Yunus Says Bangladesh Wage Rise Wouldn’t Damage Competitive Edge

By Kenneth Maxwell
Published on: 14th June, 2013

Nobel laureate Muhammad Yunus said raising minimum wages in Bangladesh’s garment manufacturing industry wouldn’t push apparel companies to leave the country.

“The average wage is 25 cents an hour, making it 50 cents an hour won’t cost a leg and an arm,” Yunus, the founder of microfinance lender Grameen Bank, said today in an interview on Bloomberg Television.

Labor rights groups are pressuring companies from Wal-Mart Stores Inc. (WMT) to Fast Retailing Co. (9983) to improve wages and conditions in Bangladesh’s multibillion dollar garment industry since more than 1,000 people died in the April 24 collapse of the Rana Plaza factory -- the worst industrial incident in the country’s history. Raising wages for Bangladesh’s 3 million or so garment workers would spur increases in other countries, according to Yunus.

“Prices will go up everywhere, Bangladesh will not lose its competitive edge,” the Nobel Peace Prize winner said. Executives running global retailers are “decent people,” Yunus said. Once they understand the issues at stake, they will see the need to improve wages and conditions, he said.

“The factory inspection systems need to be right,” Yunus said. The clothing that emerges from Bangladesh’s factories has good quality and the factories themselves should match that, he said.

“Maybe we were too busy negotiating prices, we didn’t look beyond,” Yunus said, referring to garment manufacturing contracts. “Today we all have to be responsible.”

Yunus calls for minimum int’l wage


Third from left, Nobel Laureate Professor Muhammad Yunus poses with, from left, Rushanara Ali MP (Labour), vice-chair of All-Party Parliamentary Group for Bangladesh; Baroness Uddin (Labour), member; Pauline Latham OBE MP (Conservative), chair of All-Party Parliamentary Group for UN Women; and Baroness Hussein Ece OBE (Liberal Democrat), secretary and Anne Main MP(Conservative), Chair, All-Party Parliamentary Group for Bangladesh; at a meeting to discuss measures to improve and strengthen the garments industry in Bangladesh and protect the right of women workers. Photo: Yunus Centre

Nobel Peace Prize winner Prof Muhammad Yunus has called for an international minimum wage for garment factory workers to shield them from exploitation.

In an interview with the BBC Bangla Service yesterday, the founder of Nobel Peace Prize winner Grameen Bank said the minimum wage could be applied in all garment-producing countries.

“Everybody has to have the same minimum wage. Bangladesh will have the international minimum wage. Burma and Cambodia will have the international minimum wage.”

Prof Yunus said it has to be done “as we have all agreed that the workers will no longer be allowed to be exploited”.

“You may say that for a poor person in Bangladesh one US dollar is too much. I understand that. But why does a buyer from a western country want to exploit a woman from a rural village?” he said.

His comments came after the Rana Plaza disaster in Savar last month that left over 1,127 people dead, mostly garment factory workers. It was the worst-ever industrial disaster in the country’s history and it prompted the government to announce an initiative to look into raising the minimum wage.

Prof Yunus also said he did not think that Bangladesh would lose its competitiveness in the readymade garment sector with the rise of the minimum wage.

“Even after the 50-cent wage per hour, Bangladesh will still be cheaper [to make garments from]. There are not too many countries with the 50-cent per hour minimum wage.”
Garment workers in Bangladesh are some of the lowest paid in the world, with per-hour minimum wage between 15 cents and 20 cents.

Prof Yunus said even new players in the global garment sector should provide workers with the same wage.

“If Burma makes a foray into the sector as a new player, their workers will have to be given the 50-cent wage. You cannot exploit them by giving them 10 cents or 20 cents under the pretence that they are a new country.

“These countries are part of the Global economy. You cannot judge them with the yardstick of the local economy,” he said.

Source: The Daily Star

Q&A ‘Wherever I See a Problem, I Create a Business to Solve It’

Muhammad Yunus, the Nobel Prize-winning economist, wants to transform U.S. foreign aid.

By Sara Sorcher and Catherine Hollander
Published on: May 9, 2013

A loan, not a handout: Yunus (Chet Susslin)

Economist Muhammad Yunus introduced the world to the concept of microfinance, or small-scale loans with low interest rates and a long repayment timeline, through his Grameen Bank in his native Bangladesh. Yunus and just six others—Martin Luther King Jr., Nelson Mandela, and Mother Teresa among them—have received the Nobel Peace Prize, the U.S. Presidential Medal of Freedom, and the Congressional Gold Medal, which Yunus was awarded in a Capitol Hill ceremony this month. Edited excerpts of his conversation with NationalJournal follow.

NJ What was your first microloan, and when did you realize microfinance was a viable concept?

YUNUS Back in 1976, in one village next to the university where I was teaching, was awful poverty and famine. I didn’t know what I [could] do. I saw how terrible the loan-sharking was. I thought, “Well, I can solve this problem; all I have to do [is] lend the money myself.” I was not worrying whether they were going to pay me back. Then, as it became popular, I thought, “I should link the bank with them, instead of me always coming up with my money.” And the bank said, “No, it cannot be done.” Ultimately, I came up with the idea, “Why don’t I offer myself as a guarantor and make sure the bank doesn’t lose money?” The first loan I gave was $27 [distributed among] 42 people. I had to come up with the idea of how to get the money back, otherwise the bank will not. So I started coming up with the rules, procedures, which will make it easy for them to pay back. And that’s how I came to the idea of paying back [in a] weekly installment. If you take a $100 loan—which is way big, just for the example I’m giving—every week you pay $2. That has become kind of a signature mark of microcredit.

NJ Now the United States has 15,000 microborrowers. How did this get started?

YUNUS I was invited to come to Arkansas in 1986 by Governor [Bill] Clinton. He came to know about our work in Bangladesh. He thought this would be useful for him to do a similar thing in Arkansas, because Arkansas is one of the poorest states in the country. Then it spread in other places, in Chicago and among the Navajo Indians and Cherokee Indians and so on. In his first presidential campaign, [Clinton] took this item as one of his campaign pledges, that “if I’m elected president, I’ll have Grameen programs started in all inner cities of the United States.” Journalists kept asking, “What is this Grameen program?” He says, “Oh, it’s in Bangladesh.” [They said], “You mean you want to bring something from Bangladesh?” He was ridiculed.
In 2008, we started this program in New York City. We have given out more than $35 million. The average loan [is] $1,500 and the repayment rate is 99.4 percent. It is spreading in other cities like Omaha, Nebraska, in Indianapolis, in Los Angeles, in San Francisco, in Charlotte, North Carolina. We are hoping that gradually, the numbers of borrowers in a few years’ time will exceed 50,000 [in the United States].

NJ What are the microloans used for here in the U.S.?

YUNUS Women do what they are familiar with, like hairdressing. Either they have training or they have worked as a hairdresser but lost the job. Now, with this money, she rents a chair in the hairdressing salon, and she is an independent businesswoman. Pet care is again a very popular thing. Catering services. Day care. House-cleaning service.

NJ What’s “social business”?

YUNUS Whenever I see a problem, I create a business to solve it. In a charity, which is a very good thing, money goes out. It doesn’t come back. If you can transform [fixing the problem] into some kind of business model, then money goes out [and] it comes back. So you can do the same thing over and over again with the same money.

NJ Foreign aid is usually unpopular, especially during tight financial times. Is there a way to incorporate microfinance and social-business concepts to change the face of U.S. foreign-aid platforms?

YUNUS When you create a business, it cannot disappear. When it’s a charity, you give—it’s done, and that’s the end of it. But if you’re a business, five years later you go back, it’s still running, still doing the job, maybe doing better than the first year. It has a life; in a charity, you don’t create a life. You also create dependence. If you don’t repeat the same thing next year, it won’t be done. To give one concrete example: Roads are built with donor money. Beautiful roads. But there’s no maintenance money included. You go back five years later and that road is not the same road that you built—it’s this sort of potholes, falling apart, because nobody’s maintaining it. I’m not against giving grants. I’m saying there are certain areas where you can create businesses. You are encouraging people—local people—to come up with their solutions in a business way.

NJ Are American policymakers receptive?

YUNUS They like the idea. But they cannot move out of [the current model of foreign aid]. Who will take the decision of how to do something else? So I’ll keep on encouraging. I’ll show the [Congressional] Gold Medal [and say,] “See, you gave it to me!” So now it’s legitimate. That gives them courage.

This article appears in the May 11, 2013, edition of National Journal as A Micro-Revolution.

Source: National Journal

Savar tragedy, garments industry and Bangladesh


pcp023THE Savar tragedy is a symbol of our failure as a nation. The crack in Rana Plaza that caused the collapse of the building has only shown us that if we don’t face up to the cracks in our state systems, we as a nation will get lost in the debris of the collapse.

Today, the souls of those who lost their lives in Rana Plaza are watching our actions and listening to what we say. The last breath of those souls surrounds us.

Did we learn anything at all from this terrible massacre? Or will we have completed our duty by merely expressing our deep sympathy?

What should we do?
* Do everything to prevent such an incident from repeating in the future.
* What to do for those who have lost lives, their limbs or their livelihoods?
* What do we need to do to not only save our garments industry but make it stronger?

The collapse of the nine-storey building in Savar was not merely a collapse. It is just a precursor to the imminent collapse of all our state institutions. If we look closely at the collapse of the Savar building, we can read the symptoms of collapse of our state institutions. We will have to find ways to fix the institutions to protect them from complete collapse.

Citizens’ action group

I will discuss how we might be able to not just save, but also strengthen our garments industry.

Questions have been raised about the future of the garments industry. A very large foreign buyer has decided to pull out of Bangladesh because of the dangers in the garments industry here. Others may follow. If this happens, it will severely damage our social and economic future. This industry has not only increased our national income, but has also brought immense change in our society by transforming the lives of women in the country.

We cannot allow this industry to be destroyed. Rather, we have to be united as a nation to strengthen it.

The government, the leaders of the garments industry, the NGOs, and the civil society have to come forward in unity to do so.

We have to give complete reassurance to the foreign buyers that they will never again face this kind of situation, and that we are all united to take steps in order to achieve that, and will firmly carry out this commitment in the future.

Each of these actors (government, owners, civil society etc.) will work jointly and also work independently within their own spheres. Civil society will have to undertake programmes in its own way. Civil society can try to bring hope and trust in the minds of the foreign buyers on behalf of the country. They can immediately send jointly signed letters to the chairmen of the foreign companies as well as to the CEOs of those companies. The message will be to highlight the social and economic importance of the garments industry in Bangladesh, and to thank them for the role they have played in the empowerment of women and in bringing widespread transformation in Bangladesh.

It will inform them that the civil society is ready to work together with the government, as well as separately, to solve the problems being faced by the industry. It will let them know about the types of programmes that are being considered, express interest in meeting with the companies to discuss about these programmes, and let them know about the formation, structure and work of a citizens’ action group for “protecting garment workers and garment industry” (or something similar) that could take quick decisions etc. in support of these.

Another letter will go to the foreign organisations, international NGOs, and consulting firms that are already working to improve the quality of the garment industries in the third world, including on the issue of workers’ rights, monitoring and screening, and so on. This letter will let them know that the citizens’ action group would like to work and cooperate with them to improve the conditions of the workers. The letter will express the group’s interest in meeting and remaining connected with them.

We must also write letters to various government agencies in the countries of the foreign buyers to inform them that the citizens’ action group is determined to bring widespread change in the garments industry in Bangladesh.

Within the country, letters to the government, garments owners, BGMEA, BKMEA, labour organisations, NGOs, buying houses, and other affiliated organisations should be written and meeting arrangements should be made with them to elaborate the working procedures with them.

My two proposals regarding workers
savarTDSI have from time to time given recommendations to foreign buyers about how to tackle the problems faced by the garments industry in Bangladesh. Under the present circumstances I find it all the more important that I raise this issue again, particularly because of the castigation by Pope Francis that buyers are treating the garment workers like slave labourers with $40 wage per month.

My first proposal is as follows:
(a) A minimum wage law for the labour already exists in our country. If any company pays a salary below that minimum wage, that will be illegal.
My proposal is that the foreign buyers will jointly fix a minimum international wage level. For example, if the minimum wage is now 25 cents per hour in Bangladesh, then they will standardise minimum wage for garment industry as 50 cents per hour. No buyer will give any salary below this rate, and no industry/owner will fix salary below this limit. It would be an integral part of compliance.

Of course, we have to be prepared for a negative market reaction to this. As a result of this, some will argue that Bangladesh may overnight lose the competitiveness it had gained for being a country offering “the cheapest labour.” In order to retain its competitiveness, Bangladesh will have to increase its attractiveness in other ways. For example, increasing labour productivity, increasing specialised labour skills, regaining the trust of buying companies, giving assurance that no unfavourable situations will be created in future, ensuring the complete welfare of the workers, and so on. Until we are able to ensure this international minimum wage, we will not be able to pull out the workers from the grievous category of “slave labour” as mentioned by the Pope.

We have to gain support for the international minimum wage through discussions with politicians, business leaders, citizens, church groups, and media leaders in the countries of the foreign buyers. In the past, I had tried to convince the buyers, but have not yet succeeded. Now after the Savar tragedy, and in light of the castigation from the Pope, the issue has gained a new dimension. I want to mobilise my international and Bangladeshi friends to make my efforts stronger and more persistent this time.

We have to get the international business houses to understand that while the garment workers are physically working in Bangladesh, they are actually contributing their labour for their (international business houses) businesses. They are stakeholders of their businesses. Their business depends on the labour here. Mere physical separation should not be a ground for them to look away from the well-beings of this labour. That is the main message from the Pope. I hope the buying companies get the point.

It is not necessary for all the companies to agree on the minimum international wage at the same point in time. If some of the leading companies come forward on this issue, I think the process will start. Others will soon accept it.

(b) I have made my second proposal many times before, but it did not get any attention. There is now an opportunity for me to propose it again. This time I see a good chance for its adoption because of its relevance to the current situation.

Bangladesh garment factory produces and sells a piece of garment for five dollars, which is attractively packed and shipped to the New York port. This five dollars not only includes the production, packaging, shipment, profit and management but also indirectly covers the share that goes to the cotton-producing farmers, yarn mills for producing the yarn, cost of dyeing, and weaving as input cost.

When an American customer buys this item from a shop for $35, he feels happy he got a good bargain. The point to note is that everyone who was involved in the production collectively received $5. Another $30 was added within the US for reaching the product to the final consumer. I keep drawing attention to the fact that with just a little effort only we can achieve a huge impact in the lives of those so-called “slave labours.” My proposal relates to the little effort. I ask whether a consumer in a shopping mall would feel upset if he is asked to pay $35.50 instead of $35 for the item of clothing. My answer is: No, he will not even notice the little change. If we could create a “Grameen (or Brac) Garment Workers Welfare Trust” in Bangladesh with that additional $0.50, then we could resolve most of the problems faced by the workers — their physical safety, social safety, individual safety, work environment, pensions, healthcare, housing, their children’s health, education, childcare, retirement, old age, travel could all be taken care of through this Trust.

What do we need to do for this?
The international buying company will pay 10% of the amount that it has agreed to pay the garments factory owner (based on their negotiated price for the garments produced) against a particular order to the Trust. This money will be managed solely for the welfare of the workers in that particular factory.
There will be separate sub-funds in the Trust for each and every factory so that the workers in each factory benefit on the basis of their own production, if the buyers place this 10%.

Bangladesh now annually exports garments worth $18 billion. If all the garment buyers accept this proposal, then $1.8 billion would be received by the Trust each year. This would mean that an amount of $500 would be deposited in the Trust for each of the 3.6 million workers. If this amount of fund can be collected, the situation of the workers can be vastly improved. All we have to do is to sell the item of clothing for $35.50 instead of $35. A small, unnoticeable addition to the price can do wonders.

Of course, international buyers may argue that that extra 50 cents charged in the final price will reduce the demand for the product and that their profit would shrink. My answer to that will be that we will offer them an arrangement whereby their sales will go up, instead of down. We would give them a good marketing tool to make this product more attractive to the buyers by making the consumers feel they are getting more for this extra 50 cents. We would put a special tag on each piece of clothing to make them “special.” The tag would say: “From the happy workers of Bangladesh, with pleasure.” Workers’ well-being is managed by Grameen or Brac or any other internationally reputed organisation. There would be a beautiful logo that would go with it. This would immediately convey the message that the dress has been made with a lot of warmth and happiness by the factory workers in Bangladesh.

When consumers will see that a well known and trusted institution has taken responsibility to ensure both the present and the future of the workers who produce their garments, they won’t mind paying 50 cents extra. The retailers may say in their advertising that these products are made by well protected, well supported workers. Consumers would be proud to support the product and the company, rather than feel guilty about wearing a product made by “slave labour” under harsh working conditions. A consumer will be able to know from the company’s website and annual report what benefits the dress she wears are currently bringing to the workers, and what benefits their children are receiving.

Both the national and the international businesses should feel as though the workers are a part of their family. The days of slave labour have to come to an end. It is better to start the process now, before more ugly incidents occur.

I do not expect that all companies will immediately implement my proposal. I hope that a few would come forward to experiment with the proposal. Their country’s governments, the agencies, organisations who work to protect labour rights, citizens’ groups, church groups, media, will step forward to support it. This issue will attract attention more urgently now in light of the mass death in Savar, as well as for the Pope’s comments on the treatment of the poor labour in garment industry in Bangladesh. 

I believe that for buying companies leaving Bangladesh is definitely not a solution. It would be as unfortunate for Bangladesh as it would be for the foreign buyers. There can be no sense of relief for them in leaving a country which has been highly benefited through their business, a country which could have gained continuing rapid and visible economic and social progress because of them, a country that would always remain grateful to them for their business.

Rather, if the Bangladesh government and citizens come forward to work together to remove all the difficulties being faced by the foreign buyers, and work shoulder to shoulder with them, it would bring joy for creating a new kind of business that takes pride in achieving something which is far beyond only business success — something which leads to a bright new future for a country.

I believe that they would rather like to remain in Bangladesh, face the challenges and take pride in creating a new society and a new economy. Not only will Disney, which left the country because of the recent problems, come back when they see big changes taking place because of the collective efforts of the government and the citizens, but more companies will also be interested to invest here.

Changes are taking place in the world of business. Even if they are tiny changes, they are coming nonetheless. We can accelerate that change. A citizen action group can prepare the ground for that.

Savar related programmes
The citizens’ action group can create a data-base of all those who lost their lives in Savar, lost their limbs or have had their livelihoods affected, and work to regularly update it. The primary work of this has already been initiated by Grameen with the help of other organisations. The citizens’ action group can take the responsibility to coordinate this work.

Many programmes have been announced and a lot of funds have been pledged for those who have been affected, and this is still ongoing. The citizens’ action group can provide advice on these programmes on how to best implement them. It can monitor the programmes and inform the relevant authorities accordingly. They can keep contact with the victims on an individual basis, and help them solve their problems by establishing links between them and the appropriate agencies.

The problems that are being faced by the victims of Savar range from the immediate to the long-term. The citizens’ action group should be ready to keep the people of the country engaged with the rehabilitation of the victims, and come up with effective measures to tackle the problems of different kinds (health, income, education etc.) and of different durations, faced by these victims.

When will we come to our senses?
Savar has created a huge wound and deep pain in the minds of the people of country. I pray that this deep pain compels us towards resolving the core of the problems in our national life. Savar is the creation of our dysfunctional politics. When we watched more than 600 helpless deaths, the loss of limbs of hundreds on our TV screen throughout the country, it made us aware of where our dysfunctional politics has led us to.
After all this, will we just keep on watching as it keeps happening again and again?
When will we come to our senses?

The writer is founder of Grameen Bank and Nobel Laureate.

Source: The Daily Star
Published on: THURSDAY, MAY 09, 2013

Lender to the world’s poorest people is coming to Britain


Sam Fleming Economics Editor
Posted at 12:01AM, April 30 2013

The founding father of microfinance has called on politicians to make it easier to open banks in developed countries such as Britain.

Muhammad Yunus, the Nobel Prize-winning Bangladeshi behind Grameen Bank, is helping bring his microfinance concept to Glasgow with a venture that will offer small loans to prospective entrepreneurs who are locked out of the mainstream financial system.

He hopes that the project can break the stranglehold of loan sharks in deprived areas.

Existing banking regulations are pitched at organisations that make large profits and demand collateral for loans — “banks for the rich”, Professor Yunus argued. He said that the system should be made more amenable to the creation of deposit-taking microfinance banks that are not profit- driven and where customers post no collateral and save and borrow tiny amounts.

The Grameen venture in Scotland will use services provided by Tesco Bank, which has put up £500,000 in loan capital. It plans to offer its first loans of up to £1,000 per person to “lending circles” of five customers this summer.

Applying for a banking licence requires a “huge amount of money — all the regulation, equipment and so on,” Professor Yunus said. “Behind the banking law is that you should be dealing with millions of dollars. They are not thinking of a loan of £30 or £100.”

The financial system is failing poor people in the West, he argued. “As long as you have people living out of payday lenders, loan sharks, pawn shops, borrowing from friends, selling things off to bring in money, you have a great case where you have to have microfinance. Why don’t we create a law for the bank for the poor? Then loan sharking will disappear.”

Britain has eased access for new players by demanding less capital for small upstart banks. Last year the Government lowered the barriers to the formation of credit unions.

Chris Leslie, the Shadow Financial Secretary, said that he was counting on credit unions and other mutuals to address financial exclusion in Britain. “I would be open to the idea of widening access to banking licences as long as consumer and taxpayer safeguards can be guaranteed,” he said.

Professor Yunus was speaking in Washington, where this month he was awarded the Congressional Gold Medal for his work in combating poverty.

Source: The Times, UK tellyseries