potential; some simply never have the opportunity to know about it, to unleash it, so that they can contribute it and change the world…that is what poverty is all about.”crafts_captioned_2.fw

In an effort to serve those that the larger financial institutions traditionally denied, Dr. Yunus sought to create a system that was accessible to everyone, relying on social networking and trust amongst its members to function effectively. Joking with the audience, the Nobel Laureate remarked that when designing the Grameen Bank, he simply observed how the conventional banks operated and did the exact opposite – a statement, which, despite the ensuing laughter, is not far from the truth.

One of the most unique aspects of the Grameen Bank, and of Microfinance Institutions (or MFIs) in general, is the fact that they lend almost exclusively to women. Although most MFIs do not deny loans to men, approximately 97 percent of all borrowers worldwide are female.

Furthermore, the bank is run by the borrowers themselves. As Dr. Yunus emphasized, “It is not the banker’s job to say who is credit worthy and who is not; it is our job, outside the bank, to tell whether the banks are people worthy.”

And rather than requiring customers to come to them, MFIs actively go into villages in hopes of attracting new borrowers into their programs.

“People self-select their bank members, they’re not assigned,” said Dr. Lisa Jones Christensen, a professor at Kenan-Flagler and expert in the field of microfinance. “Thatsocial vetting, the strong social network is part of the support system that helps the loans work. Because these communities are nested and know each other so well, it ensures that this system remains on track.”

Lastly, unlike traditional banks, which scour the credit history of their borrowers, the Grameen Bank is not concerned with digging up the past. Rather, MFIs are focused on creating a better future for their clients, understanding that the poor cannot be entirely blamed for what their individual circumstances may have forced them to do.

“Our job is to build a future for them,” said the Nobel Laureate. “So we want to build a future, whether that person is a criminal just coming out of jail or whatever. That’s not something we can control. All we can do is give them a loan, help to rehabilitate that person so that he or she can move on with their life.”

Microfinance in the Twenty-First Century

With the microfinance system firmly established and thriving worldwide, Dr. Yunus has begun to explore new areas in his quest to alleviate global poverty, beginning with his latest initiative – ‘social business.’

In his new book, “Creating a World Without Poverty: Social Business and the Future of Capitalism,” the Nobel Laureate discusses his plans to completely revolutionize the corporate world, combining traditional business strategy with philanthropy to address complex societal problems such as poverty, health and the environmental. And rather than focusing exclusively on the bottom line, these social businesses are run with one single goal in mind: to change the world. provost_captioned.fw

“We like to talk of microfinance as being the first couple rungs on the ladder toward bringing yourself out of poverty, the first few steps for the poor to climb up,” said Leatham. “Social businesses may be the next few rungs, helping to really shift the dynamic of the whole system. It’s not only providing opportunities, but it is also taking innovation and entrepreneurship and forming businesses that  both give value to the marketplace and help to solve social justice issues – particularly  in the developing world.”

A number of successful social businesses are already making an impact, including Grameen-Danone, a partnership between the Grameen Bank and the French food-products giant, Groupe Danone, known more commonly as Dannon in the United States. Launched in 2006, Grameen-Danone is developing new products such as inexpensive, nutrient-rich yogurt to help address the problem of malnutrition amongst Bangladeshi children.

Other social businesses include Grameen-Veolia, which is committed to building water treatment plants in poor villages across Bangladesh, as well as an array of companies that are designing innovative products from low-cost, environmentally-friendly cars to treated mosquito nets.

“In the money-making business, we want to make money for ourselves. In this other type of business, we want to give everything to others. And I’m calling it social business,” said Dr. Yunus. “It’s still a business, but not for personal benefit; it is for the purpose of achieving a social goal. It’s a non-loss, non-dividends company with a social objective.”

Developing the Microfinance Movement at UNC

Though pockets of interest for microfinance had been around for years at UNC, the movement took off in full force approximately three years ago, due principally to the passion and dedication of one entrepreneurial undergraduate and the network of students and faculty that supported her.

Lindsey Witmer, class of 2008, first heard about microfinance in an Environmental Studies course and became instantly captivated by the concept.

“For me, learning about microcredit represented a real paradigm shift in thinking about poverty; the whole concept recognizes and acts on the fact that the ‘poor’ are people just like you and I, who have as much power and potential as anyone,” said Witmer, who now works for a nonprofit organization located outside Cape Town, South Africa.

Looking to learn more, Witmer eventually connected with Dr. Lisa Jones Christensen, a devoted advocate of microfinance who has extensive experience and a deep knowledge of the industry as a whole. Together, they developed a course entitled “Social Entrepreneurship Through Microfinance,” which included a service-learning summer trip to Peru, where students put their knowledge into action working for a local MFI. The course, which is now offered every spring in the Business School (BUSI 515), is extremely popular among students of all majors. group_captioned_3.fw

Upon returning to Chapel Hill, Witmer formed Carolina Microfinance Initiative (CMI) and the organization has been thriving ever since.

“CMI is so much more than a campus organization; it’s a movement built on the passion that students have here at UNC,” said Dr. Christensen. “Microfinance is an extremely effective tool in our globalized world, helping to bring more and more deserving, hardworking, able-bodied, innovative people into the market. Once students hear about it, they not only have an interest in learning more, but they want to actively participate as well.”

Though some students are initially intimidated by the term, ‘microfinance,’ CMI has managed to develop a strong following at UNC. Guided by the three main objectives of awareness, education and engagement, CMI has been successful in executing  an aggressive agenda of workshops, social events and fundraisers each semester, that are helping students to deepen their knowledge and enthusiasm for the industry.

And with ambitious future plans, which include establishing a nationwide student network of university microfinance organizations as well as expanding their repertoire of international programs (including four new programs this summer in South Africa, Kenya, Tanzania and India), CMI is hoping to foster even more interest among Tar Heels in the years to come.

“The reason CMI members do what we do is because we feel that this is a really unique time in the lives of students. This is when they’re making their career decisions, deciding what they want to do with their lives and developing their ideas on how the world works,” said Leatham, who took over Witmer’s position beginning in the fall of 2008. “If we can reach students and get them involved now, then that would mean a life of supporting and striving to solve issues of social justice. I can’t think of a better time to reach out to young people than right now.” meeting_captioned_2.fw

UNC is also making strides as an innovative leader in the microfinance movement, particularly in its unique commitment to providing students with a strong foundation in both the financial and social aspects of the industry. While many universities are interested in teaching microfinance from a strictly business perspective, Carolina acts under the belief that its students cannot truly understand the fiscal benefits without first understanding what makes the system function as a whole, including both its rich history and social complexities.

Furthermore, with its fervent commitment to sustainability, UNC is also avidly exploring the possibility of using microfinance as a means of fostering new environmental initiatives.

“We have a massive number of people worldwide who are in need of improved access to markets,” said Dr. Christensen. “Microfinance can do that, but we as a university community have the unique role of training students so that they are aware of all the tools they have available to them to make this happen. I think UNC is fulfilling this role and is taking some progressive steps to remain relevant in this evolving field.”

Taking the Next Steps

Whether inspired, motivated, or perhaps even a little skeptical of Dr. Yunus’ lecture, students and faculty left Koury Auditorium wondering what sort of impact this visit will have on the campus community at large. For after all, it is not every day that a Nobel Peace Prize winner walks the halls of UNC.

For Leatham, who considers Dr. Yunus to be one of his heroes, just having the chance to hear the Nobel Laureate speak in person was exciting enough. However, he ultimately hopes that the lecture will act as a catalyst for students to get involved in microfinance on campus, while also raising awareness for the movement in general. quad_walkway_captioned_2.fw

“Hopefully students will be inspired by what Dr. Yunus had to say, to take what they have learned and actually apply it. That is going to be our job as well, to foster the temporary inspiration that they might feel and translate that into something tangible. I hope it will have a huge impact, and I’m excited to see what is going to happen,” said Leatham.

As for the Nobel Laureate himself, his mission has not changed very much, if at all, since the Grameen Bank was first founded more than 30 years ago. And while microfinance has continued to expand and progress, including the recent foray into the new, exiting realm of social business, Dr. Yunus has never lost faith in man’s ability to thrive if only given access to the proper resources.

“If we redesign the system piece by piece…then we create a completely different world,” said Dr. Yunus in his closing remarks. “In that world, nobody has to be a poor person anymore because it is not inside the human being that poverty exists; poverty is artificially imposed on the human being. So if you lift all those factors that created those artificial conditions, nobody would be poor…and then the only place you will see poverty is in a museum.”

– Story by Robyn Mitchell ‘09

Dr. Yunus’ lecture was hosted by the Office of International Affairs and Kenan-Flagler Business School, with support from the Carolina Entrepreneurial InitiativeCarolina Microfinance InitiativeCenter for Sustainable EnterpriseAASHA – Humanitarian Organization for Bangladesh, and Campus Y.

View a recording of Dr.Yunus’ lecture. (Quicktime)

To learn more about the Carolina Microfinance Initiative contact Ryan Leatham at leatham@email.unc.edu . Or for more information on CMI’s Summer International Programs, contact Rachel Escobar at rachelcescobar@gmail.com.