How much money is needed to eradicate poverty worldwide? $100 million, $1 billion, $1 trillion? In 1983, a man in Bangladesh believed that $27 was enough to start making a difference. Now, nearly 40 years later, he hasn't solved global poverty, but he has made a significant contribution.
This is the story of Professor Muhammad Yunus from Bangladesh, who founded the Grameen Bank. The bank, as they say themselves, is for the poor and was the initiator of microcredits. His motto: Fighting poverty, one loan at a time.
Disruption is in Muhammad Yunus's DNA
I often write about one of my favorite topics: disruption, and I have previously written about Muhammad Yunus on another platform. However, I had never considered that he might be the most successful disruptive entrepreneur I know of.
Growing up in Bangladesh, he had the opportunity to study economics in the U.S. but he returned and discovered two remarkable issues that had been seldom named until then:
Most people are not poor because they are unemployed, but because they are underpaid and have no chance to escape this trap.
Charity makes people dependent, whereas borrowing money gives them the opportunity to develop themselves or their businesses.
This led him to the following idea: Starting a bank for the poor to provide microcredits.
Using his contacts through his family and as a professor by then, he arranged meetings with several banks to present his idea.
Out of respect, he was usually allowed to finish his story, but that was as far as it went. The poor are unreliable, not entrepreneurial, and therefore absolutely not profitable, according to their research and experience. With that message, he was shown the door everywhere.
The Start of Disruptive Grameen Bank
After yet another rejection, the disruptive DNA of Muhammad Yunus began to bubble, and he decided to put his vision to the test. He lent the equivalent of $27 of his own money to 42 extremely poor workers, and his dream came to life.
One by one, they managed to improve their lives and financial situations with this small amount, and they all paid the money back. Yunus had a business case!
Back at the table with the same banks, he enthusiastically shared the success he had achieved, but they were absolutely not willing to listen. The reality Yunus presented simply could not be true in their eyes.
The only option Muhammad Yunus had was to guarantee every loan he provided himself, and that was exactly what he did and the start of an amazing company.
What Makes the Grameen Bank So Disruptive?
In an interview, Muhammad Yunus was asked how he managed to set up his processes so successfully. His answer was that he had meticulously studied how traditional banks did everything and by doing it radically differently, everything just fell into place.
He mentioned the following examples:
They serve the rich; we serve the poor.
They are in the big cities; we are in the villages and remote areas.
They mainly have men as clients; we focus on women.
They want to know every detail of a client's past; we are mainly interested in the future of our clients.
They have a department with lawyers; we are the only bank without a lawyer on staff.
They are owned by rich men; our bank is owned by poor women.
These points make Muhammad Yunus one of the most remarkable disruptive entrepreneurs because he simply thought that if they do it this way, then I will do exactly the opposite.
Of course, this is not something that always works, but in his case, it was exactly what was needed to make the concept of microcredits succeed.
What is the Impact of Grameen Bank?
Since it was founded in 1983 to mid-March 2024, the Grameen Bank has lent approximately $40 billion in microcredits to more than 10 million clients. While this amount may not seem immense, it concerns people from areas with high poverty, nearly 97% of whom are women. This illustrates the extraordinary impact one man can have.
If you start to help 10 million people with a starting capital of just $27 - helping people who also have partners and children - who in turn reinvest this money in their local communities, then in my opinion, you create a significant impact. This may even be one of the largest impacts at a global level.
Moreover, Muhammad Yunus with his Grameen Bank has played a pivotal role by introducing the concept of microcredit. The ripple effect of this is hard to measure but is undoubtedly vast.
Lastly, by demonstrating that the Grameen Bank has an impressively high repayment rate of 96.76% - much higher than other banking institutions - you prove all skeptics wrong. This not only confirms the viability of Yunus's vision but also puts the entire banking sector in a different light. This is what I call making an impact.
How Has Muhammad Yunus Become so Successful?
Few are given this gift, and Muhammad Yunus is one of them, a quiet authority. These are leaders who do not shout from the rooftops about how great they are, nor do they make empty promises. In silence, they consistently speak about their vision and mission.
They have a dream and are guided by it. Quiet authorities engage people in their story because they inspire without fanfare. This does not mean that quiet authorities are invisible, but that they make themselves visible only through channels where people want to hear their vision. This is why Muhammad Yunus has been able to become so successful.
Muhammad Yunus is Discredited by Prime Minister Sheikh Hasina
Although Muhammad Yunus is regarded by many - international leaders -, won a Nobel price, and is seen as a 'savior of the poor,' there are people in Bangladesh who would rather see him behind bars. One of these people, unfortunately, is a puppet of higher powers and the current Prime Minister of Bangladesh, Sheikh Hasina.
She -accuses Muhammad Yunus and three of his employees of various matters, including charging too high interest rates to the poor clients of their bank. During a recent raid on many of his enterprises, some of these were even temporarily, albeit unlawfully, seized.
Prime Minister Sheikh Hasina openly labels Muhammad Yunus as a 'bloodsucker on the poor', but it strongly appears that all these actions have a political motive. Although Muhammad Yunus himself says he has no political ambitions, his now wealthy friends do, and they absolutely disagree with the current political situation in the country.
Muhammad Yunus has recently been sentenced to four months in prison but has, of course, appealed, as outside a very small powerful circle around Sheikh Hasina, no one sees any legal basis in the charges brought against this admirable man and his colleagues.
Frequently Asked Questions (FAQ)
What is Grameen Bank?
Grameen Bank is a microfinance organization and community development bank founded in Bangladesh. Established by Professor Muhammad Yunus in 1983, it is renowned for providing small loans (known as microcredits) to the poorest without the need for collateral.
Who is Muhammad Yunus?
Muhammad Yunus is an economist from Bangladesh who has gained global recognition for his efforts to combat poverty through microcredit. He received the Nobel Peace Prize in 2006 for his work with the Grameen Bank.
How has Grameen Bank impacted poverty?
Grameen Bank impacts poverty by providing small loans to poor people, especially women, to help them start or expand small businesses. This has not only helped to increase their income but also to enhance their autonomy and status within their communities.
What makes Grameen Bank disruptive?
Grameen Bank is considered disruptive because it challenges conventional banking norms by providing loans without collateral and primarily targeting women in rural areas. This model has fundamentally changed how financial services are provided to the poor.
What are the repayment rates of Grameen Bank?
Grameen Bank boasts a remarkably high repayment rate, typically around 96.76%. This high percentage illustrates the success of the microcredit model and the reliability of the poor population as borrowers.
Does Muhammad Yunus have political ambitions?
While Muhammad Yunus has had significant political influence, he has stated that he has no political ambitions. His focus is primarily on social and economic development through his work with microfinance and social businesses.
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