Grameen Bank

245px
Type	Body Corporate (Bank Ordinance)
Industry	Financial services
Founded	1983
Founder(s)	Muhammad Yunus
Headquarters	Dhaka, Bangladesh
Number of locations	2,565 (July 2010)[1]
Area served	Bangladesh
Key people	Mohammad Shahjahan, Acting Managing Director (CEO)
Products	Microfinance
Revenue	12,435,830,045 Taka (176.67 million USD) (2010)[2]
Operating income	8,513,832,110 Taka (120.95 million USD) (2010)[2]
Net income	757,241,322 Taka (10.76 million USD) (2010)[2]
Total assets	125,396,957,972 Taka (2010)[3]
Employees	22,149 (July 2011)[1]
Website	grameen-info.org

The Grameen Bank (Bengali: গ্রামীণ বাংক) is a microfinance organization and community development bank started in Bangladesh that makes small loans (known as microcredit or "grameencredit"^[4]) to the impoverished without requiring collateral. The name Grameen is derived from the word gram which means "rural" or "village" in the Bengali language.^[5]

The system of this bank is based on the idea that the poor have skills that are under-utilized. A group-based credit approach is applied which utilizes the peer-pressure within the group to ensure the borrowers follow through and use caution in conducting their financial affairs with strict discipline, ensuring repayment eventually and allowing the borrowers to develop good credit standing. The bank also accepts deposits, provides other services, and runs several development-oriented businesses including fabric, telephone and energy companies. Another distinctive feature of the bank's credit program is that the overwhelming majority (98%) of its borrowers are women.

The origin of Grameen Bank can be traced back to 1976 when Professor Muhammad Yunus, a Fulbright scholar at Vanderbilt University and Professor at University of Chittagong, launched a research project to examine the possibility of designing a credit delivery system to provide banking services targeted to the rural poor. In October 1983, the Grameen Bank Project was transformed into an independent bank by government legislation. The organization and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006;^[6] the organization's Low-cost Housing Program won a World Habitat Award in 1998.

History[link]

Muhammad Yunus, the bank's founder, earned a doctorate in economics from Vanderbilt University in the United States. He was inspired during the terrible Bangladesh famine of 1974 to make a small loan of US$27.00 to a group of 42 families so that they could create small items for sale without the burdens of predatory lending.^[7] Yunus believed that making such loans available to a wide population would have a positive impact on the rampant rural poverty in Bangladesh.

Nobel Laureate Muhammad Yunus, the bank's founder

The Grameen Bank (literally, "Bank of the Villages", in Bengali) is the outgrowth of Yunus' ideas. The bank began as a research project by Yunus and the Rural Economics Project at Bangladesh's University of Chittagong to test his method for providing credit and banking services to the rural poor. In 1976, the village of Jobra and other villages surrounding the University of Chittagong became the first areas eligible for service from Grameen Bank.^[8] The Bank was immensely successful and the project, with support from the central Bangladesh Bank, was introduced in 1979 to the Tangail District (to the north of the capital, Dhaka).^[8] The bank's success continued and it soon spread to various other districts of Bangladesh. By a Bangladeshi government ordinance on October 2, 1983, the project was transformed into an independent bank.^[8] Bankers Ron Grzywinski and Mary Houghton of ShoreBank, a community development bank in Chicago, helped Yunus with the official incorporation of the bank under a grant from the Ford Foundation.^[9] The bank's repayment rate was hit following the 1998 flood of Bangladesh before recovering again in subsequent years. By the beginning of 2005, the bank had loaned over USD 4.7 billion^[10] and by the end of 2008, USD 7.6 billion^[11] to the poor.

The Bank today continues to expand across the nation and still provides small loans to the rural poor. By 2006, Grameen Bank branches numbered over 2,100.^[12] Its success has inspired similar projects in more than 40 countries around the world and has made World Bank to take an initiative to finance Grameen-type schemes.^[13]

The bank gets its funding from different sources, and the main contributors have shifted over time. In the initial years, donor agencies used to provide the bulk of capital at very cheap rates. In the mid-1990s, the bank started to get most of its funding from the central bank of Bangladesh. More recently, Grameen has started bond sales as a source of finance. The bonds are implicitly subsidised as they are guaranteed by the Government of Bangladesh and still they are sold above the bank rate.^[14]

Application of microcredit[link]

Grameen believes that charity is not an answer to poverty. It only helps poverty to continue as it creates dependency and takes away individual's initiative to break through the cycle of poverty, whereas loans offer people the opportunity to take initiatives in business or agriculture, providing earnings and enabling them to pay off the debt.

Grameen regards all human beings, including the poorest, as endowed with endless potential, and that unleashing the creativity in each individual should be the answer to poverty.^[15] Grameen has offered credit to many poor, women, illiterate and unemployed people. It created access to credit on reasonable terms such as the group lending system and weekly-installment payment with reasonably long term of loans, enabling the poor to build on their existing skill to earn a better income in each cycle of loans.^[15]

Grameen’s objective has been to promote financial independence among the poor. Yunus encourages all borrowers to eventually become savers so that their local capital can be converted into new loans. Since 1995, Grameen has funded 90 percent of its loans with interest income and deposits collected, hence aligning the interests of its new borrowers and depositor-shareholders. Hence, Grameen distinguishes itself from such institutions by converting deposits made in villages into loans for the more needy in the villages (Yunus and Jolis 1998).^[16]

It targets the poorest of the poor, with a particular emphasis on women, who receive 95 percent of the bank’s loans. Women represent a suitable clientele because, given that they have less access to alternatives, such as traditional credit lines and incomes, they are more likely to be credit constrained and they have an inequitable share of power in household decision making. Lending to women also generates considerable secondary effects, including empowerment of a marginalized segment of society (Yunus and Jolis 1998). This is especially crucial as Yunus claims that in 2004, women still have difficulty getting loans as it represented less than 1 percent of borrowers from commercial banks (Yunus 2004).^[16] The interest rates charged by microfinance institutes including Grameen Bank is high compared to that of traditional banks; Grameen's interest (reducing balance basis) on its main credit product is about 20%.^[17]

Down the years, Grameen has also diversified the types of loans it makes. Among its new interests, hand-powered wells and loans to support the enterprises of Grameen members' immediate relatives. There were also seasonal agricultural loans and lease-to-own agreements for equipment and livestock. The bank also set a new goal for itself: making each of its branches free of poverty, as defined by benchmarks such as having adequate food and access to clean water and latrines.

Grameen Bank Building in Dhaka

Grameen Bank is best known for its system of solidarity lending.^[13] The Bank also incorporates a set of values embodied in Bangladesh by the Sixteen Decisions.^[19] At every branch of Grameen Bank the borrowers recite these Decisions and vow to follow them. As a result of the Sixteen Decisions, Grameen borrowers have been encouraged to adopt positive social habits. One such habit includes educating children by sending them to school. Since the Grameen Bank embraced the Sixteen Decisions, almost all Grameen borrowers have their school-age children enrolled in regular classes. This in turn helps bring about social change, and educate the next generation.

Solidarity lending is a cornerstone of microcredit and the system is now at work in over 43 countries. Although each borrower must belong to a five-member group, the group is not required to give any guarantee for a loan to its member. Repayment responsibility solely rests on the individual borrower, while the group and the centre oversee that everyone behaves in a responsible way and none gets into a repayment problem. There is no form of joint liability, i.e. group members are not obliged to pay on behalf of a defaulting member. However, in practice the group members often contribute the defaulted amount with an intention of collecting the money from the defaulted member at a later time. Such behavior is facilitated by Grameen's policy of not extending any further credit to a group in which a member defaults.^[20]

There is no legal instrument (no written contract) between Grameen Bank and its borrowers, the system works based on trust.^[21] To supplement the lending, Grameen Bank also requires the borrowing members to save very small amounts regularly in a number of funds like emergency fund, group fund etc. These savings help serve as an insurance against contingencies.^[13]

In a country in which few women may take out loans from large commercial banks, Grameen has focused on women borrowers as 97% of its members are women.^[22] While a World Bank study has concluded that women's access to microcredit empowers them through greater access to resources and control over decision making, some other economists argue that the relationship between microcredit and women-empowerment is less straightforward.^[23] In other areas, Grameen's track record has also been notable, with very high payback rates—over 98 percent. However, according to the Wall Street Journal, a fifth of the bank's loans were more than a year overdue in 2001.^[24] Grameen claims that more than half of its borrowers in Bangladesh (close to 50 million) have risen out of acute poverty thanks to their loan, as measured by such standards as having all children of school age in school, all household members eating three meals a day, a sanitary toilet, a rainproof house, clean drinking water and the ability to repay a 300 taka-a-week (around 4 USD) loan.^[25]

Village Phone Program[link]

Among many different applications of microcredit by the bank, one is the Village Phone program, through which women entrepreneurs can start a business providing wireless payphone service in rural areas of Bangladesh. This program earned the bank the 2004 Petersburg Prize worth of EUR 100,000/-, for its contribution of Technology to Development.^[26] In the press release announcing the prize, the Development Gateway Foundation noted that through this program:

...Grameen has created a new class of women entrepreneurs who have raised themselves from poverty. Moreover, it has improved the livelihoods of farmers and others who are provided access to critical market information and lifeline communications previously unattainable in some 28,000 villages of Bangladesh. More than 55,000 phones are currently in operation, with more than 80 million people benefiting from access to market information, news from relatives, and more.^[26]

Struggling members program[link]

In 2003, Grameen Bank started a new program, different from its traditional group-based lending, exclusively targeted to the beggars in Bangladesh.^[27] This program is focused on distributing small loans to beggars. The existing rules of banking are not applied, the loans are completely interest-free, the repayment period can be arbitrarily long, for example, a beggar taking a small loan of around 100 taka (about US $1.50) can pay only 2.00 taka (about 3.4 US cents) per week and furthermore the borrower is covered under life insurance free of cost.^[28]

Operational statistics[link]

One unusual feature of the Grameen Bank is that it is owned by the poor borrowers of the bank, most of whom are women. Of the total equity of the bank, the borrowers own 94%, and the remaining 6% is owned by the Government of Bangladesh.^[22]

The bank has grown significantly between 2003-2007. As of October 2007, the total borrowers of the bank number 7.34 million, and 97% of those are women.^[22] The number of borrowers has more than doubled since 2003, when the bank had only 3.12 million members.^[29] Similar growth can be observed in the number of villages covered. As of October 2007, the Bank has a staff of over 24,703 employees and 2,468 branches covering 80,257 villages,^[22] up from 43,681 villages covered in 2003.^[29]

Since its inception, the bank has distributed Tk 684.13 billion (USD 11.35 billion) in loans out of which Tk 610.81 billion (USD 10.11 billion) has been repaid.^[30] The bank claims a loan recovery rate of 96.67%,^[30] up from the 95% recovery rate claimed in 1998.^[30] David Roodman has critiqued the accounting practices that Grameen used to determine this rate.^[24]

Nobel Peace Prize[link]

Grameen Bank received several prestigious awards including the highest civilian award in Bangladesh, the Independence Day Award, in 1994. However, the greatest recognition of the bank's achievements came on October 13, 2006, when the Nobel Committee awarded Grameen Bank and its founder, Muhammad Yunus, the 2006 Nobel Peace Prize "for their efforts to create economic and social development from below."^[31] The award announcement also mentions that:

From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.^[31]

On December 10, 2006, Mosammat Taslima Begum, who used her first 16-euro (20-dollar) loan from the bank in 1992 to buy a goat and subsequently became a successful entrepreneur and one of the elected board members of the bank, accepted the Nobel Prize on behalf of Grameen Bank's investors and borrowers at the prize awarding ceremony held at Oslo City Hall.^[32]

Grameen Bank is the only business corporation to have won a Nobel Prize. In a speech given at the presentation ceremony, Professor Ole Danbolt Mjøs, Chairman of the Norwegian Nobel Committee, mentioned that, by giving the prize to Grameen Bank and Muhammad Yunus, the Norwegian Nobel Committee wished to focus attention on dialogue with the Muslim world, on the women's perspective, and on the fight against poverty.^[33]

The Nobel prize announcement was celebrated with a lot of enthusiasm in Bangladesh.^[34] Some critics asserted that the award affirms neoliberalism.^[23]

Related ventures[link]

The Grameen Bank has grown into over two dozen enterprises represented by the Grameen Family of Enterprises. These organizations include Grameen Trust, Grameen Fund, Grameen Communications, Grameen Shakti (Grameen Energy), Grameen Telecom, Grameen Shikkha (Grameen Education), Grameen Motsho (Grameen Fisheries), Grameen Baybosa Bikash (Grameen Business Development), Grameen Phone, Grameen Software Limited, Grameen CyberNet Limited, Grameen Knitwear Limited, and Grameen Uddog (owner of the brand Grameen Check).^[35]

On July 11, 2005 the Grameen Mutual Fund One (GMFO), approved by the Securities and Exchange Commission of Bangladesh, was listed as an Initial Public Offering. One of the first mutual funds of its kind, GMFO will allow the over four million Grameen bank members, as well as non-members, to buy into Bangladesh's capital markets. The Bank and its constituents are together worth over USD 7.4 billion.^[36]

The work of Grameen Bank in Bangladesh Inspired the creation of the Grameen Foundation, which aims to share the Grameen philosophy and accelerate the impact of microfinance on the world’s poorest people.^[37] Grameen Foundation, which has an A-rating from [Charity Watch],^[38] not only provides microloans in the USA itself (the only developed country where this is done), but also supports microfinance institutions worldwide with loan guarantees, training, and technology transfer.^[39] As of 2008, Grameen Foundation supports microfinance institutions in the following regions:^[40]

• Asia-Pacific: Bangladesh, China, East Timor, Indonesia, India, Lebanon, Pakistan, Philippines, Saudi Arabia, Yemen
• Americas: Bolivia, Dominican Republic, El Salvador, Haiti, Honduras, Mexico, Peru, USA
• Africa: Cameroon, Egypt, Ethiopia, Ghana, Morocco, Nigeria, Rwanda, Tunisia, Uganda

Premiering at the 2010 Sundance Film Festival, the film To Catch a Dollar documents the process of establishing Grameen America programs in Queens, New York in 2008. The documentary is expected to open in September 2010.

Criticism[link]

Analysts have suggested that microcredit can bring communities into debt from which they cannot escape,^{[41][42][43][44]} citing situations where microloans from the Grameen Bank were linked to exploitation and pressures on poor families to sell their belongings, leading in extreme cases to humiliation and ultimately suicides.^[45]

The Mises Institute's Jeffrey Tucker suggests that microcredit banks depend on subsidies in order to operate, thus essentially becoming another example of welfare,^[46] whereas Yunus believes that he is working against the subsidized economy, giving borrowers the opportunity to create businesses. Some of Tucker's criticism is based on interpretations of the Grameen's 16 decisions, seen as indoctrination, whithout further analysing what they mean in the context of poor, illiterate peasants.^{[citation needed]}

Maulana Ibrahim, a reactionary imam in Bangladesh, spoke out against the Grameen Bank in 1993 for fostering "un-Islamic ways", alleging (referring to the lenders' pledge) that women were taking a vow not to obey their husbands and not to live in poverty anymore.^[47]

Grameen bank has been accused of tax evasion in a Norwegian documentary, Caught in Micro debt. These accusations have recently been repeated in a Spanish documentary, Microcredit. The accusation is based on the unauthorised transfer of approximately US$100 million donated by The Norwegian Agency for Development Cooperation (NORAD) from one Grameen entity to another "Grameen Kalyan" in 1996, before the expiry of the Grameen bank's tax exemption. Muhammad Yunus denies that this is tax evasion: "There is no question of tax evasion here. The Government has provided organizations with opportunities; we have made use of these opportunities with aim of benefitting our shareholders who are the rural poor women of Bangladesh."^[48] The matter has since been resolved.

David Roodman^[49] and Jonathan Morduch^[50] question the statistical validity of studies of microcredit's effects on poverty, pointing to the complexity of the situations involved.^[51]

Difficulty in exporting the Grameen Bank Model[link]

Muhammed Yunus envisioned the Grameen Bank to be a banking model for the poor. The model is essentially providing loans to the poor to embark on an income generating activity. This will catalyse their escape from poverty.^[52]

Despite the bank’s success in Bangladesh,^[53] little success has been achieved in exporting the Grameen Bank Model to other poverty-stricken areas. There is an estimated demand of 1 billion micro-borrowers globally, with a total loan demand of $250 billion.^[54] However, the present microfinance model can only provide for 100 million of them and $25 billion of loans.^[54] The immense funding gap points to a constraint within the capital structure of the Grameen Bank.

Yunus believes the predominant aim of Grameen Bank is to improve the social welfare of the poor. Thus, The Grameen Bank Model has adhered to a collective ownership model and discouraged use of foreign capital. Yunus believes that this model best represents the borrowers’ interests. Today, the Grameen Bank is 95% owned by the local poor and 5% by the government.^[55] In a discussion with Vikram Akula, CEO of SKS Microfinance, Yunus emphasised the notion that introducing foreign capital will induce the bank to adopt more profit maximizing methods and distorting the aims.^[56] Thus, microfinance should only be financed by local depositors. A paper published by Deutsche Bank reinforces this by showing that local deposits are the cheapest and most sustainable source of financing.^[54]

However, this model is extremely restrictive. By eliminating the option of tapping into the capital markets for funds, it greatly limits microlenders to operate effectively. This is especially the case in countries which have stricter banking laws.^[57] In India, microlenders cannot accept deposits due to local banking regulations.^[57] These cash-strapped microlenders have to turn to local banks or rely on government grants. This source of capital is usually unstable, insufficient, or too expensive,^[57] as it relies too heavily on the goodwill of the government or the corporate credit cycle. In order to adequately meet the growing financing needs, there is a need to source for an alternative source of capital which is cheaper and more permanent. In that thought, it is also equally important to structure the financing such that it does not lose the socially responsible aim of microfinance.

See also[link]

Sustainable development portal

• Accion International
• Acción Emprendedora
• Accion USA
• Cooperative banking
• Count Me In
• Flat rate (finance)
• Grama Vidiyal, Indian Microfinance Bank
• Grameen America, Grameen's microfinance project in the United States
• Islamic banking
• Micro credit for water supply and sanitation
• Microgrant
• Opportunity International
• Project Enterprise
• Solidarity lending

References[link]

Further reading[link]

External links[link]

• Grameen Bank official site
• gramBangla, Australian Bangladeshi Community Grameen Support Group
• Grameen Bank: Taking Capitalism to the Poor, Mainsah, E. et al., Chazen Journal of International Business, Columbia Business School, 2004
• "Ending Global Poverty". MIT World. http://mitworld.mit.edu/video/289/.  Video by Muhammad Yunus talking about Grameen Bank
• Grameen II: The First Five Years, 2001-2005; Stuart Rutherford et al. for MicroSave, February 2006.
• Grameen Bank History
• The crushing burden of microcredit F24 international report
• Grameen America - Grameen's microfinance operations in the US

Muhammad Yunus
মুহাম্মদ ইউনুস

Welfare economics , Development economics , Public Health , Gender Studies , Political Philosophy , Utilitarianism
Muhammad Yunus at World Economic Forum in Davos, Switzerland, 25 January 2012
Born	(1940-06-28) 28 June 1940 (age 71) Chittagong, Bangladesh
Nationality	Bangladeshi
Institution	Chittagong University Shahjalal University of Science and Technology Middle Tennessee State University
Field	Microcredit, Welfare economics, ethics
Alma mater	University of Dhaka Vanderbilt University
Contributions	Grameen Bank Microcredit
Awards	Independence Day Award (1987) World Food Prize (1994) Nobel Peace Prize (2006) Presidential Medal of Freedom (2009)
Information at IDEAS/RePEc

Muhammad Yunus (Bengali: মুহাম্মদ ইউনুস, pronounced Muhammôd Iunus; born 28 June 1940) is a Bangladeshi economist and founder of the Grameen Bank, an institution that provides microcredit (small loans to poor people possessing no collateral) to help its clients establish creditworthiness and financial self-sufficiency. In 2006 Yunus and Grameen received the Nobel Peace Prize "for their efforts through microcredit to create economic and social development from below".^[1] Yunus himself has received several other national and international honors.

He is a member of advisory board at Shahjalal University of Science and Technology. Previously, he was a professor of economics at Chittagong University where he developed the concepts of microcredit and microfinance. These loans are given to entrepreneurs too poor to qualify for traditional bank loans. He is the author of Banker to the Poor and two books on Social Business Models, and a founding board member of Grameen America and Grameen Foundation. Grameen Intel is just one of hundreds of public and private partnerships now mediated through Youth & Yunus. In early 2007 Yunus showed interest in launching a political party in Bangladesh named Nagorik Shakti (Citizen Power), but later discarded the plan. He is one of the founding members of Global Elders.

Yunus also serves on the board of directors of the United Nations Foundation, a public charity created in 1998 with entrepreneur and philanthropist Ted Turner’s historic $1 billion gift to support UN causes. The UN Foundation builds and implements public-private partnerships to address the world’s most pressing problems, and broadens support for the UN.^[2]

In March 2011, after months of government attack, the Bangladesh government controversially fired Yunus from his position at Grameen Bank, citing legal violations and an age limit on his position.^[3] Bangladesh's High Court affirmed the removal on 8 March. Yunus and Grameen Bank are appealing the decision, claiming Yunus' removal was politically motivated.

Professor Yunus was chosen by Wharton School of Business for PBS documentary, as one of 'The 25 Most Influential Business Persons of the Past 25 Years'.^[4] In 2006, Time magazine listed him under "60 years of Asian Heroes" as one of the top 12 business leaders.^[5] In 2008, in an open online poll, Yunus was voted the 2nd topmost intellectual person in the world on the list of Top 100 Public Intellectuals by Prospect Magazine (UK) and Foreign Policy (United States).^[6]

Early life and education[link]

Early years[link]

Muhammad Yunus at Chittagong Collegiate School, while visiting the school in 2003.

The third of nine children,^[7] Yunus was born on 28 June 1940 to a Muslim family in the village of Bathua, by the Boxirhat Road in Hathazari, Chittagong, in Bangladesh.^[8][9] His father was Hazi Dula Mia Shoudagar, a jeweler, and his mother was Sufia Khatun. His early childhood years were spent in the village. In 1944, his family moved to the city of Chittagong, and he was shifted to Lamabazar Primary School from his village school.^[8][10] By 1949, his mother was afflicted with psychological illness.^[9] Later, he passed the matriculation examination from Chittagong Collegiate School securing the 16th position among 39,000 students in East Pakistan.^[10] During his school years, he was an active Boy Scout, and traveled to West Pakistan and India in 1952, and to Canada in 1955 to attend Jamborees.^[10] Later when Yunus was studying at Chittagong College, he became active in cultural activities and won awards for drama acting.^[10] In 1957, he enrolled in the department of economics at Dhaka University and completed his BA in 1960 and MA in 1961.

After graduation[link]

Following his graduation, Yunus joined the Bureau of Economics as a research assistant to the economical researches of Professor Nurul Islam and Rehman Sobhan.^[10] Later he was appointed as a lecturer in economics in Chittagong College in 1961.^[10] During that time he also set up a profitable packaging factory on the side.^[9] He was offered a Fulbright scholarship in 1965 to study in the United States. He obtained his PhD in economics from Vanderbilt University in the United States through the graduate program in Economic Development (GPED) in 1971.^[11] From 1969 to 1972, Yunus was an assistant professor of economics at Middle Tennessee State University in Murfreesboro, TN.

During the Bangladesh Liberation War in 1971, Yunus founded a citizen's committee and ran the Bangladesh Information Center, with other Bangladeshis living in the United States, to raise support for liberation.^[10] He also published the Bangladesh Newsletter from his home in Nashville. After the War, Yunus returned to Bangladesh and was appointed to the government's Planning Commission headed by Nurul Islam. He found the job boring and resigned to join Chittagong University as head of the Economics department.^[12] He became involved with poverty reduction after observing the famine of 1974, and established a rural economic program as a research project. In 1975, he developed a Nabajug (New Era) Tebhaga Khamar (three share farm) which the government adopted as the Packaged Input Programme.^[10] In order to make the project more effective, Yunus and his associates proposed the Gram Sarkar (the village government) programme.^[13] Introduced by then president Ziaur Rahman in late 1970s, the Government formed 40,392 village governments (gram sarkar) as a fourth layer of government in 2003. On 2 August 2005, in response to a petition filed by Bangladesh Legal Aids and Services Trust (BLAST) the High Court had declared Gram Sarkar illegal and unconstitutional.^[14]

Early career[link]

Grameen Bank Head Office at Mirpur-2, Dhaka

In 1976, during visits to the poorest households in the village of Jobra near Chittagong University, Yunus discovered that very small loans could make a disproportionate difference to a poor person. Jobra women who made bamboo furniture had to take out usurious loans for buying bamboo, to pay their profits to the moneylenders. His first loan, consisting of US$27.00 from his own pocket, was made to 42 women in the village, who made a net profit of BDT 0.50 (US$0.02) each on the loan. Accumulated through many loans, this vastly improving Bangladesh's ability to export and import as it did in the past, resulting in a greater form of globalization and economic status.^[8]

Dr. Akhtar Hameed Khan, founder of the Pakistan Academy for Rural Development (now Bangladesh Academy for Rural Development), is credited alongside Yunus for pioneering the idea.^[15] From his experience at Jobra, Yunus, an admirer of Dr. Hameed,^[15] realized that the creation of an institution was needed to lend to those who had nothing.^[16] While traditional banks were not interested in making tiny loans at reasonable interest rates to the poor due to high repayment risks,^[17] Yunus believed that given the chance the poor will repay the borrowed money and hence microcredit could be a viable business model.

Yunus finally succeeded in securing a loan from the government Janata Bank to lend it to the poor in Jobra in December 1976. The institution continued to operate by securing loans from other banks for its projects. By 1982, the bank had 28,000 members. On 1 October 1983 the pilot project began operations as a full-fledged bank and was renamed the Grameen Bank (Village Bank) to make loans to poor Bangladeshis. Yunus and his colleagues encountered everything from violent radical leftists to the conservative clergy who told women that they would be denied a Muslim burial if they borrowed money from the Grameen Bank.^[9] As of July 2007, Grameen Bank has issued US$ 6.38 billion to 7.4 million borrowers.^[18] To ensure repayment, the bank uses a system of "solidarity groups". These small informal groups apply together for loans and its members act as co-guarantors of repayment and support one another's efforts at economic self-advancement.^[13]

The Grameen Bank started to diversify in the late 1980s when it started attending to unutilized or underutilized fishing ponds, as well as irrigation pumps like deep tubewells.^[19] In 1989, these diversified interests started growing into separate organizations, as the fisheries project became Grameen Motsho (Grameen Fisheries Foundation) and the irrigation project became Grameen Krishi (Grameen Agriculture Foundation).^[19] Over time, the Grameen initiative has grown into a multi-faceted group of profitable and non-profit ventures, including major projects like Grameen Trust and Grameen Fund, which runs equity projects like Grameen Software Limited, Grameen CyberNet Limited, and Grameen Knitwear Limited,^[20] as well as Grameen Telecom, which has a stake in Grameenphone (GP), biggest private sector phone company in Bangladesh.^[21] The Village Phone (Polli Phone) project of GP has brought cell-phone ownership to 260,000 rural poor in over 50,000 villages since the beginning of the project in March 1997.^[22]

The success of the Grameen model of microfinancing has inspired similar efforts in a hundred countries throughout the developing world and even in industrialized nations, including the United States.^[23] Many, but not all, microcredit projects also retain its emphasis on lending specifically to women. More than 94% of Grameen loans have gone to women, who suffer disproportionately from poverty and who are more likely than men to devote their earnings to their families.^[24] For his work with the Grameen Bank, Yunus was named an Ashoka: Innovators for the Public Global Academy Member in 2001.^[25] In the book,^[26] Grameen Social Business Model, Rashidul Bari shows how Grameen Social Business Model(GSBM)- has gone from being theory to become an inspiring practice adopted by leading universities (e.g., Glasgow), entrepreneurs (e.g., Franck Riboud) and corporations (e.g., Danone) across the globe. Through Grameen Bank, Rashidul Bari claims that Yunus demonstrated how Grameen Social Business Model can harness the entrepreneurial spirit to empower poor women and alleviate their poverty. One of the conclusions of Yunus' concepts is that the poor are like a “bonsai tree,” and they can do big things if they get access to the social business that holds the potential to redeem the failed promise of free-market enterprise.

Recognition[link]

Muhammad Yunus was awarded the 2006 Nobel Peace Prize, along with Grameen Bank, for their efforts to create economic and social development. In the prize announcement The Norwegian Nobel Committee mentioned:^[1]

Muhammad Yunus at the Grand Hotel in Oslo, Norway

Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty.

Muhammad Yunus was the first Bangladeshi and third Bengali to ever get a Nobel Prize. After receiving the news of the important award, Yunus announced that he would use part of his share of the $1.4 million award money to create a company to make low-cost, high-nutrition food for the poor; while the rest would go toward setting up an eye hospital for the poor in Bangladesh.^[27]

Former U.S. president Bill Clinton was a vocal advocate for the awarding of the Nobel Prize to Muhammed Yunus. He expressed this in Rolling Stone magazine^[28] as well as in his autobiography My Life.^[29] In a speech given at University of California, Berkeley in 2002, President Clinton described Dr. Yunus as "a man who long ago should have won the Nobel Prize [and] I’ll keep saying that until they finally give it to him."^[30] Conversely, The Economist stated explicitly that Yunus was a poor choice for the award, stating: "...the Nobel committee could have made a braver, more difficult, choice by declaring that there would be no recipient at all."^[31]

Muhammad Yunus at the Annual Meeting 2009 of the World Economic Forum in Davos, Switzerland.

He is one of only seven persons to have won the Nobel Peace Prize, Presidential Medal of Freedom,^[32] and the Congressional Gold Medal.^[33] Other notable awards include the Ramon Magsaysay Award in 1984,^[34] the World Food Prize,^[35] the International Simon Bolivar Prize (1996), ^[36] the Prince of Austurias Award for Concord ^[37] and the Sydney Peace Prize in 1998,^[38] and the Seoul Peace Prize in 2006. Additionally, Dr. Yunus has been awarded 50 honorary doctorate degrees from universities across 20 countries, and 113 international awards from 26 different countries including state honours from 10 countries.^[39] Bangladesh government brought out a commemorative stamp to honor his Nobel Award.^[40]

Professor Yunus was named by Fortune Magazine in March 2012 as one of 12 greatest entrepreneurs of the current era.^[41] In its citation, Fortune Magazine said ″Yunus' idea inspired countless numbers of young people to devote themselves to social causes all over the world.″

In January of 2012, Professor Yunus featured in "Transformative Entrepreneurs: How Walt Disney, Steve Jobs, Muhammad Yunus and Other Innovators Succeeded" a book by Jeffrey Harris.^[42]

Professor Yunus was named "Nobel-Laureate-in-Residence" at Universiti Kebangsaan Malaysia (National University of Malaysia) on July 15, 2011.^[43]

Professor Yunus delivered the Seventh Nelson Mandela Annual Lecture.^[44]

In January 2008, Houston, Texas declared 14 January as "Muhammad Yunus Day".^[45]

On 15 May 2010, Yunus gave the commencement speech at Rice University for the graduating class of 2010. On 16 May 2010, Yunus gave the commencement speech at Duke University for the graduating class of 2010. During this ceremony, he was also awarded an honorary degree, Doctor of Humane Letters.

Professor Yunus was invited and gave the Wharton School of Business commencement address on 17 May 2009,^[46] the MIT commencement address on 6 June 2008,^[47], Adam Smith Lecture at Glasgow University on 1 December 2008^[48] and Oxford's Romanes Lecture on 2 December 2008.^[49]

He received the Dwight D. Eisenhower Medal for Leadership and Service from the Eisenhower Fellowships at a ceremony in Philadelphia on 21 May 2009. He was also voted 2nd in Prospect Magazine's 2008 global poll of the world's top 100 intellectuals.^[50]

Yunus was named among the most desired thinkers the world should listen to by the FP 100 (world's most influential elite) in the December 2009 issue of Foreign Policy magazine.^[51] On 1 March 2010, Yunus was awarded the prestigious Presidential Award from the University of Illinois at Urbana–Champaign. This is the highest honor available from the University.

A documentary on Yunus' work titled To Catch a Dollar was shown at the 2010 Sundance Film Festival and is due to be released in theaters in the US on September 2010.

In 2010, The British Magazine New Statesman Listed Muhammad Yunus at 40th in the list of "The World's 50 Most Influential Figures 2010".^[52]

In October 2010, He received the Social Entrepreneur of the Year Award at The Asian Awards^[53]

On September 22, 2011 the documentary film, "Bonsai People – The Vision of Muhammad Yunus", the first documentary film that looks his full body of work from microcredit to social business, premiered at the United Nations.

Yunus received 50 honorary doctorate degrees from universities from Argentina, Australia, Bangladesh, Belgium, Canada, Costa Rica, India, Italy, Japan, Korea, Lebanon, Malaysia, Russia, South Africa, Spain, Thailand, Turkey, UK, USA and Peru.^[54]

United Nations Secretary General, Ban Ki-Moon, invited Professor Yunus to serve as an MDG Advocate. Professor Yunus sits on the Board of United Nations Foundation, Schwab Foundation, Prince Albert II of Monaco Foundation, Grameen Credit Agricole Microcredit Foundation. He has been a member of Fondation Chirac's honour committee,^[55] ever since the foundation was launched in 2008 by former French president Jacques Chirac in order to promote world peace.

Professor Yunus has appeared on The Daily Show with Jon Stewart and Oprah Winfrey Show in 2006, The Colbert Report in 2008, Real Time with Bill Maher in 2009 and The Simpsons in 2010.

On Google+, Professor Yunus is one of the most followed person worldwide, with over 1.7 million followers.^[56]

Political activity[link]

In early 2006 Yunus, along with other members of the civil society including Professor Rehman Sobhan, Justice Muhammad Habibur Rahman, Dr Kamal Hossain, Matiur Rahman, Mahfuz Anam and Debapriya Bhattchariya, participated in a campaign for honest and clean candidates in national elections.^[57] He considered entering politics in the later part of that year.^[58] On 11 February 2007, Yunus wrote an open letter, published in the Bangladeshi newspaper Daily Star, where he asked citizens for views on his plan to float a political party to establish political goodwill, proper leadership and good governance. In the letter, he called on everyone to briefly outline how he should go about the task and how they can contribute to it.^[59] Yunus finally announced that he is willing to launch a political party tentatively called Citizens' Power (Nagorik Shakti) on 18 February 2007.^[60][61] There was speculation that the army supported a move by Yunus into politics.^[62] On 3 May, however, Yunus declared that he had decided to abandon his political plans following a meeting with the head of the interim government, Fakhruddin Ahmed.^[63]

On 18 July 2007 in Johannesburg, South Africa, Nelson Mandela, Graça Machel, and Desmond Tutu convened a group of world leaders to contribute their wisdom, independent leadership and integrity together to the world. Nelson Mandela announced the formation of this new group, The Global Elders, in a speech he delivered on the occasion of his 89th birthday.^[64][65] Archbishop Tutu is to serve as the Chair of The Elders. The founding members of this group include Machel, Yunus, Kofi Annan, Ela Bhatt, Gro Harlem Brundtland, Jimmy Carter, Li Zhaoxing, and Mary Robinson. The Elders are to be independently funded by a group of Founders, including Richard Branson, Peter Gabriel, Ray Chambers; Michael Chambers; Bridgeway Foundation; Pam Omidyar, Humanity United; Amy Robbins; Shashi Ruia, Dick Tarlow; and The United Nations Foundation. Yunus is a member of the Africa Progress Panel (APP), an independent authority on Africa launched in April 2007 to focus world leaders’ attention on delivering their commitments to the continent. The Panel launched a major report in London on Monday 16 June 2008 entitled Africa's Development: Promises and Prospects.^[66]

In July 2009, Yunus became a member of the SNV Netherlands Development Organisation International Advisory Board to support the organisation's poverty reduction work.^[67]

Since 2010, Yunus has served as a Commissioner for the Broadband Commission for Digital Development, a UN initiative which seeks to use broadband internet services to accelerate social and economic development.^[68]

He also serves on the advisory board of the Holcim Foundation for Sustainable Construction, a foundation supporting initiatives that combine sustainable construction solutions with architectural excellence.^[69]

Controversies[link]

This section's factual accuracy is disputed. Please help to ensure that disputed facts are reliably sourced. See the relevant discussion on the talk page.

The examples and perspective in this article may not include all significant viewpoints. Please improve the article or discuss the issue. (March 2011)

Since late November 2010, several allegations have been made against Yunus. These allegations started when a documentary, titled “Caught in Micro Debt”,^[70] was aired on Norwegian television on 30 November 2010, criticizing microcredit and blaming Grameen Bank on several points .^[71] They developed during a time when larger questions were being raised about the benefits of microfinance and its effects on poverty alleviation, particularly in regards to several microfinance institutions (MFIs) in India^[72] and Mexico .^[73]

The allegations against Yunus turned political in nature when the government of Bangladesh – led by ^[74]Sheikh Hasina Wajed, who reportedly has viewed Yunus as a political rival since he looked into setting up a political party in 2007^[75] – suddenly turned against him and the concept of microfinance (which she had formerly championed ^{[citation needed]}), accusing it of “sucking blood from the poor” .^[76] In the book,^[77] Grameen Social Business Model, Rashidul Bari wrote that the political vendetta in Bangladesh by Sheikh Hasina against Muhammad Yunus^[78] could be understood as a modern-day replay of the famous conflict between Pope Urban VIII and Galileo Galilei.^[79][80]

"Pope Urban VIII put 70-year-old Galileo in prison in 1632 for condemning and rejecting Ptolemy's geocentric model, which was adopted by the early Christian Church. In the same spirit, Sheikh Hasina who labeled Yunus as a “blood sucker of poor people^[81]”—unleashed her propaganda machine (e.g., AMA Muhith) to remove Yunus from Grameen—and used the High Court and Supreme Court to justify her decision. Why did Pope Urban VIII insult the Father of Astronomy? Because Galileo rejected the accepted Christian Church view, that the earth is the center of the universe, and that all other celestial objects orbit around it.^[82]

The Government announced a review into the activities of Grameen Bank on 11 January 2011 ;^[83] this review is currently ongoing. In February, several international leaders, such as Mary Robinson, stepped up their defense of Yunus through a number of efforts, including the founding of a formal network of supporters known as “Friends of Grameen” .^[84]

On 15 February 2011, the Finance Minister of Bangladesh, Abul Maal Abdul Muhith, declared that Muhammad Yunus should “stay away” from Grameen Bank while it is being investigated.^[85]

On 2 March 2011, Muzammel Huq – a former employee of Grameen Bank and vocal critic of Yunus ^{[citation needed]} whom the government had appointed Grameen Bank chairman in January^[86] – announced to the media that Yunus had been fired as Managing Director of the Bank .^[87] Jannat-E Quanine, General Manager of the Grameen Bank issued a Grameen Bank Statement clarifiying that Yunus was “continuing in his office” pending review of the legal issues surrounding the controversy .^[88]

On 3 March 2011, Muhammad Yunus filed himself a writ at the High Court challenging the legality of the decision from the Bangladeshi Central Bank to remove him as Managing Director of Grameen Bank .^[89] The same day, nine elected directors of Grameen Bank filed a second writ petition .^[90] The High Court hearing on these petitions, initially planned on 6 March 2011, was postponed. On 8 March 2011, the Bangladeshi Court finally confirmed the dismissal of Yunus as Grameen Bank Managing Director .^[91]

Following Hillary Clinton, John Kerry expressed his support to Yunus in a statement released on 5 March 2011 and declared that he was “deeply concerned” by this affair. In Bangladesh, thousands of people protested and formed human chains on 5 March 2011 to support Yunus .^[92]

Disproved allegations from a Danish documentary[link]

A Danish documentary called Caught in Micro Debt,^[70] produced and directed by journalist Tom Heinemann, aired on Norwegian national television NRK on 30 November 2010. It made a number of allegations against Muhammad Yunus and Grameen Bank. Those allegations have been disproved by later inquiries.

The documentary falsely accused Yunus and Grameen Bank of:

• Diverting 7 billion taka (about 100 million dollars) given by the Norwegian Agency for Development Cooperation (NORAD) from Grameen Bank to another organization called Grameen Kalyan in 1996 – an allegation widely spread in the Bangladeshi electronic media on December 1, 2010.^[93] Nonetheless, on 6 December, NORAD published an official statement^[94] clearing Yunus and Grameen Bank from any wrongdoing on this point, following a comprehensive review of NORAD’s support commissioned by the Minister of International Development.

However, the allegations quickly spread through the Bangladesh media. To quote a leading Bangladeshi economist Rehman Sobhan,^[95] “Rather than first seeking clarification and response from Grameen Bank as to the validity of the TV program, some sections of the media and society pounced on it with unseemly enthusiasm, using it as an opportunity to cite wrongdoing in a widely respected organization.” Muhammad Yunus asked for consistent and transparent investigations on these matters.

Questioning microfinance – the ‘loan sharks’ issue[link]

The allegations against Muhammad Yunus and Grameen Bank have been made in a context where some people have begun to question the effectiveness of microfinance, prompted by the actions of some for-profit MFIs in India^[96] and Mexico.^[97] Coercion, peer pressure and physical harassment have been reportedly used as loan repayment practices in some specific microfinance institutions.^[98] Commercialization of microcredit^[99] prompted Muhammad Yunus to state that he “never imagined that one day microcredit would give rise to its own breed of loan sharks.”^[100]

The lure of profits has attracted some for-profit microfinance institutions to hold Initial Public Offerings (IPOs), including the largest Indian microfinance institution, SKS Microfinance, which held an IPO in July 2010.^[101] In September 2010, Yunus and Vikram Akula, founder of SKS, debated during the Clinton Global Initiative meeting,^[102] where Yunus made his position on the SKS IPO clear: “Microcredit is not about exciting people to make money off the poor. That's what you're doing. That's the wrong message completely.”

It is widely assumed that the government of Bangladesh is exploiting this “moral crisis around microcredit” to oust Muhammad Yunus.^[103]

Political motivations behind the allegations[link]

Though Grameen Bank was quickly cleared by the Norwegian government of all allegations surrounding misused or misappropriated funds in December 2010, in March 2011 the Bangladeshi government launched a three-month investigation of all Grameen Bank’s activities.^[104] This inquiry prevented Muhammad Yunus from participating in the World Economic Forum.^[105]

On 18 January 2011, Yunus appeared in court in a defamation case filed by a local politician from a minor left-leaning party in 2007, complaining about a statement that Yunus made to the AFP news agency, “Politicians in Bangladesh only work for power. There is no ideology here”.^[106] At the hearing, Yunus was granted bail and exempted from personal appearance at subsequent hearings.^[107]

These latter investigations have fueled suspicion that many attacks might be politically orchestrated,^[108] related to difficult relations between Sheikh Hasina and Yunus that date to early 2007, when Muhammad Yunus created his own political party, an effort he dropped in May 2007.^[109]

Transition to a new management[link]

Muhammad Yunus is now 71 years old, 11 years beyond the legal retirement age for banks in Bangladesh.^[110] The Finance Minister, who is himself 77 years old, has called for Prof. Yunus to step down and declared, ”We need to redefine the bank’s role and bring it under closer regulation.”^[111]

The government recently appointed a new chairman, Muzammel Huq, who was a former Grameen Bank employee.^[86] He has publicly criticized Prof. Yunus, saying, ‘I think he is a good man with a small heart ... He cannot give credit to anyone but himself”. On 28 February 2011, he presented a letter written by a Bangladesh Bank official at a meeting of the Grameen Bank Board of Directors,^[110] saying that Muhammad Yunus “staying in the post for an indefinite period ... was not within the law,” and asking that the meeting be adjourned; however, because the letter was not addressed to the Managing Director, the rest of the Board – including the two other government-appointed Directors – determined that the meeting should continue as planned.

A journalist of the Telegraph has commented that “the Bangladeshi Government should remove Chairman Huq immediately. If calling Yunus a ‘chicken hearted man’ in the New York Times is his way of showing commitment, independence and integrity, then something is seriously wrong. In his defense, it’s a pretty accurate description of someone who is determined to destroy a force for good!”^[112]

Prof. Yunus has stated his desire for an orderly transition, to make sure that the Bank’s governing practices and transparency are effective and ensure that the institution does not turn into a political instrument if taken over by the government:^[86] “I am riding the tiger. I cannot just get off the tiger without drawing the attention of that tiger. So I have to very quietly do it.”

Allegations involving partners: the food case and the phone case[link]

On 27 January 2011, Muhammad Yunus appeared on court about a food-adulteration case filed by the Dhaka City Corporation (DCC) Food Safety Court, accusing him of producing an “adulterated” yogurt^[113] in that the fat content would not comply with the legal minimum requirements. This yogurt is produced by Grameen Danone, a social business joint venture between Danone and Grameen Bank that works to alleviate poverty by providing opportunities for street vendors to sell the yogurt and to improve nutrition among the poor by providing nutrient-fortified yogurts to children in Bangladesh. According to Prof. Yunus’s lawyer, these allegations are “false and baseless”.^[114] At the request of Prof.Yunus lawyers, pointing procedural irregularities and errors, this case is now considered by the High Court.

On 15 February 2011, Prof. Yunus was summoned by a court in Pabna (in North Bangladesh) to appear on 18 April in a fraud case involving Grameen Phone.^[115] This case concerns a Grameen village phone user, who received overdue bills even though she had paid the bills regularly.

Family[link]

In 1967 while Yunus attended Vanderbilt University, he met Vera Forostenko, a student of Russian literature at Vanderbilt University and daughter of Russian immigrants to Trenton, New Jersey, U.S. They were married in 1970.^[9][12] Yunus's marriage with Vera ended within months of the birth of their baby girl, Monica Yunus (b. 1979 Chittagong), as Vera returned to New Jersey claiming that Bangladesh was not a good place to raise a baby.^[9][12] Yunus later married Afrozi Yunus, who was then a researcher in physics at Manchester University.^[12] She was later appointed as a professor of physics at Jahangirnagar University. Their daughter Deena Afroz Yunus was born in 1986.^[12]

His brothers are also active in academia. His brother Muhammad Ibrahim is a professor of physics at Dhaka University and the founder of The Center for Mass Education in Science (CMES), which brings science education to adolescent girls in villages.^[116] His younger brother Muhammad Jahangir is a popular television presenter and a well known social activist in Bangladesh. He is also the moderator of several Talk show programmes in Bangladesh. Monica Yunus, his elder daughter, is a Bangladeshi-Russian American operatic soprano, working in New York City.^[117]

Publications[link]

Books by Muhammad Yunus

• Three Farmers of Jobra; Department of Economics, Chittagong University; 1974
• Planning in Bangladesh: Format, Technique, and Priority, and Other Essays; Rural Studies Project, Department of Economics, Chittagong University; 1976
• Jorimon and Others: Faces of Poverty (co-authors: Saiyada Manajurula Isalama, Arifa Rahman); Grameen Bank; 1991
• Grameen Bank, as I See it; Grameen Bank; 1994
• Banker to the Poor: Micro-Lending and the Battle Against World Poverty; Public Affairs; 2003; ISBN 978-1-58648-198-8
• A World Without Poverty: Social Business and the Future of Capitalism; Public Affairs; 2008; ISBN 978-1-58648-493-4
• Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs^[118] ; Public Affairs; 2010; ISBN 978-1-58648-824-6

Articles by Muhammed Yunus

• World Policy Journal: "Economic Security for a World in Crisis"; World Policy Journal; Summer 2009;

On Muhammad Yunus

• David Bornstein; The Price of a Dream: The Story of the Grameen Bank and the Idea That Is; Simon & Schuster; 1996; ISBN 0-684-81191-X

See also[link]

	Sustainable development portal
	Bangladesh portal

• Yunus Centre
• Fazle Hasan Abed
• Islamic banking
• Notable Bangladeshis
• The Green Children are a European musical duo. In June 2006, they shot a music video in Bangladesh to celebrate the work of Yunus

References[link]