Ending Poverty on a Shoestring Budget
Author: Raymond Yeh

Ending Poverty on a Shoestring Budget
Excerpted from "The Art of Business"

Ending Poverty on a Shoestring Budget

Would you try to end world poverty if you only had in your pocket?

Probably not.

But Professor Muhammad Yunus, formerly a professor of economics in Bangladesh would and did. This is the story about this incredible visionary and his stunning courage in following his vision:

During a visit to one of the villages neighboring his university, Yunus was shocked at the utter devastation he found in the villages situated around the University. He came to understand that the poor people in these villages were committed to a form of labor, or slavery, in which they traded their labor for a mere 22 cents per day, barely enough for survival. This cycle continues day in and day out, from one generation to the next. Yunus recalls, “I never heard of anyone suffering for the lack of 22 cents. It seemed impossible to me, preposterous.”

He personally lent the equivalent of to 42 people, which amounted to about 62 cents per person. With this money, each person bought materials for the day’s work, weaving chairs or making pots. At the end of their first day as independent business owners, each of the 42 people sold their wares and paid back the loan. Thus began the micro credit movement and the subsequent formation of Grameen Bank, which means “village.” Based on this experience, Yunus, together with a group of like-minded colleagues and students, formed Grameen Bank as a micro-lending organization dedicated to lifting the poor out of the perpetual cycle of poverty.

Grameen Bank was created out of the deeply held belief that the poor are as trustworthy as the wealthy or middle class. By studying the villages around him, Yunus came to understand that the poor are poor not because they are untrained or illiterate, but because they cannot retain the returns of their labor since they have no control over capital. Once they are economically empowered, however, they “are the most determined fighters in the battle to solve the population problem, end illiteracy, and live healthier, better lives.”

Grameen Bank considers credit to be a basic human right, and operates on the faith that the poor will repay their debts. Micro credit lending provides small, collateral-free loans to the poor as capital for building small businesses. It has proven itself to be an effective and popular countermeasure against poverty, enabling people without access to traditional lending institutions to borrow at market rates to start small businesses. More importantly, micro loans structured by Grameen Bank force borrowers to set aside savings as guarantees for their loans, which increases the wealth and financial standing of not only the borrowers, but also the villages, towns, and the entire nation.

Since many of the bank’s borrowers are illiterate, Grameen keeps the repayment formula very simple:

Loans last for one year.
Loan installments are paid weekly.
Repayment begins one week after the loan.
Weekly loan payments are 2 percent of the loan amount each week for 50 weeks.
Interest payments are 2 taka per week for every 1,000 taka () loaned.
If borrowers are unable to repay loans, the bankers at Grameen focus on assisting borrowers in overcoming problems, not punishing them. Bankers will restructure any loan into a very long term loan, even if it reduces the repayment amount to half a penny each week. Such discipline helps the borrower maintain a sense of self-reliance and confidence. This unconventional approach, rare in the banking industry, springs from the belief that each person should be given the necessary tools and assistance to control his or her destiny.

More than 25 years later, Yunus’ original vision has manifested to a remarkable degree. Grameen Bank has loaned out more than .5 billion dollars. More importantly, the practice of micro credit lending has spread to 43 countries, including some highly developed countries such as the United States . Furthermore, an unprecedented 98% of borrowers have paid their loans back in full.

Given Grameen Bank’s success over the last 25 years, what is its vision for the future? Professor Yunus’ vision is to create a poverty free society by 2050. In a summit for micro credit held in Feb. 1997, he said:

“Only one hundred years back, men were still struggling to find a way to fly. Many people seriously thought men would never fly. Those people who were committed to the idea of flying were looked at as crazy people. In 1903, the Wright brothers flew their first plane. It stayed in the air for just 12 seconds. Yes, 12 seconds. It covered 120 feet. At that moment the seed of a new world was planted. Only 65 years later, man confidently went to the moon, picked up moon rocks and returned to the world. The whole world watched every moment of it on the television.

In the micro credit field, we are just flying our Wright brothers’ plane. We are covering 120 feet here, 500 feet there. Some find our plane unsafe, some find it clumsy, and some find it not good enough for the job. We can assure you we’ll soon fly our Boeings, our Concords; we’ll be ready with booster rockets.

We believe that poverty does not belong to a civilized human society. It belongs to museums. This summit is about creating a process which will send poverty to the museum.… Sixty-five years after this summit, we will also go to our moon. We will create a poverty-free world.”

Sustaining the Dream
Dream the impossible dream! If there is one message in all the stories of this chapter, it is that for true dreamers nothing is impossible. The dreamers at SWA, Medtronic, and Grameen Bank smashed every mold, ignored every preconception, and denied every scrap of conventional wisdom in their quest to create a freer and more humane world. How many people could conceive of the idea that credit is a human right, that Frankenstein could be real, or that the masses should be liberated to fly? Clearly, dreamers are inspired in some special way when they encounter life events that others would consider normal or “just the way things are.” Some force calls these dreamers to step forth and change what they see, create something above and beyond “the way things are.” Most of us have been inspired in this way at some time or other in our lives, but few step forth with the vigor and spark of these dreamers. Few answer to the higher purpose that is always calling to us. By their actions, these dreamers not only show us how it is done, but also ask us whether we are willing to step up and create our own dreams.



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Raymond Yeh, PhD, is a senior research fellow at IC2 Institute at the University of Texas at Austin. He has been a management consultant to many nations and works with executives of global companies such as IBM, GTE, AT&T, Siemens, and NEC, as well as with founders of many start-up companies. Dr. Yeh has published ten technical books and the highly acclaimed business book titled, "Zero Time: Providing Instant Customer Value—Every Time, All the Time!”

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