The Greatest Happiness of Muhammad Yunus

Solving Human Problems

In his four-decade journey from microfinance to social business, 75-year-old Bangladeshi economist and banker Muhammad Yunus learned how small steps to solve problems become ‘mighty rivers’ of sustainability that can spread across the world. He won a Nobel Peace Prize in 2006 in recognition of his success in creating a bank for the poor.

Professor Yunus, most of our readers know you as the founder of Grameen Bank and as the 2006 Nobel Laureate. What has changed at Grameen Bank in the past decade – besides the fact that you had to resign as the bank’s MD – and where does it stand today?

Bangladesh’s current government decided to convert Grameen Bank into a government-controlled bank, a departure from its original structure as a private bank owned by poor women borrowers.

The government claimed that the bank was a government bank. At the same time, the government changed basic law governing the bank. The borrowers are fighting a legal battle against the government takeover, and to keep the legal framework as it was before.

So far, because of the legal proceedings, the government has not been able to take it over. But government action has created a very risky situation, which threatens the future of the bank. The government has the power to let the bank continue to grow if it lets it remain as it is, or it may take it over and bring it to a disastrous end. We are just keeping our fingers crossed.

Looking at the journey from micro-credit to microfinance to financial inclusion, what are some of successful (and not as successful) practices around the world? Which countries have mastered microfinance as an effective development tool?

Lots of good things are happening right now. For example in Bangladesh, four in five households have access to financial services, thanks to microfinance institutions. Every ‘Poverty Reduction Strategy’ in Bangladesh, and anywhere else in the world, includes microfinance as an element of national development.

The Grameen Bank model is now replicated all over the world. But even today an estimated 2.5 billion people – mostly women and the poor – lack access to basic financial services and formal financial systems, which is unfortunate. Financial inclusion is important, especially for the marginalized and for women. We need new financial systems based on the Grameen Bank methodology.

Pushing the existing banks to achieve a goal that they were not built for is a futile task. We should not fool ourselves into expecting to reach 2.5 billion people with the existing bank structure or to achieve financial inclusion. A new structure is an unavoidable necessity. Eliminating poverty will be much easier if we can create a financial system that does not leave anyone behind, not even beggars or homeless people.

Bangladesh has accomplished a lot by creating a system that brings financial services to almost all poor families. Bangladesh has achieved the Millennium Development Goal of reducing its poverty by half. We reached the goal in June 2013, two-and-a-half years before the 2015 deadline. Someday research will be conducted to measure the contribution of near universal microcredit availability in Bangladesh. Researchers may even discuss and calculate the size of contribution. But I doubt anyone will disagree that this accomplishment could have been reached without microcredit.

Microcredit has spread all over the world. Many have abused the concept and turned it into a money-making machine for the rich, but nobody has ever complained about its sustainability. It works in extremely poor countries in Asia, Africa, and Latin America, as well as in the rich countries of Europe and North America.

The success of Grameen America is a case in point. Since opening in January 2008, Grameen America has disbursed over $311.5 million in microloans to over 41,000 women through 18 branches spread across 10 cities. It has almost 100 percent repayments since it started.

You continue to run scores of companies and partnerships aimed at serving the poor. Which areas do they focus on and which of them are most successful?

I have created nearly 60 different businesses aimed at solving social problems. None of them was created for me to make money personally. I started to call them ‘social businesses.’

These are non-dividend companies dedicated to solving human problems. Each social business is designed to address a different problem affecting people at the bottom of the economic pyramid. Some of the social businesses are joint ventures between a Grameen organization and a multinational partner, such as Danone, Intel, Veolia, Uniqlo, and BASF. Some of these social businesses have made impressive national contributions, such as Grameen Shakti and Grameen GC Eye Care Hospital. They have already made social impact on a significant scale. For example, Grameen GC Eye Care Hospital provided low-cost eye care – including eye exams and cataract surgery – to over half a million patients at a significantly reduced, or even negligible, price.

BASF Grameen’s insecticide-treated mosquito nets protect many families from insect-borne diseases. Grameen Shakti’s solar home systems provide more than 1.6 million families with access to clean electricity with more than 31,505 biogas stoves and 936,195 improved cooking stoves; these have created a cleaner living environment.

Grameen Euglena has increased the production of mung beans in the country and has been exporting the beans to Japan.

Can you name some multinational corporations that have adopted the social business model, and made engaging in social business one of their core tenets?

There are several MNCs that are doing social business alongside their core businesses. For example, Danone has a joint venture with us in Bangladesh. Grameen Danone Foods reaches more than 300,000 customers with fortified yogurt. Preliminary scientific studies confirm the positive impact that the yogurt has on childhood growth rates and their ability to concentrate. They also created a social business fund called the Danone Communities Fund, which invests in many social businesses around the world. It has already invested in a network of social businesses. Danone supports India’s Naandi Community Water Services, Senegal’s La Laiterie du Berger, Cambodia’s 1001 Fontaines Project, and many other projects in China and elsewhere, in addition to Grameen Danone Foods in Bangladesh.

Grameen Intel is another example of providing information technology solutions for rural entrepreneurs who are providing services in their local communities. Grameen Veolia is another example. Veolia is a French water company that we worked with to create a tiny water treatment plant to serve 50,000 people in a village in Bangladesh. Arsenic is a big problem in Bangladesh, where there is a very high level of poison in the water. Grameen Veolia wanted to create an alternative for that.

What is the difference between social business and corporate social responsibility?

Corporate Social Responsibility (CSR) programs are the philanthropic arm of companies. CSR funds are used for giving donations to NGOs and other humanitarian organizations to achieve social objectives.

A company’s CSR personnel are not involved in implementing the programs. The limitation of this type of funding is that money is donated, it goes out, and it may achieve its objective, but the money never comes back. So the donation only has a one-time use.

On the other hand, social business creates something to achieve the objective. Money is invested in a company, money goes out, achieves the goal, and then money comes back along with a small profit. Now that money can be used by the business again and again. With each new cycle, the problem will be further solved. Social business is sustainable, replicable, and expandable.

Corporate business has quite different values than social business does. Take, for example, the ‘Nestlé boycott’ case or Bangladesh’s ‘Rana Plaza’ tragedy. When partnering with corporations for your social business projects, how do you deal with a conflict of interests or values?

We are cautious about these conflicts. We choose our MNC and TNC partners as carefully as we can. Basically, we try to see whether they are genuinely interested in social business. I think it is important to give most of them a chance to experience social business. I strongly believe that once they are exposed to social business this will impact their core business.

Has your experience creating joint ventures with big corporations been good or bad? What kind of obstacles have you faced, and what lessons have you learned?

Yes, there have been many interesting experiences. Big companies approach us to start joint venture social businesses – it’s like we are trying to solve a problem with them. They give their ideas; we give our ideas. Eventually, we come closer to each other’s vision. Then the exciting part begins. In getting the work on the ground, sometimes there are misunderstandings and disagreements, just like any other joint ventures. But since our objectives are clear, we overcome these problems. At the end, both sides embrace successful results.

Looking back, I see more excitement than problems. I can recount an interesting problem with Danone that became a classic case. We had a 50-50 joint venture agreement: Grameen would give €500,000, and so would Danone. Grameen didn’t have any problems, but Danone couldn’t provide its half for technical reasons.

Weeks and months went by, and they were stuck. Finally, they explained – their lawyers were objecting, saying that the money belonged to the shareholders and therefore couldn’t be used to invest in a company that would not pay them a dividend. But then Danone came up with a solution. It sent out a letter to all the shareholders before the annual general meeting saying, “We want to start a company in Bangladesh that will tackle child malnourishment. If you want to use part of your dividend to invest in this company, please sign up and tell us what percentage you want to put in.”

Around 97 or 98 percent of the shareholders signed up, and Danone ended up with €35 million. So there was a problem, and there was a solution. This solution was very exciting, so it’s one I always remember. When you go directly to real people, they always have the right answers. It is intermediaries that make the work difficult.

Most of the time, I do not contribute personally to the design of products. But I am a catalyst for bringing people together, focusing on objectives, and reminding everyone what we want.

In Bangladesh, four in five households now have access to financial services, thanks to microfinance institutions. Every ‘Poverty Reduction Strategy’ in the country, and anywhere else in the world, includes microfinance as an element of national development. Bangladesh has accomplished a lot by creating a system that brings financial services to almost all poor families. And it has achieved the Millennium Development Goal of reducing its poverty by half

For example, in the Danone case, they initially showed me a plastic yogurt container. I said, “In social business, plastic is not allowed. We want biodegradable material.” The Danone guys said, “We use plastic all over the world.” And I said, “In the rest of the world you’re a profit maker. Here you’re a social business.” They were unhappy, but they started looking for an alternate solution. Four months later, they came back with a new container made of cornstarch. “Can I eat it?” I asked. “Why should poor people spend money on something they have to throw away? Why can’t you put nutrition in the cup?” So now they are working to make an edible cup. These big companies have enormous creative power. But unless you ask, you will never get an answer.

Can a person or an organization having ideas and vision but lacking start-up capital start a social business?

Yes, provided that funding opportunities have already been created. That is the key to promoting social businesses. When a person sees that there is money waiting for ideas, he starts generating ideas until there’s competition of ideas. But some people have to ensure that they’ll be able to find the money if they come up with good ideas. Funding can come from pre-pooled assets, from case-by-case crowd funding, from investor and entrepreneur matching, etc. Businesses can come up with joint venture partners, and philanthropic funds can be made available.

Speaking of balancing conventional business with social business, is there an effective formula for distributing resources amongst both businesses?

Any business in the world can be a social business, and it will make for a stronger global economy. The world’s resources would be better utilized. Right now profit maximization goals leave many resources unutilized, which leads to unemployment. What we call ‘balancing’ depends on what we want from our lives. That’s the key issue. We cannot resolve economic issues without having a purpose in our lives. If the purpose of life is to accumulate limitless wealth, then the present system may be the right system. But not everybody is fortunate enough to play this game. The vast majority of people form the bottom of the pyramid, and only a handful benefit from this system.

If we are interested in a sustainable society, economy, and planet, the present framework has to be abandoned. To me, balance means all-around sustainability, which only social business can provide.

People often ask if social business is sustainable with no profit incentive. I find this strange – is personal profit the only incentive? The world is filled with people who are not chasing money: politicians, teachers, researchers, workers, and other low-salaried people. My point is that people can live a life without money as their incentive and still be happy, and people can bring this attitude to the business world too. I’ll try to sum it up by saying, “making money is happiness, but making other people happy is greater happiness.”

A person will distribute his or her resources (time, money, manpower, etc.) according to what makes him or her happy. But people should know there are multiple sources of happiness; we should not brainwash them into thinking that money is the only one.

In the case of social business, performance is measured by how effectively you achieve the initial goal (the social one), and not by profits. How exactly do you measure that?

That’s very simple. Social business is about solving human problems. We start by defining the problem. Once the business is launched, it has to monitor how it is addressing that problem.

In conventional business, you create the business to make money. At the end of the year you have to assess how much money you have made. In social business, you run the business to solve a problem. At the end of the year you have to assess how much of the problem you solved. If you wanted to solve unemployment, you find out how many people went from unemployed to employed because of your business. If you wanted to tackle drug addiction, you find out how many people overcame their drug problem. It is not as crazy as it sounds. You count your success stories and that’s the business’ success.

In Bangladesh, 30 million Bangladeshis have fallen victim to chronic arsenic poisoning. So Grameen Veolia Water launched a joint venture to make clean drinking water accessible to more villages in Bangladesh. Now you can count how many more people are drinking safe water, and the number is increasing every year.

Malaria is also a major health problem. According to the World Health Organization, 72 percent of Bangladesh’s population is at risk of malaria. In March 2009, BASF and Grameen Healthcare decided to found BASF Grameen Ltd. to provide mosquito nets to protect people against mosquito-borne diseases. BASF Grameen Ltd. is not a charity; it’s a social business. It sells long-lasting insecticidal nets at a price that’s affordable to the poor. The use of insecticidal nets will provide effective protection against malaria and other insect-borne diseases. At the end of each year, you find out how many people bought and are using your nets.

We have another joint venture with a Japanese company called Grameen Euglena. It aims to produce high quality mung beans, for both domestic consumption in Bangladesh and export to Japan, and to create job opportunities for rural Bangladeshi farmers (particularly rural women). We find out how much food we have produced, how many people have gained jobs and increased their income, and how much we have exported. The more you export, the better the price the farmers get.

Many social problems that social businesses target are not just isolated problems, but structural ones – poverty, a lack of effective healthcare, and the education system, for example. How can social businesses impact these arenas without government cooperation?

The world is complex and everything is related to everything else. If I sneeze here, it will create a storm somewhere else. But that does not mean everybody is waiting to see if my problem will be solved by the system.

People are busy solving their own problems. Social business is like that – it doesn’t wait. It just picks small slices of a bigger problem, without getting overwhelmed by the giant problems of today. Social businesses try to solve one problem at a time. Once they figure out how to solve one person’s problem, they know how to solve the next person’s and the next.

As the saying says, a thousand mile journey is made of little steps. Social business is good at taking small steps. But these little drops become mighty rivers.

You have mentioned that social business is sustainable, replicable, and expandable. If we speak of BRICS countries, how can social business models be transferred from one country to another?

The core of social business is a creative idea. Sustainable ideas have no boundaries, no religion, and no color. They can be applied throughout the world. In social business, we encourage people to copy. If Shakti Doi (a yogurt fortified with micro-nutrients) is combatting malnutrition in Bangladesh, it will do the same in Brazil, China, India, and everywhere else. If Grameen Danone found a way to bring this yogurt to poor families in an affordable way, and still run a sustainable business, it should be able to do it in other countries too.

We tell unemployed young people to forget about jobs – a ‘job’ is an obsolete and flawed idea. We tell them to say to themselves, “We are not job-seekers, we are job creators,” and to think and act like job creators. We ask them to come up with simple business ideas and bring them to us. We have created a social business fund. We invest in these businesses to form partnerships with them so we can help them make their businesses succeed. Once a business starts to make a profit, they return our initial investment and continue with their business as full owners.

The unemployed are turning into new entrepreneurs. This can be repeated in any corner of the world – in rich countries or in poor countries, in inner cities or remote villages.

So social business is a model, not only for the developing world but for developed countries as well?

Social business is about solving universal problems. It is not only about solving poor countries’ problems or poor people’s problems. The present economic system has created problems for people everywhere – problems of poverty, healthcare, unemployment, climate change, a dependence on state charity, crime, drugs, etc.

In your opinion, what are the top issues BRICS as a whole should deal with?

I would say the top-5 issues for BRICS countries are the following. I would start with the goal of achieving three zeros: first, zero poverty; second, zero unemployment; and third, zero net carbon emissions. The other two goals would be: fourth, good governance and human rights, and, fifth, bringing state-of-the-art technology to all services – particularly in healthcare, education, and government services – so they are nearly instantaneous and affordable.

How can the New Development Bank established by the BRICS countries work towards achieving these ‘three zeros,’ considering NDB’s mandate to focus first on infrastructure?

Its name contains both ‘new’ and ‘development bank.’ If it is a development bank, the first focus and its number one priority should be people – particularly poor people, the rejected, and unemployed.

Roads and bridges are not development; they are facilitators to development. When people are firmly addressed, then roads and bridges become meaningful. Otherwise, you remain occupied dealing with contractors and big money, which may have the reverse effect on development. I hope NDB will decide what it wants to stand for.

I hope NDB will be interested in social issues like poverty and unemployment. I think it should keep its eyes on environmental issues. If it does that, then it should pursue the goal of helping the world reduce its net carbon emissions to zero. I would like to see NDB as a place for doers, committed to specific goals. If the United Nations has goals, I don’t see why NDB should hesitate to set its own goals as well.

This interview was conducted by Alexandra Katz and has been condensed and edited for clarity.