Woman Are Better with Money

SPIEGEL Interview with Nobel Laureate Muhammad Yunus

Published on: December 07, 2006

Nobel Prize winner Muhammad Yunus, 66, discusses the failure of traditional development aid his successful use of microcredits in the battle against poverty.

SPIEGEL: Professor Yunus, the United Nations' goal to cut global poverty by half by the year 2015 remains as distant as ever. Meanwhile, the number of starving people rose this year from 840 to 854 Million. What is going wrong with development aid?

Yunus: I see it primarily as an achievement of the UN to have brought the global community to a consensus over this goal at the Millenium Summit 2000. For, just a few years before that summit, we had begun to notice that all hitherto attempts at tackling poverty had failed.

SPIEGEL: But that did nothing to alleviate hunger and poverty in the world.

Yunus: Because unfortunately, shortly after the UN declaration, terrorism, the Iraq war and the global war against terrorism threw everything into disarray. The policies of United States President George W. Bush derailed the entire process. Instead of concentrating on the war against poverty, global attention is now focused on another kind of slaughter -- on something that is intangible and yet being tackled by all the possible military means we can muster. And all the lofty declarations by world leaders about combatting poverty that were lauded by the General Assembly turned out to be damp squibs.

SPIEGEL: Despite more than $106 billion in development aid that was paid last year alone. You've settled for another path. What triggered your idea to make microcredit and microloans available to the poorest of the poor?

Yunus: At the university in Chittagong in southern Bangladesh, where I taught for a while, there were no advisors -- neither from Dhaka nor from abroad -- to tell us what to do. In the small village neighboring the university and along with our students, who themselves belonged to that village, we started a project against poverty in 1976. Very soon, we noticed that the people were all dependent on dubious money-lenders and loan sharks. We calculated their collective debt and found it to be $27 dollars. I was shocked. When we speak of development aid, we speak in terms of billions, but never about how $27 can drive an entire village into the clutches of loan sharks and keep them there in a state of dependence. And I thought, hey, I can solve this problem.

SPIEGEL: How?

Yunus: It wasn't really a big challenge academically. I gave them the $27 -- there was no need for any cost-benefit analysis or balance sheets. The people were freed of a burden and I thought to myself at the time, if it is so easy to end a dependence, why donÂ’t more do it? Today, we see how simple village kids can set something moving, that wins them the Nobel Prize 30 years later.

SPIEGEL: How did the banks react?

Yunus: The bank refused, saying it was impossible to lend money to the poorest of the poor. I asked them, whatÂ’s the problem? Twenty-seven dollars? Are you worried you may never see your money again? The banks said it was a matter of principle not to give loans to the poor. So I offered myself as a guarantor for the micro-credits and signed the papers. Next we tried the same thing in two villages, then in five. When we realized it worked, I thought: Forget the banks, letÂ’s open our own bank And the idea of Grameen Bank was born: micro-credits for the poor.

SPIEGEL: Do your micro-loans provide the kind of radical reinvention that critics of traditional developmental aid have long been asking for?

Yunus: Every concept can be improved, so why donÂ’t we just review all our of experiences of the last years and consider all the promising ideas seriously? We could think of private ownership by poor people. For instance, the mega-port that Bangladesh is planning to build in southern Chittagong and with which it wants to revolutionize BangladeshÂ’s economy, does not have to belong automatically to the state or the public. International donors could finance a port authority, which would be owned by the poor women of the country.

SPIEGEL: That sounds ambitious.

Yunus: Why? We could wait to begin construction when the money has arrived and everything makes business sense and the investors are sure to get their money back. This would be not only an economic investment, but one in an idea, the very spirit of any policy. Nobody would have to worry about poverty in Bangladesh anymore.

SPIEGEL: Your own experience with the story of the micro-credits must have taught you, that it is best to first try out any revolutionary idea on a small scale.

Yunus: There are opportunities galore even to do just that. We all know what happens when, say, a German donor builds a bridge in Bangladesh and hands it over to the state: nobody bothers about its servicing and maintenance. So why canÂ’t this bridge be handed over to a private company which belongs to the people? Who could collect a toll from its users and even build another new bridge with the profits? Now please donÂ’t tell me that poor women cannot run a port economically. Poor women can run a bank profitably. All they need is a little help with management.

SPIEGEL: European bankers doubt that and most of all, the economic success story of Grameen Bank. How do you explain their skepticism?

Yunus: They donÂ’t want to read anything, understand anything and would rather believe us to be imposters. But all our balance sheets are well documented in public, for instance on our Web site, and it is verified and certified by international auditors. Since it was foudned, Grameen Bank has disbursed loans totalling $5.8 billion and the pay-back rate is 98.9 percent. We have not needed subsidies since 1995, and with the exception of 1983, 1991 and 1992, we have registered profits every year.

SPIEGEL: Why are 97 percent of your loan-takers women?

Yunus: It took months and years to talk the women round, to convince them that they can handle money just as well as men or even better. After six years, we reached a man-woman ratio of 50-50. Then we noticed, that the families and households of female loan-takers enjoyed far greater benefits. So we changed our policy. Since then, we have focused entirely on women.

SPIEGEL: Does this mean that women hold the key to fighting poverty and hunger?

Yunus: We certainly noted that when given the opportunity, women handle money more efficiently. They have longterm vision, they manage money more carefully. Men are more callous with money. Their first reflex is to blow it by getting drunk in a pub, or on prostitutes or gambling. Women, on the other hand, are endowed with a tremendous sense of self-sacrifice and try to get the best out of the money, for their children, but also for their husbands.

SPIEGEL: Isn't it a logical corollary that development policies must concentrate to a far greater extent on womens rights and gender equality than they have done up to now?

Yunus: I am not making any political demands, for example, for gender equality. We've already had a 50-50 ratio. Our way works so much better. Today, all children of Grameen Bank are in school, many went further and are in high schools and universities, studying to become doctors or engineers. That is all because of their mothers. Mothers always focus on bringing benefits for the children.

SPIEGEL: Development experts and non-government organizations have been demanding a debt cancellation for the poorest countries. Do you support that demand?

Yunus: No. And in rejecting the idea, I speak in the name of the poor. We want to help the poorest of the poor, who cannot pay us in hard currency. So we need community funds or micro-credits, which would give the loan-taker the ability and therewith the dignity of being able to pay back his loans in his own currency, as and when he can. But one must give the people the feeling that it is their money, for their needs. If we just If you just forgive debts in a kind of blanket forgiveness, the money you forgive may be used for anything -- for weapons, luxury goods -- except for the poor.

SPIEGEL: The Nobel Prize committee holds poverty to be a far greater threat to world peace in poverty than fundamentalist terrorism. Is that right?

Yunus: Yes. The children who study in madrassas, or Koran schools, are from extremely poor families. Fathers send their sons there to be fed, looked after and spiritually educated and guided -- all for free. By giving one or two of their sons up to the faith, many poor parents feel almost as though a place were reserved for them in Heaven. This is how religious fanaticism is cultivated amidst the poor. This problem cannot be solved through military means, but only through global justice and equality.

SPIEGEL: Your countrymen have great expectations from their Nobel Peace Prize laureate and see you as the beacon of hope in the forthcoming elections. Are they right to do so?

Yunus: For several years now, we have been No. 1 on the list of the most-corrupt nations of the world. Elections are slated in early 2007 and we have a golden opportunity to reverse this statistic. It is for that reason that I am conducting a campaign against corruption. My aim is to ensure clean candidates, a clean government and clean politics. I would like to ensure that thieves have no more chances.

Interview conducted by Manfred Ertel and Padma Rao.

Link- http://www.spiegel.de/international/spiegel/spiegel-interview-with-nobel-laureate-muhammad-yunus-woman-are-better-with-money-a-453234.html