Berenberg hosted “A Conversation with Professor Muhammad Yunus”
The harsh geographic and economic environment of Bangladesh is, perhaps, not a likely birthplace for an inspiring entrepreneurial achievement which continues to have a profound affect on the means by which companies, customers and charities develop their business strategies alongside their social and environmental responsibilities.
Professor Muhammad Yunus is the founder of Grameen Bank, an institution that provides microcredit (small loans to poor people possessing no collateral) to help its clients establish creditworthiness and financial self-sufficiency. In 2006, Professor Yunus and Grameen Bank received the Nobel Peace Prize “for their efforts to create economic and social development from below”.
An economics professor and Fulbright scholar, Professor Yunus has a vision of “putting poverty in a museum”. In 1975 he gave 42 people the equivalent of USD 27 in aggregate to pay off money lenders in the village of Jobra. He started a system of offering collateral free “micro” loans the following year and this was converted into a formal bank in 1983 called Grameen Bank. A peer group infrastructure created by local communities which makes sure that their borrowers behave in a responsible way has provided the checks and balances.
Today, Grameen Bank has 2,567 branches, works in 81,387 villages and has loaned USD 13.9 billion*. Some 96% of the borrowers are women and the repayment rate for all members is 97%**. Thirty years on, the next generation of borrowers are poised to move their communities out of poverty; a profound step towards achieving Professor Yunus’s vision.
Professor Yunus has used his experiences to develop the global business community’s broader thinking about “Social Business”. He has worked with global companies, such as Danone, to help develop social business models. Grameen Bank has established a presence internationally, opening in New York in 2008. In the UK, Grameen is present in Glasgow and Salford. As global economics continue to shift their focus towards a more balanced economy, Yunus’s views and achievements are frequently cited.
Having already visited Bangladesh in 2010 and arranged an interview with Euromoney in January 2012, we were delighted to host Professor Yunus at our London offices in May 2013 for a private meeting to discuss the progress of Grameen Bank, his definition of Social Business, the state of the microcredit industry, his views on technology as an enabler of social impact, and his observations on the textile industry following the tragic collapse of a factory in Bangladesh earlier this year.
Professor Yunus explained his observations openly and sincerely. Empower people and communities within a framework governed by peers and where profit motives are contained, and watch innovation unfold. Apply this approach consistently and you have the emergence of social business models which can scale, become market competitive and financially sustainable, and improve the quality of life of disadvantaged communities.
“This was the most impressive event I’ve attended in a long, long time”, Dr Holger Schmieding, Berenberg Chief Economist.
Professor Yunus makes his teachings/learning sound straightforward. The important role of women in business (delivering higher impact), the unrelenting focus on entrepreneurship (he encourages the second generation of Grameen borrowers to “be a job creator not a second generation job seeker”) and his strong views on what is a fair return on investment (cost of funds plus 10% or less on microcredit).
His ongoing desire to challenge protocols motivated our guests; for example, he has campaigned for all foreign clothes firms operating in Bangladesh to jointly fix a minimum wage for workers in the industry, with a 50p supplement on the price of clothes paid into a garment workers’ welfare trust.
“It is good to get a regular “kick up the butt”. Once one settles back into the routines of family and work it is easy to forget about the rest of the world. Eloquent people who have shown the way through their actions, like Professor Yunus, are a real help to continue striving for a more equitable world.” Serge Kremer, Ashoka Support Network
His optimism is infectious and inspiring (“human creativity is limitless”) and was summarised by Baroness Lane-Fox***: “I was just fortunate enough to have lunch with Professor Yunus, pioneer of micro finance and founder of the Grameen Bank in Bangladesh. He was introduced by Berenberg Bank because both they and he are challenging the UK to create a much bigger Social Business sector. Very simply, he thinks a social business is one for social good not profit – where dividends get put back. What a hero. A quiet, optimistic and revolutionary man who has changed millions of lives by lending to the most poverty stricken communities.
I loved him for a few reasons. Here are some. 97% of the loans are to women. Grameen see this as the biggest way to create systemic change. Professor Yunus thinks access to technology is fundamental to help people gain control over difficult circumstances and set up a mobile company to help (predominantly) women have phones. Grameen is a model for anywhere and they are currently working on a project in Glasgow.
However I mainly loved him due to his fundamental belief in human beings and their ability to make the right decision. “Some people see walls, I see holes in walls and climb through them.”
We were left with a call to action:
- Create a fund to support social enterprises
- Publish more stories and examples of successful enterprises
- Develop infrastructure to support sound entrepreneurs
- Improve the integrity of the banking model
- Recognise the fundamental role of women in business and family
We are delighted to say that Berenberg are developing initiatives and projects in all of these areas.
We like Yunus’s clarity of views. We applaud the deployment of a business model to address social problems. History shows that the lure of increasing financial return can disrupt best intentions. We believe that Impact Investing is a much-needed investment strategy with measurable and accountable social and financial parameters which should remain independent of other investment strategies.
We have debated many aspects of Yunus’s position. You can argue whether the commercialisation of microcredit is simply making money off the poor; get annoyed with the stubborn purity of his non-dividend, non-loss social business model, or indeed raise your eyebrows at some of the claims he makes about his collaborations with multi nationals. But what you can’t put aside is the scale of his achievements not only in terms of the people whose lives he has changed – many millions – but the power of what he stands for in the world.
* Cumulative amount disbursed since inception, June 2013 [http://www.grameen-info.org/index.php?option=com_content&task=view&id=453&Itemid=527]
** Grameen Bank Monthly Update in USD, June 2013