The $27 loan that led to a Nobel Prize

In 1974, Muhammad Yunus was a professor in Bangladesh when famine hit his country. He wanted to do whatever he could as an individual to help. He ended up loaning $27 of his own money to 42 people who otherwise had no access to credit at reasonable rates. Yunus, the founder of the Grameen Bank ...

603298_Yunus5.jpg
603298_Yunus5.jpg

In 1974, Muhammad Yunus was a professor in Bangladesh when famine hit his country. He wanted to do whatever he could as an individual to help. He ended up loaning $27 of his own money to 42 people who otherwise had no access to credit at reasonable rates.

Yunus, the founder of the Grameen Bank and the creator of the concept of microcredit, told this inspiring story of going from a $27 loan to a Nobel Prize when he addressed a packed audience Wednesday at Georgetown University. Along the way, he described how his success in developing ways to help the poor stemmed from challenging ideas that people take for granted everyday. A couple of these conventional wisdoms are:

CW #1: "You can't do banking with two thirds of the world's population."

In 1974, Muhammad Yunus was a professor in Bangladesh when famine hit his country. He wanted to do whatever he could as an individual to help. He ended up loaning $27 of his own money to 42 people who otherwise had no access to credit at reasonable rates.

Yunus, the founder of the Grameen Bank and the creator of the concept of microcredit, told this inspiring story of going from a $27 loan to a Nobel Prize when he addressed a packed audience Wednesday at Georgetown University. Along the way, he described how his success in developing ways to help the poor stemmed from challenging ideas that people take for granted everyday. A couple of these conventional wisdoms are:

CW #1: “You can’t do banking with two thirds of the world’s population.”

Yes, you can. Banks thought poor people weren’t creditworthy. Yunus said he thought banks should be asked whether they’re people-worthy. Today 7 million poor people, mainly women, borrow small sums of money from the Grameen Bank to be entrepreneurs and work their way out of poverty. The bank’s recovery rate on loans is 97 percent.

CW #2: “The only thing people want to do is make money.

Wrong. Yunus believes that the story of capitalism is a half-told story. Economics, as it is currently structured, denies that we have other instincts and feelings. But people enjoy helping others—it makes their hearts feel warm. This idea isn’t accomodated in the current structure of economics. Therefore, Yunus proposes expanding the idea of business to include social businesses. These businesses do good for people and offer no monetary reward in the form of dividends. One example is the joint venture between Grameen Bank and Danone. Last November, the social business started selling yogurt enriched with micronutrients. The purpose is to reduce malnutrition among children in Bangladesh.

Yunus says that as the list of social businesses grows, a social stock market could be created, one in which people invest based on what types of social goals they wish to support.

When a student in the audience asked how poor people without any business sense could succeed as entrepreneurs, Yunus gave the example of a beggar. The beggar goes door to door asking for money. Just loan him some toys and small items to take along as he begs. If his “sales division” ends up doing better than his “begging division,” then he can close down his begging business.

It may sound clichéd, but overall, Yunus was genuinely inspiring. He showed how an individual with $27 and an unconventional idea can make a difference. He encouraged the audience to be bold and imaginative so that one day the only place where people will see poverty will be in a poverty museum.

Preeti Aroon was copy chief at Foreign Policy from 2009 to 2016 and was an FP assistant editor from 2007 to 2009. Twitter: @pjaroonFP

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