Social Business

Jake Whitney interviews Muhammad Yunus

Was Nobel Peace Laureate Muhammad Yunus’s sacking from the microlending bank he created part of a conspiracy to discredit and force him out?

Was it a conspiracy? Last November, a documentary aired on Norwegian television accusing Muhammad Yunus, the 2006 Nobel Peace Prize winner, of a slew of unethical and illegal practices. The most serious was the illegal transfer of $100 million from Grameen Bank, the financial institution he established to help his country’s poor, to another Grameen company. The film sparked an investigation by the Norwegian government, but not a single charge leveled against Yunus held up to scrutiny.

Regardless of the film’s inaccuracies, its consequences were significant. Prime Minister Sheikh Hasina Wazed’s government began attacking Yunus soon afterward, and the Bangladeshi press all but declared him guilty. Then in March, Yunus was fired as Grameen’s director. The official reason was that the 70-year-old Yunus was ten years past the mandatory retirement age for government workers. But to some, this smelled contrived. Yunus had offered to step down numerous times over the years, and his requests were repeatedly denied. Moreover, there were cabinet members older than Yunus, like Abul Maal Abdul Muhith, the 76-year-old finance minister. In light of these inconsistencies, Yunus’s supporters cast their gaze on the prime minister.

Sheikh Hasina’s change of heart toward Yunus has indeed been striking. An ardent supporter for years, she recently began calling him a “bloodsucker of the poor.” The reasons for her turn are murky, but many believe she harbored a grudge against Yunus because of his Nobel win (she had lobbied for the Peace Prize after signing a peace treaty in 1997) and because of his plan in 2007 to launch a political party to clean up Bangladeshi politics (Bangladesh currently ranks among the most corrupt countries). Yunus’s supporters assert that Hasina exploited Yunus’s damaged reputation caused by the documentary to settle her vendetta. But would the prime minister really have waited fourteen years to get even? Microfinance, after all, has earned Yunus more enemies than Sheikh Hasina.

The concept of microfinance is as simple as it is revolutionary. Rather than relying on outside forces to help the impoverished, such as Western aid or foreign development, Yunus’s idea was to start a bank that would provide tiny loans to poor families so they could help themselves by starting their own businesses. A family could take a loan for something as simple as seeds and garden tools, for instance, and sell vegetables, or buy a cow and sell milk. Yunus founded Grameen Bank in 1978, and within Bangladesh it has proved remarkably successful, eventually garnering Yunus his Nobel Prize. Today the bank has 8.3 million borrowers, most of whom are Muslim women. This empowerment of Islamic women earned Yunus his first group of enemies: religious radicals who accused microcredit of “destroying Islam.”
Beyond the religious ramifications have been broader socioeconomic ones. Microcredit uprooted entrenched economic forces by putting many local money lenders—loan sharks who charge exorbitant interest rates and possess significant political power—out of business. Moreover, the country’s extreme left and extreme right “hated” microfinance from the beginning (the right thought it was communism in disguise, the left believed it was U.S.-promoted capitalism). On a global level, consider microcredit in the context of a world economy dominated by a few dozen multinational corporations. If microcredit were to thrive globally, it would mean fewer wage workers for foreign corporations to exploit and fewer people dependent upon Western aid—aid generated by what the Zambian economist Dambisa Moyo has described as an “aid industry” of half a million people whose jobs depend on keeping the money flowing.

So Yunus has made enemies. And, as he admits in the following interview, he has become a target. Whether Sheikh Hasina or any of his other enemies were behind the fraudulent documentary is unknown (no links have been established, he says). Nevertheless, the Bangladeshi government is currently mulling a takeover of Grameen Bank as well as his fifty-five other companies—a “crazy idea,” he says, because politics would inevitably turn the bank from a vehicle to help the poor into a political weapon. While he considers his legal options, Yunus has managed to remain busy and optimistic. He has stepped up his efforts to promote social business, which he describes as “the business of solving problems, not making a profit.”
Of all Yunus’s revolutionary ideas, this is perhaps the most so. Social business strikes at the very theory of capitalism itself, the idea that mutual profit, or mutual selfishness, is its driving force. “Humans get excited for different reasons,” he says. “Profit is only one.” Like a stunted child whom he seeks to nourish with the yogurt produced by his food company Grameen-Danone, capitalism as an idea, Yunus contends, remains inchoate and malformed. With social business, he seeks nothing less than to redefine the term by helping it evolve into a philosophy that incorporates selflessness as much as selfishness. We spoke by phone on a Tuesday, 10 P.M. Bangladesh time.
—Jake Whitney for Guernica
Guernica: Let’s start with the controversy surrounding your firing from Grameen Bank. The documentary that started all your problems has been proven false on every charge. So why was it made? Was it politically motivated or just people trying to stir up controversy to attract viewers?
Muhammad Yunus: One theory is that it was politically motivated and the motivation came from Bangladesh. The basic allegation of the film was that we improperly transferred money from one Grameen company to another. But the Bangladesh press even twisted that into: “Professor Yunus benefited from an illegal transfer of money.” Those were the kind of headlines that appeared here. So people saw a political hand in it. A smear campaign against me [then ensued] in which all kinds of accusations and allegations were made. Strengthening the idea that it was politically motivated is that I’m accused by the prime minister of being a bloodsucker and destroying the lives of poor people. [My supporters] brought evidence to show how politically motivated it was.
Guernica: Has there been actual evidence brought to the table showing a political motivation by the government in Bangladesh?
Muhammad Yunus: The political leaders have been directly accusing me. So that fits into the allegation that it was politically motivated.
Guernica: But have there been any links established between the Bangladesh government and the makers of the film, monetarily or otherwise?
Muhammad Yunus: We have not seen that.
Guernica: Do you think microfinance threatened entrenched economic powers and caused you to become a target?
Muhammad Yunus: Yes. Before microfinance the local moneylenders were making money from the poor. Microfinance threatened them because Grameen Bank offered loans at much better [interest] rates, and suddenly poor people didn’t need loan sharks. These loan sharks were very powerful people in the villages. They depended upon the support of the poor because they were in essence their patrons. The loan sharks would give the poor some help and in return they would get political and social support. The poor believed that it was only because of their support for their patrons that they were getting loans and staying alive. But now with Grameen the poor don’t need those patrons.
If you’re using microcredit the way it should be used, as we are, the profits go back to the borrowers. There’s no way you can describe that as bloodsucking.
Guernica: Could these groups have rallied politicians to instigate a smear campaign against you?
Muhammad Yunus: There are certainly political groups that don’t like us. The ultra-left has always hated us. They believe we’ve been promoted by the United States to bring capitalism [to Bangladesh] and disrupt the future socialist revolution. They believe our plan is to spread the seed of capitalism by giving poor people just enough money that they don’t demand an end to power by the rich. The extreme right is also upset with us because they think that microcredit is communism in disguise. Their theory is that once the poor have enough money, they will take over the government. We’re targets of both sides because [microcredit] has become very popular and deals with millions of families. We are looked at with suspicion that someday this power will be used as a political tool.
Guernica: As microfinance has moved into other countries, it has strayed from its mission of helping the poor toward something more profit-driven. Its reputation has suffered as a result. How did that happen?
Muhammad Yunus: As microcredit grew and the benefits to the poor became clear, it received lots of admiration and respect. So seeing this credibility, some began to exploit it for their own benefit. It was so abused in some places that it turned into a new form of loan sharking, a way to profit from the poor. Once you start personally benefiting, you [divert] from the original mission, which was to help the poor. That takes you in the direction of loan sharking. Loan sharking is what we were fighting when we started microcredit. So they are reversing the whole process. We tried to stop [people who use microcredit as a profit-making enterprise], but they promoted it independently. I’ve been very critical of this. I’ve said if it can’t be stopped at least it should be called something else. Reserve the terms “microcredit” and “microfinance” for programs dedicated to helping the poor rather than those in which you personally benefit. There should be pro-poor micro credit and another term for commercialized, profit-driven microcredit. We want microcredit to remain true to its mission.
Guernica: Have any people associated with Grameen Bank profited at the expense of the poor in Bangladesh?
Muhammad Yunus: Grameen Bank is owned by the borrowers, so once the bank makes a profit, it goes back to the borrowers as dividends. So within Grameen Bank there is no possibility of profit or loan sharking. But if another [microcredit] bank is created by an individual to lend money, he or she may take the profit if they choose to. In order to maximize profits he will keep on squeezing the services to the poor and increasing [interest rates] so that his profit margin increases. That is the wrong direction. But within Grameen, that is not a possibility. We are promoting microcredit programs the way we have done them: let the borrowers be the owners of the program so that there is no question of benefits going outside it.
Guernica: So the comment that you mentioned earlier describing you as a bloodsucker of the poor. Why do you think it was said?
Muhammad Yunus: This is a misunderstanding. They have no idea how Grameen works. I am an employee of the bank so I cannot be a bloodsucker. I can only collect my salary. The system as such is sucking the blood of poor people in those cases where it has become a profit-making enterprise. Because if you’re using microcredit the way it should be used, as we are, the profits go back to the borrowers. There’s no way you can describe that as bloodsucking.
Guernica: Let’s talk about the impact microcredit has had in developing nations. One of the most striking things about Grameen Bank is the focus on lending to women, almost all of them Muslim. In Islamic households, women aren’t typically breadwinners or community leaders, but microfinance has empowered them to become these things. Was religion a roadblock when you started out?
Muhammad Yunus: Yes. Approximately 88 percent of Bangladesh’s population is Muslim. But let’s start with why we focused on women. Not even 1 percent of the borrowers in conventional banks [in Bangladesh] are women. It is absolutely wrong. When I began my work I addressed this by ensuring that at least half the borrowers in my program were women. But in the beginning, they wouldn’t even leave their houses to talk to us. We were forced to speak with their husbands. I had to bring my female students to speak to women. When we described the loans they would say: “We’ve never had any money in our lives. Our husbands handle the money.” It took us six years to convince enough women that they could handle money, and finally we brought the level of participation to fifty-fifty. But then we noticed something interesting: loaning money to women brought more benefits to families than loaning money to men, even when it was the same amount. It turned out that women were very cautious with money and made sure that the benefits went primarily to their children. We didn’t see this kind of behavior among men. So we decided to focus on women. Over time we brought women to 70, 80, 90 percent of our borrowers. Today we have 8.3 million borrowers and 97 percent of them are women.
The theory is that everyone benefits from specialization. But in practice we see big countries taking over the economies of the poor countries, big companies taking over the small companies, and big companies becoming more powerful than the governments themselves.
Guernica: What other roadblocks did you encounter?
Muhammad Yunus: Their own thinking was a roadblock. Religion was a big part of this. Many religious leaders accused us of destroying [Islam] by giving money to women and making them come out of their houses. Religious leaders threatened the bank, threatened the women, saying, “If you take loans from Grameen you will be ex-communicated.” It was a challenge to avoid violent confrontations. The husbands opposed the idea of lending money to their wives. They thought absolute authority of the household lied with them and none should go to the women.
Guernica: Before microfinance, the key ways of addressing poverty in developing nations were through Western aid and foreign development. Aid has received criticism lately. Should we consider stopping it?
Muhammad Yunus: Aid is important and necessary, so it should continue. The problem is the way aid programs are structured. Currently, aid is given directly to governments, but government is not an efficient machine when it comes to implementing projects, especially in third world countries. So inefficiency is one problem. Another is that aid can encourage corruption because it funds tyrannical regimes and makes governments less accountable to their citizens. There’s also the issue of donors having their own ideas about what the aid should be used for. They may have good intentions, but their ideas are not necessarily what is best for the recipient country. Since recipient countries feel beholden to donor countries, they often just accept their ideas. Aid creates dependence by donor countries because ideas like self-reliance and sustainability are not encouraged. The money needs to go where it can do the most benefit, such as into the civil society and into areas such as social business, a new type of business that I am promoting. This is the business of solving problems, not making money for yourself. Social businesses can be run by local people. Many of the [foreign] businesses in Africa are looked at as a new kind of financial or commercial imperialism, a new colonialism, because they are exploiting or plundering the countries. These are all issues that must be addressed with aid. We need to redesign the aid model so instead of [encouraging] plundering you create capacity and entrepreneurship.
Guernica: You mentioned that many Africans consider foreign businesses within their countries to be a new type of imperialism. How do you see the role played by foreign corporations in developing nations? They bring jobs but they have histories of polluting local environments, exploiting native workers, and undercutting native industries.
Muhammad Yunus: Not only undercutting native industries, but destroying them. Big companies go into poor countries, take over the economy and destroy the inherent capacity. Chains like Walmart know that local companies can’t compete with them because they mobilize resources that local companies cannot. But of course this is part of globalization. Globalization is extremely important. When you open up the world countries benefit from each other. The theory is that everyone benefits from specialization. But in practice we see big countries taking over the economies of the poor countries, big companies taking over the small companies, and big companies becoming more powerful than the governments themselves. In that type of globalization only one side wins. The benefits should be shared. Not a tiny bit for me and a lot for you. So to make things more equal we need regulation. If you look at globalization as a highway, you need traffic rules, speed limits, and laws governing its use. Otherwise, large corporations and large countries will drive their huge trucks and vehicles in every lane and the small countries with their tiny carts and rickshaws will get run over. We need rules so everybody has a chance, so everyone is safe no matter what kind of vehicle they’re driving. Once we get rules in place, we need traffic police, otherwise the big guys will ignore the rules. We need to start having discussions about how we can implement these rules.
It can be a crazy idea to transform a borrower-owned bank into a government-owned bank. Politics will creep into it. Whichever party is in power, they will use it to their political advantage rather than focus on helping the poor.
Guernica: So you’re saying there is a role for both aid and foreign development as long as there is more oversight over each.
Muhammad Yunus: Of course. Globalization is an excellent concept; I’m not saying get rid of it. You couldn’t stop globalization if you wanted to. But its difficulties have not been properly addressed. You’re happy if you’re taking all the benefits. But if you’re losing everything through globalization, if your business is drying up because big companies are taking your market, then you have to say this is not acceptable. And this will not promote peace. Because it is taking things from people that they were enjoying before. This creates tension, it creates violence, it creates political unrest.
Guernica: Let’s talk about your future. Now that you are out as managing director, there’s been talk that the Bangladeshi government wants to bring all the Grameen companies under one umbrella organization and nationalize them, effectively taking over your companies.
Muhammad Yunus: A committee was appointed by the government [to determine the bank’s future] and it made very specific recommendations. One recommendation is a change in the bank’s ordinance to make it government-owned. Today, borrowers own 97 percent of it, and only 3 percent is owned by the government. We have been very critical of this recommendation because government institutions, particularly financial institutions, are not known for being run efficiently or free of corruption. So it can be a crazy idea to transform a borrower-owned bank into a government-owned bank. Politics will creep into it. Whichever party is in power, they will use it to their political advantage rather than focus on helping the poor. Another Review Committee recommendation is that the other Grameen companies be taken over by Grameen Bank, and then the government. This too would be a mistake. These other companies are independent; they are not Grameen Bank-owned organizations. But the Review Committee didn’t take time to properly understand how they operate. We’re worried that the government may take these steps, and then these companies would become arms of the government.
Guernica: What is your next step in this process?
Muhammad Yunus: The government has only heard the recommendations from the Review Committee but hasn’t taken a step yet. If the government adopts the recommendations then we’ll have to go through the legal course of action. We need to see what legal point they have to claim these companies for themselves. We don’t see anything; our lawyers don’t see anything. Grameen Bank may have some financial link with [other Grameen companies], but a financial link doesn’t establish ownership. If a financial link established ownership, all the companies in the world would be bank-owned because banks lend money to companies. We are hoping that the legal procedure will work and that it will be transparent.
Guernica: You flirted with politics in the past. Do you have any plans to launch a political party as you almost did in 2007?
Muhammad Yunus: I’m not involved in politics and I don’t want to be. When [I considered it] in 2007, it was an intention, but I never created a party. I was under many pressures at that time, so initially I agreed to get involved. But it was just a short period where I considered it. I’m going to keep doing what I do, continue with my mission of social business, advocate it, use it to help the problems we see with development, social problems, environmental problems, food security problems, health problems. We want to discover ways to solve these problems instead of continuously adding to them.
Capitalism is not about the profit motive. Capitalism is about free markets. What you do in the market, in your free will, is the essence of capitalism.
Guernica: Explain the concept of social business.
Muhammad Yunus: Social business is a business that is set up to address a very specific social or environmental problem in a businesslike manner. Its goal is not to make money. The drive for problem-solving replaces the drive for profit. There are two kinds of businesses. One is a profit-driven business where the goal is to maximize profits. The other is a social business where the goal is to solve a problem. Social businesses can make a profit, but the owner never takes a dividend. It’s a non-loss, non-dividend company. The first condition of a social business is it must be sustainable. You have to run it with your own money so you’re not donor-dependent or charity-dependent. You sell a product to cover your costs, but you need to make your product very cheaply so it’s affordable. Owners can take back their investment money, but that’s all.
Guernica: Are any of your companies social businesses?
Muhammad Yunus: We have many. We have a joint venture with Danone called Grameen-Danone. Its goal is to address the problem of malnutrition among Bangladesh’s children. We’ve created a special yogurt that we sell very cheaply. We have created social businesses in health care, and we have one that addresses the problem of [clean] water. We have an eye-care hospital. We created Adidas-Grameen to make affordable shoes. We joined with BASF to produce mosquito nets to protect against malaria. Other countries are getting involved. I met with President Dilma of Brazil in June and we will be launching social businesses in Brazil. We are already working in Colombia, Albania, and Haiti. In July, we’re holding a forum in Japan to bring Japan’s big businesses and universities together to see how to create social businesses in Asia. Every year we hold a global summit where we bring business leaders from multinational companies together—as well as faculty members and young people from universities—to see how they can use their talent, creativity and technology to solve specific problems. This year [the global summit] will be held in Vienna in November. We are expecting about twelve hundred people, including U.N. Secretary General Ban-Ki Moon, President Dilma, and many other political and business leaders.
Guernica: You say the primary goal of social business is to solve problems, not make money. But free-market purists of the Ayn Rand or Milton Friedman school would say that it is precisely profit-seeking that makes capitalism work. That mutual selfishness leads to a greater good.
Muhammad Yunus: I dispute that. Capitalism is not about the profit motive. Capitalism is about free markets. What you do in the market, in your free will, is the essence of capitalism. I want to sell my yogurt, but I don’t want to make a profit. I want to see children become healthy. Human beings are excited for many reasons. Profit is only one. The same people who are excited by profit might also be excited by changing the world. As I explained, big companies like Danone, BASF, Adidas, Uniqlo, and Schneider are working with us. These are the best profit makers you can imagine. At the same time they are interested in the positive change that social business can bring. What I’m saying is that capitalism is standing on one leg. I’m providing another leg so it can be balanced. I have two dimensions in me. I have the selfish dimension where I could run a profit-making business. I have the selfless dimension so I use the money that I make to change the world. I get very excited about that. If you say that I’m doing this under pressure or because of my religious fear or something like that, no, I enjoy it. I have already created fifty-five companies and I don’t own a share in any of them. I never intended to make a penny out of any company. Every single one of my companies was designed to address a specific problem.
Guernica: Would you describe this as a more fully realized or perhaps a more enlightened form of capitalism?
Muhammad Yunus: Not enlightened, but a more fully developed capitalism. Capitalism was half done. Now I’m pushing it toward completion. I won’t say this completes it because there might be other aspects of capitalism that have not yet been explored. But I’m adding social business as a piece so that the pieces can work together. People have every right to make as much money as they want. But people also have the right to create businesses to solve problems. So it’s up to the people to decide. Nobody’s forcing this. Government is not forcing it, religion is not forcing it, political leaders aren’t forcing it. It’s my intention, my idea.
Guernica: You attribute altruistic motives to these large companies who are working with you to form social businesses, but don’t you think much of it is done for PR reasons, so in the end it really is about making a profit?
Muhammad Yunus: Whatever brings them in. They know they’re not going to make money in these social businesses, so if it’s done for PR that’s fine with me. If it gives them a good name, why shouldn’t they take it? This is their incentive. Why shouldn’t you solve the problem of malnutrition in the world if it gives you good PR? What may start as PR may influence the decision makers of a company more fundamentally. Immediate reasons for starting a social business may be for charity or publicity, but once you discover the joy of doing it, it reshapes your thinking and your actions in a more sustained way.

By: Jake Whitney
Published on : August 1, 2011
Published by : www.guernicamag.com
Source:https://www.guernicamag.com/interviews/muhammad_yunus_8_1_11/