Nobel Peace Prize winner shares his expertise on helping the world's poor at Missouri State event
Kathryn WallNews-Leader
Nobel Peace Prize winner Muhammad Yunus shared the secret of his successful microfinance program Tuesday to a nearly packed Juanita K. Hammons Hall.
His advice to battle poverty? Do the exact opposite of what traditional banks do.
"The more you have, the more you can get," he said, referring to modern banking which loans to people who already have wealth as collateral. "We reverse it."
Although he didn't develop the idea, his microfinance practices are considered exceptional models. His is a radical idea: give the poor a small loan, without collateral, and help them help themselves.
That unique idea has earned him awards -- too many to list here -- including the Nobel Peace Prize and the Presidential Medal of Freedom, given by President Barack Obama.
In 1976, Yunus returned to his hometown in Bangladesh after college at Vanderbilt University and witnessed the devastating local poverty. After discovering that loan sharks were preying on the poor in a local village, Yunus set out to find out how much money was owed and to find a solution.
More than 40 villagers owed a total of $27.
"I couldn't believe people had to suffer so much for so little money," he said.
Yunus gave villagers money to pay back the loan sharks and noticed how revered he was in the community.
"I thought 'With $27, you could become an angel. Maybe if I give them another $27, I can become a super angel,' " he said, joking.
But quickly, Yunus realized that small amounts of money could make a big impact when people are scraping by. He approached local banks about setting up loan programs for the suffering locals.
They laughed at him.
Instead, he got a loan and distributed the money. Bank officials told him to kiss his money goodbye, but he got it all back -- with interest.
Over the years, the grass-roots effort to help some locals led to the creation of Grameen Bank in 1983. (Grameen means "of the village"). The bank expects to loan $1.4 billion in 2010.
The dramatic growth of the program wasn't without struggles, he said. The far right political groups thought he was promoting communism. The far left political groups thought he was a CIA agent undermining government authority. Religious groups -- and even some husbands -- were mad that Yunus loaned to women, his primary borrowers.
The program continued to work despite the opposition and has grown throughout Bangladesh. In January 2008, Grameen American opened.
The American arm of the bank makes loans of $1,500 on average in New York and Omaha, Neb. It will soon be operating in San Diego. Yunus said borrowers often use the money for products needed for a small business -- like a mixer for a small bakery or a carpet cleaner for a one-person cleaning service.
All of Grameen's loans, both in the U.S. and overseas, require a business plan to pay the money back.
Yunus also discussed his social business model, which takes the profit-making component out of most business plans. Rather than focusing on how profit can be made and returned to owners, a social business focuses on solving a problem and reinvesting in the business.
He used the example of Dannon yogurt in Bangladesh. The problem was that too many children were malnourished.
Dannon developed a yogurt that contained the nourishment unavailable to children and then sold it at a price where even the most poverty-stricken families could afford to buy it.
Any profit made off the sales goes back into the program -- Dannon can take back any money it invested in the program, but does not collect a profit, he said.
Yunus compared the idea to donations. He said people are willing to make huge donations, and this program is similar, except that the money comes back to the investor.
Yunus' ultimate goal is to eliminate poverty. He said it would be great to one day have "poverty museums" where kids would have to go and learn what poverty was way back in history.
"That's the day we should be creating as soon as possible. It can be done," he said.
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