Yunus is creating another new financial model to include the poor in global capitalism – and still more models are needed.
More than 30 years ago, Grameen Bank and its founder, Professor Muhammad Yunus, gave its first loan – $27 – to a group of 42 villagers in Bangladesh, pioneering a new financing model for the poor. Since then the Grameen model has proved enormously successful, lending to more than seven million borrowers, 97% of them women, and inspiring the blossoming of more than 10,000 microfinance institutions worldwide today. In 2006, Professor Yunus and Grameen were duly awarded the Nobel Peace prize for their “efforts to create economic and social development from below”.
Microfinance is helping to transform not only Bangladesh, but also many other countries. The sector’s estimated loan volume of $25bn is attracting considerable interest from international banks and investors as an emerging investment opportunity. The model is working and participation by large banks and capital markets could help to boost systemic co-operation, bring resources and strengthen microfinance’s bottom-up approach.
Social business
Going beyond microcredit, Professor Yunus is now looking at a new model for business. In his latest book, Creating a World Without Poverty, he tackles what he calls social business and the future of capitalism. Put bluntly, social businesses require investors to invest in particular projects but to take no dividends. Unlike the traditional model, in which owners seek return on their capital, the social business model allows investors to withdraw from the investment but obtain no benefits – the benefits are for the project. Professor Yunus uses the example of the Grameen-Danone joint venture, which produces affordable, nutritious yoghurt for malnourished children in Bangladesh; Danone takes no dividends.
Professor Yunus believes that unfettered markets in their current form are not meant to solve social problems, and instead may exacerbate poverty, disease, pollution, corruption, crime and inequality. “To have win-win globalisation, we must have fair traffic laws, the rule of ‘the strongest takes all’ must be replaced by rules that ensure that the poorest have a place on the highway,” he says.
Although this social business model may not be attractive to everyone, new financial models are desperately needed to cope with the social and environmental anomalies that challenge today’s globalised world. John Maynard Keynes once said: “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” Recent developments have shown that capitalism and the global financial sector are ripe for repair. Professor Yunus’ ideas are creating new realities but many more fresh approaches are needed.
