In 1974, Professor Muhammad Yunus, a Bangladeshi economist from Chittagong University, led his students on a field trip to a poor village. They interviewed a woman who made bamboo stools, and learnt that she had to borrow the equivalent of 15p to buy raw bamboo for each stool made. After repaying the middleman, sometimes at rates as high as 10% a week, she was left with a penny profit margin. Had she been able to borrow at more advantageous rates, she would have been able to amass an economic cushion and raise herself above subsistence level.Realizing that there must be something terribly wrong with the economics he was teaching, Yunus took matters into his own hands, and from his own pocket lent the equivalent of $27 to 42 basket-weavers. He found that it was possible with this tiny amount not only to help them survive, but also to create the spark of personal initiative and enterprise necessary to pull themselves out of poverty.Against the advice of banks and government, Yunus carried on giving out 'micro-loans', and in 1983 formed the Grameen Bank, meaning 'village bank' founded on principles of trust and solidarity. In Bangladesh today, Grameen has 1,084 branches, with 12,500 staff serving 2.1 million borrowers in 37,000 villages. On any working day Grameen collects an average of $1.5 million in weekly installments. Of the borrowers, 94% are women and over 98% of the loans are paid back, a recovery rate higher than any other banking system. Grameen methods are applied in projects in 58 countries, including the US, Canada, France, The Netherlands and Norway.In 2006, Yunus and the bank were jointly awarded the Nobel Peace Prize, "for their efforts to create economic and social development from below.
Muhammad Yunus: Well I had no idea that I would ever get involved in anything about lending or microfinance. At that time that word didn’t exist, so the idea of having such a program didn’t come to my mind. I was teaching at Chittagong University in Bangladesh at a time when our country was going through a big famine. Lots of people were dying of hunger. So I was kind of feeling terrible that I teach something beautiful, some economic elegant theories, but it doesn’t come to any use for people. So I wanted to see if I could do something directly as a person – to individual person, human being right next door to the university campus, adjacent to the university campus. So I was doing some little things to help people, and I saw how many lenders are operating in the village and made a list of those people who borrowed from lenders. There are 42 names on my list. The total money they borrowed was $27. So I thought I can solve this problem; help them get out of the clutches of the money lenders by lending this money to 42 people, this $27. They can return the money to the money lenders and they will be free. And that’s what I did and they were pretty excited about it, so I wanted to continue it. I went to the banks who do the lending to the poor people. They refused. So ultimately I offered myself as a guarantor to the banks so that they will allow them to get the money. So that’s how it began, and it continued and we’ve been successful.
Recorded on: 1/23/08