Nobel Peace Prize-winner Yunus believes the power of the free market can solve the problems of poverty, hunger and inequality. As founder of the Grameen Bank, Yunus developed a concept of a microcredit banking program, which provides poor people -- mainly women -- with small loans to start businesses. Since the 1970s, this program has spread to every country and benefited millions of families.
In the Grameen Bank experience, microcredits are offered to the poorest of the poor, with a particular emphasis on women, who receive 95 percent of the bank’s loans. Groups of potential clients form groups of five. No collaterals are required. Loans are made to individual participants within the group, but there is joint responsibility. If a member fails in repayment, all the members have to pay for her or the entire group is excluded from future loans. Group lending under joint responsibility gives customers incentives to select responsible partners, to (peer) monitor and repay. The microcredit amount really is micro: $27.
Together with the loan, the clients accept 16 decisions: “We shall follow and advance the four principles of the Grameen Bank: Discipline, Unity, Courage and Hard Work -- in all walks of our lives. Prosperity we shall bring to our families. We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses. We shall grow vegetables all year round. We shall eat plenty of them and sell the surplus. During the planting season, we shall plant as many seedlings as possible. We shall plan to keep our families small. We shall minimize our expenditure. We shall look after our health. We shall educate our children and ensure they can earn to pay for their education. We shall always keep our children and the environment clean. We shall drink water from wells. We shall not practise child marriage. We shall not inflict any injustice on anyone, nor shall we allow anyone to do so. We shall collectively undertake bigger investments for higher incomes. We shall always be ready to help one another. If anyone is in difficulty, we shall all help him or her. If we come to know of any breach of discipline in any centre, we shall all go there and help restore discipline. We shall take part in all social activities collectively.” These decisions are practical rules to change the lives of the poor; in other words, they are the minimum requirements of a standard of living.
In “Creating a World Without Poverty,” Yunus goes beyond the microcredit program to pioneer the idea of social business. He describes existing companies as profit-maximizing businesses and the new kind of business as social business. Entrepreneurs will set up social businesses not to achieve limited personal gain, but to pursue specific gain. Social businesses operated with management principles, just like a traditional profit-maximizing business, aim for full-cost recovery, or more, even as they focus on creating products or services that provide a social benefit.
How can they do it? Yunus responds: by a social business that manufactures and sells high-quality, nutritious food products at very low prices to a targeted market of poor and underfed children. These products can be cheaper because they do not compete in the luxury market. There is no costly packaging or advertising required. This social business develops renewable energy systems and sells it at reasonable prices to rural communities that otherwise can’t afford access to energy. It also recycles garbage, sewage and other waste products, and prevents pollution in poor neighborhoods.
This book is good for everybody living in a Western society to reflect on and do something about the poorest people of the world. With the money we spend on lunch, a poor family can start a business.