Muhammad Yunus on October 2007

Grameen Bank methodology is almost the reverse of the conventional banking methodology. Conventional banking is based on the principle that the more you have, the more you can get. In other words, if you have little or nothing, you get nothing. As a result, more than half the population of the world is deprived of the financial services of the conventional banks.

Conventional banking is based on collateral, Grameen system is collateral- free.

Grameen Bank starts with the belief that credit should be accepted as a human right, and builds a system where one who does not possess anything gets the highest priority in getting a loan. Grameen methodology is not based on assessing the material possession of a person, it is based on the potential of a person. Grameen believes that all human beings, including the poorest, are endowed with endless potential.

Conventional banks look at what has already been acquired by a person. Grameen looks at the potential that is waiting to be unleashed in a person.

Conventional banks are owned by the rich, generally men. Grameen Bank is owned by poor women.

Overarching objective of the conventional banks is to maximize profit. Grameen Bank’s objective is to bring to help¾financial services to the poor, particularly women and the poorest them fight poverty, stay profitable and financially sound. It is a composite objective, coming out of social and economic visions.

Conventional banks focus on men, Grameen gives high priority to women. 97 per cent of Grameen Bank’s borrowers are women. Grameen Bank works to raise the status of poor women in their families by giving them ownership of assets. It makes sure that the ownership of the houses built with Grameen Bank loans remain with the borrowers, i.e., the women.

Grameen Bank branches are located in the rural areas, unlike the branches of conventional banks which try to locate themselves as close as possible to the business districts and urban centers. First principle of Grameen banking is that the clients should not go to the bank, it is the bank which should go to the people instead. Grameen Bank’s 24,703 staff meet 7.34 million borrowers at their door-step in 80,257 villages spread out all over Bangladesh, every week, and deliver bank’s service. Repayment of Grameen loans is also made very easy by splitting the loan amount in tiny weekly instalments. Doing business this way means a lot of work for the bank, but it is a lot convenient for the borrowers

There is no legal instrument between the lender and the borrower in the Grameen methodology. There is no stipulation that a client will be taken to the court of law to recover the loan, unlike in the conventional system. There is no provision in the methodology to enforce a contract by any external intervention

Conventional banks go into ‘punishment’ mode when a borrower is taking more time in repaying the loan than it was agreed upon. They call these borrowers “defaulters”. Grameen methodology allows such borrowers to reschedule their loans without making them feel that they have done anything wrong (indeed, they have not done anything wrong.)

When a client gets into difficulty, conventional banks get worried about their money, and make all efforts to recover the money, including taking over the collateral. Grameen system, in such cases, works extra hard to assist the borrower in difficulty, and makes all efforts to help her regain her strength and overcome her difficulties.

In conventional banks charging interest does not stop unless specific exception is made to a particular defaulted loan. Interest charged on a loan can be multiple of the principal, depending on the length of the loan period. In Grameen Bank, under no circumstances total interest on a loan can exceed the amount of the loan, no matter how long the loan remains unrepaid. No interest is charged after the interest amount equals the principal

Conventional banks do not pay attention to what happens to the borrowers’ families as results of taking loans from the banks. Grameen system pays a lot of attention to monitoring the education of the children (Grameen Bank routinely gives them scholarships and student loans), housing, sanitation, access to clean drinking water, and their coping capacity for meeting disasters and emergency situations. Grameen system helps the borrowers to build their own pension funds, and other types of savings.

Interest on conventional bank loans are generally compounded quarterly, while all interests are simple interests in Grameen Bank.

In case of death of a borrower, Grameen system does not require the family of the deceased to pay back the loan. There is a built-in insurance programme which pays off the entire outstanding amount with interest. No liability is transferred to the family.

In Grameen Bank even a beggar gets special attention. A beggar comes under a campaign from Grameen Bank which is designed to persuade him/her to join Grameen programme. The bank explains to her how she can carry some merchandise with her when she goes out to beg from door to door and earn money, or she can display some merchandise by her side when she is begging in a fixed place. Grameen’s idea is to graduate her to a dignified livelihood rather than continue with beggin

Such a programme would not be a part of a conventional bank’s work.

Grameen system encourages the borrowers to adopt some goals in social, educational and health areas. These are knows as “Sixteen Decisions” (no dowry, education for children, sanitary latrine, planting trees, eating vegetables to combat night-blindness among children, arranging clean drinking water, etc.). Conventional banks do not see this as their business.

In Grameen, we see the poor people as human “bonsai”. If a healthy seed of a giant tree is planted in a flower-pot, the tree that will grow will be a miniature version of the giant tree. It is not because of any fault in the seed, because there is no fault in the seed. It is only because the seed has been denied of the real base to grow on. People are poor because society has denied them the real social and economic base to grow on. They are given only the “flower-pots” to grow on. Grameen’s effort is to move them from the “flower-pot” to the real soil of the society.

If we can succeed in doing that there will be no human “bonsai” in the world. We’ll have a poverty-free world.

]]> http://yunusforum.net/?feed=rss2&p=278 http://yunusforum.net/?p=272 http://yunusforum.net/?p=272#comments Sat, 25 Jul 2009 20:20:44 +0000 admin http://yunusforum.net/?p=272 Social Business Entrepreneurs Are the Solution

Muhammad Yunus

Capitalism is Interpreted too Narrowly

Social Business Entrepreneurs Can Play a Big Role in the Market

Suppose we postulate a world with two kinds of people, both one-dimensional, but having different objectives. One type is the existing type, i.e. profit maximizing type. Second type is a new type, who are not interested in profit-maximization. They are totally committed to make a difference to the world. They are social-objective driven. They want to give better chance in life to other people. They want to achieve their objective through creating/supporting sustainable business enterprises. Their businesses may or may not earn profit, but like any other businesses they must not incur losses. They create a new class of business which we may describe as “non-loss” business.

Can we find second type of people in the real world? Yes, we can. Aren’t we familiar with “do-gooders”? Do-gooders are the same people who are referred to as “social entrepreneurs” in formal parlance. Social entrepreneurism is an integral part of human history. Most people take pleasure in helping others. All religions encourage this quality in human beings. Governments reward them by giving tax breaks. Special legal facilities are created for them so that they can create legal entities to pursue their objectives.

Some social entrepreneurs (SE) use money to achieve their objectives, some just give away their time, labour, talent, skill or such other contributions which are useful to others. Those who use money may or may not try to recover part or all of the money they put into their work by charging fee or price.

We may classify the SEs, who use money, into four types:

No Cost Recovery

Some Cost Recovery

Full Cost Recovery

More than Full Cost Recovery

Muhammad Yunus

Commencement Speech at MIT, Boston on 6 June 2008

Good Morning:

It as a very special privilege for me to speak at the commencement ceremony of this prestigious institution

What a wonderful feeling to be here today. To be with all of you, some of the brightest minds in the world, right at a moment when you decide the path you will embark on in life. You represent the future of the world. The choices that you will make for yourself will decide the fate of mankind. This is how it has always been. Sometimes we are aware of it, most of the time we are not. I hope you’ll remain aware of it and make an effort to be remembered not simply as a creative generation but as a socially-conscious creative generation. Try it.

I had no idea whether my life would someday be relevant to anyone else’s. But in the mid-seventies, out of frustration with the terrible economic situation in Bangladesh I decided to see if I could make myself useful to one poor person a day in the village next door to the university campus where I was teaching. I found myself in an unfamiliar situation. Out of necessity I had to find a way out. Since I did not have a road-map, I had to fall back on my basic instinct to do that. At any moment I could have withdrawn myself from my unknown path, but I did not. I stubbornly went on to find my own way. Luckily, at the end, I found it. That was microcredit and Grameen Bank.

Now, in hindsight, I can joke about it. When people ask me, “How did you figure out all the rules and procedures that is now known as Grameen system?” My answer is: “That was very simple and easy. Whenever I needed a rule or a procedure in our work, I just looked at the conventional banks to see what they do in a similar situation. Once I learned what they did, I just did the opposite. That’s how I got our rules. Conventional banks go to the rich, we go to the poor; their rule is — “the more you have, the more you get.” So our rule became — “the less you have higher attention you get. If you have nothing, you get the highest priority.” They ask for collateral, we abandoned it, as if we had never heard of it. They need lawyers in their business, we don’t. No lawyer is involved in any of our loan transactions. They are owned by the rich, ours is owned by the poorest, the poorest women to boot. I can go on adding more to this list to show how Grameen does things quite the opposite way.

Was it really a systematic policy to do it the opposite way? No, it wasn’t. But that’s how it turned out ultimately, because our objective was different. I had not even noticed it until a senior banker admonished me by saying: Dr. Yunus, you are trying to put the banking system upside down.” I quickly agreed with him. I said: “Yes, because the banking system is standing on its head.”

I could not miss seeing the ruthlessness of moneylenders in the village. First I lent the money to replace the loan-sharks. Then I went to the local bank to request them to lend money to the poor. They refused.

After months of deadlock I persuaded them by offering myself as a guarantor. This is how microcredit was born in 1976. Today Grameen Bank lends money to 7.5 million borrowers, 97 per cent women. They own the bank. The bank has lent out over $ 7.0 billion in Bangladesh over the years. Globally 130 million poor families receive microcredit. Even then banks have not changed much. They do not mind writing off a trillion dollars in a sub-prime crisis, but they still stay away from lending US $ 100 to a poor woman despite the fact such loans have near 100 per cent repayment record globally.

While focusing on microcredit we saw the need for other types of interventions to help the rural population, in general, and the poor, in particular. We tried our interventions in the health sector, information technology, renewable energy and on several other fronts.

Since we worked with poor women, health issue quickly drew our attention. We introduced health insurance. We succeeded in developing an effective healthcare program based on health insurance, but have not been able to expand this program because of non-availability of doctors. Doctors are reluctant to stay in the villages. (It has become such a big bottleneck that we have now decided to set up a medical college to produce doctors.) Under the program a villager pays about US $ 2.00 a year as health insurance premium, to get health coverage for the entire family. Financially it is sustainable.

I became a strong believer in the power of information technology to change the lives of the poor people. This encouraged me to create a cell-phone company called Grameen Phone. We brought phones to the villages of Bangladesh and gave loans to the poor women to buy themselves cell-phones to sell their service and make money. It became an instant success.

Seventy percent of the population of Bangladesh do not have access to electricity. We wanted to address this issue by introducing solar home system in the villages. We created a separate company called Grameen Shakti, or Grameen Energy. It became a very successful company in popularising solar home system, bio-gas, and environment-friendly cooking stoves. It has already reached 155,000 homes with solar home systems, and aims to reach one million homes by 2012. As we started creating a series of companies around renewable energy, information technology, textile, agriculture, livestock, education, health, finance etc, I was wondering why conventional businesses do not see business the way we see it. They have different goals than ours. We design our businesses one way, they design theirs in another way.

Conventional businesses are based on the theoretical framework provided by the designers of capitalist economic system. In this framework ‘business’ has to be a profit-maximizing entity. The more aggressively a business pursues it, the better the system functions we are told. The bigger the profit, the more successful the business is; the more happy investors are. In my work it never occurred to me that I should maximize profit. All my struggle was to take each of my enterprises to a level where it could at least be self-sustaining. I defined the mission of my businesses in a different way than that of the traditional businesses.

As I was doing it, obviously I was violating the basic tenet of capitalist system profit maximization. Since I was engaged in finding my own solution to reach the mission of my business, I was not looking at any existing road maps. My only concern was to see if my path was taking me where I wanted to go. When it worked I felt very happy. I know maximization of profit makes people happy. I don’t maximize profit, but my businesses are a great source of my happiness. If you had done what I have done you would be very happy too! I am convinced that profit maximization is not the only source of happiness in business. ‘Business’ has been interpreted too narrowly in the existing framework of capitalism. This interpretation is based on the assumption that a human being is a single dimensional being. His business-related happiness is related to the size of the profit he makes. He is presented as a robot-like money-making machine.

But we all know that real-life human beings are multi-dimensional beings not uni-dimensional like the theory assumes. For a real-life human being money-making is a means, not an end. But for the businessman in the existing theory money-making is both a means and also an end.

This narrow interpretation has done us great damage. All business people around the world have been imitating this one-dimensional theoretical businessman as precisely as they can to make sure they get the most from the capitalist system. If you are a businessman you have to wear profit-maximizing glasses all the time. As a result, only thing you see in the world are the profit enhancing opportunities. Important problems that we face in the world cannot be addressed because profit-maximizing eyes cannot see them.

We can easily reformulate the concept of a businessman to bring him closer to a real human being. In order to take into account the multi-dimensionality of real human being we may assume that there are two distinct sources of happiness in the business world  1) maximizing profit, and 2) achieving some pre-defined social objective.

Since there are clear conflicts between the two objectives, the business world will have to be made up of two different kinds of businesses –1) profit-maximizing business, and 2) social business. Specific type of happiness will come from the specific type of business.

Then an investor will have two choices he can invest in one or in both. My guess is most people will invest in both in various proportions. This means people will use two sets of eye-glassesæ profit-maximizing glasses, and social business glasses. This will bring a big change in the world. Profit maximizing businessmen will be amazed to see how different the world looks once they take off the profit-maximizing glasses and wear the social business glasses. By looking at the world from two different perspectives business decision-makers will be able to decide better, act better, and these decisions and actions will lead to a dramatically better world.

While I was wondering whether the idea of social business would make any sense to the corporate world I had an opportunity to talk to the chairman of Danone Group Mr. Franck Riboud about this subject. It made perfect sense to him right away. Together we created Grameen Danone company as a social business in Bangladesh. This company produces yogurt fortified with micro-nutrients which are missing in the mal-nourished children of Bangladesh. Because it is a social business, Grameen and Danone, will never take any dividend out of the company beyond recouping the initial investment. Bottom line for the company is to see how many children overcome their nutrition deficiency each year.

Next initiative came from Credit Agricole of France. We created Grameen Credit Agricole Microfinance Foundation to provide financial support to microfinance organizations and social businesses.

We created a small water company to provide good quality drinking water in a cluster of villages of Bangladesh. This is a joint venture with Veolia, a leading water company in the world. Bangladesh has terrible drinking water problem. In a large part of Bangladesh tubewell water is highly arsenic contaminated, surface water is polluted. This social business water company will be a prototype for supplying safe drinking water in a sustainable and affordable way to people who are faced with water crisis. Once it is perfected, it can be replicated in other villages, within Bangladesh and outside.

We have already established an eye-care hospital specializing in cataract operation, with a capacity to undertake 10,000 operations per year. This is a joint venture social business with the Green Children Foundation created by two singers in their early twenties, Tom and Milla, from England and Norway.

We have signed a joint-venture agreement with Intel Corporation, to create a social business company called Grameen-Intel to bring information technology-based services to the poor in healthcare, marketing, education and remittances.

We also signed a social business joint venture agreement with Saudi German Hospital Group to set up a series of hospitals in Bangladesh.

Many more companies from around the world are showing interest in such social business joint ventures. A leading shoe company wants to create a social business to make sure that nobody goes without shoes. One leading pharmaceutical company wishes to set up a joint venture social business company to produce nutritional supplements appropriate for Bangladeshi pregnant mothers and young women, at the cheapest possible price.

We are also in discussion to launch a social business company to produce chemically treated mosquito-nets to protect people in Bangladesh and Africa from malaria and other mosquito-borne diseases.

Your generation can bring a breakthrough in changing the course of the world. You can be the socially-conscious creative generation that the world is waiting for. You can bring your creativity to design brilliant social businesses to overcome poverty, disease, environmental degradation, food crisis, depletion of non-renewable resources, etc. Each one of you is capable of changing the world. To make a start all that each one of you has to do is to design a business plan for a social business. Each prototype of a social business can be a cute little business. But if it works out, the whole world can be changed by replicating it in thousands of locations.

Prototype development is the key. In designing a prototype all we need is a socially-oriented creative mind. That could be each one of you. No matter what you do in your life, make it a point to design or be involved with at least one social business to address one problem that depresses you the most. If you have the design and the money, go ahead and put it into action. If you have the design but no money, contact your dean — he will find the money. I never heard that MIT has problem in finding money when it has a hot idea in its hand. MIT can even create a social business development fund in anticipation of your requests.

I can tell you very emphatically that in terms of human capability there is no difference between a poor person and a very privileged person. All human beings are packed with unlimited potential. Poor people are no exception to this rule. But the world around them never gave them the opportunity to know that each of them is carrying a wonderful gift in them. The gift remains unknown and unwrapped. Our challenge is to help the poor unwrap their gift.

Poverty is not created by the poor. It is created by the system. Poverty is an artificial imposition on people. Once you fall outside the system, it works against you. It makes it very difficult to return to the system.

How do we change this? Where do we begin?

Three basic interventions will make a big difference in the existing system:

a) Broadening the concept of business by including “social business” into the framework of market place,

b) Creating inclusive financial and healthcare services which can reach out to every person on the planet

c) Designing appropriate information technology devices, and services for the bottom-most people and making them easily available to them.

Your generation has the opportunity to make a break with the past and create a beautiful new world. We see the ever-growing problems created by the individual-centered aggressively accumulative economy. If we let it proceed without serious modifications, we may soon reach the point of no return. Among other things, this type of economy has placed our planet under serious threat through climatic distortions. Single-minded pursuit of profit has made us forget that this planet is our home; that we are supposed to make it safe and beautiful, not make it more unliveable everyday by promoting a life-style which ignores all warnings of safety.

At this point let me give you the good news. No matter how daunting the problems look, don’t get brow beaten by their size. Big problems are most often just an aggregation of tiny problems. Get to the smallest component of the problem. Then it becomes an innocent bite-size problem, and you can have all the fun dealing with it. You’ll be thrilled to see in how many ways you can crack it. You can tame it or make it disappear by various social and economic actions, including social business. Pick out the action which looks most efficient in the given circumstances. Tackling big problems does not always have to be through giant actions, or global initiatives or big businesses. It can start as a tiny little action. If you shape it the right way, it can grow into a global action in no time. Even the biggest problem can be cracked by a small well-designed intervention. That’s where you and your creativity come in. These interventions can be so small that each one of you can crack these problems right from your garage. If you have a friend or two to work with you, it is all the more better. It can be fun too.

You are born in the age of ideas. Ideas are something an MIT graduate, I am sure, will not run out of. The question I am raising now — what use you want to make of them? Make money by selling or using your ideas? Or change the world with your ideas? Or do both? It is upto you to decide.

There are two clear tasks in front of you —

1) To end poverty in the world once for all, and

2) To set the world in the right path to undo all the damage we have done to the environment by our ignorance and selfishness.

Time is right. Your initiatives can produce big results, even lead you to achieving these goals. Then yours will be the most successful generation in human history. You will take your grand-children to the poverty museums with tremendous pride that your generation had finally made it happen.

Congratulations, for being part of a generation which has exciting possibilities, and advance congratulations to you all for your future successes in creating a new world where everyone on this planet can stand tall as a human being.

Thank you.

Muhammad Yunus on 25 December 2007

While free market capitalism is thriving globally almost unopposed now and bringing unprecedented prosperity to many, half of the world lives on two dollars a day or much less. Eradication of poverty remains the biggest challenge before the world. Colossal social problems and deprivations, mostly poverty-related and very unevenly distributed around the globe, continue to shame us everyday. Obviously the free market has failed much of the world. Many people assume that if free markets can’t solve problems governments can. After all, government is supposed to represent the interests of society as a whole. But decades and even centuries of experience has shown that while government must do its parts to help alleviate our worst problems, it alone can not solve them.

Fortunately for us there is a keen desire among many to lend a hand through charity for addressing the problems of poverty and other social problems. Charity is rooted in basic human concern for other humans. The concern is now a days usually expressed in the shape of non profits and NGOs which may take various names and forms. Then there are aid organizations sponsored by rich governments-bilateral and multilateral. Nonprofits and aid organizations are trying to keep the problems within some control. But charity is a form of trickle-down economics, if the trickle stops, so does help for the needy. On the other hand multilaterals like World Bank focus only on growth as the means of helping the poor, but can not see that the poor people can be actors themselves. These are serious questions about the type of growth that can help the poor. As another response to the global social problems some businesses are identifying themselves with the movement for Corporate Social Responsibility (CSR), and are trying to do good to the people with conducting their business. But profit-making still remains their main goal, by definition. Though they are like to talk about triple bottom lines of financial, social and environmental benefits, ultimately only one bottom line calls the shot: financial profit.

I always believed that poverty can be totally conquered quite soon if the right approach is adopted.  I based my belief on the inherent ability of the poor that can be unleashed once they are given the opportunity to help themselves. This I have proven in action through my three decades of experience with Grameen Bank. I invented the concept of nicrocredit and started Grameen Bank in Bangladesh, which basically recognized that credit without collateral is a fundamental right of the poor. Our success with this in my own country has been widely replicated all over the world including in some of the richest countries; and the Nobel Peace Prize 2006 for me and for Grameen Bank is one recognition to that success. The story of Grameen Bank has been told in my earlier book: ‘Banker to the Poor’. In this new book I have described the further evolution of Grameen System. But more importantly I have introduced and elaborated here my broadened concept of Social Business that Grameen experience has led me into.

Grameen allowed the poor to be an actor in the free market and to enjoy some of its fruits to try to come out of poverty. It is fundamentally a business model, pure and simple. This is a Social Business. There can be other Social Business not necessarily involving microcredit. They are just like any other business, but for social objectives and not for personal dividend. I have tried to show in the book why Social Business can be succeed in addressing social problems where other means mentioned above have failed. Social Business should not be confused with the term Social Enterprise which is used in a more encompassing sense and includes NGOs, personal initiatives, charities etc and may include Social Business too.

Social Business introduces a totally revolutionary dimension to the free market economy. It keeps all the mechanism through which the normal Profit Making Business (PMB) works and prospers- capitalization, expert business management, competitiveness etc.– but investors here do not receive any dividend though they can recover their investment if they want to, to reinvest in other social business or PMB. The satisfaction gained in achieving the social goals are the only motive behind the investment and the business will be evaluated according to that standard. Essentially it is a no loss, no dividend business aimed at social objective–education, health, environment, whatever is needed. The profits here remain with the business and help it to grow further. The whole thing is based on the premise that entrepreneurs need not be motivated only by the profits they personally receive, but can also be motivated by social goals and may enjoy success there with equal satisfaction. The important thing is not to mix up a Social Business with a PMB. In face the inclusion of Social Businesses alongside with PMBs in the business world will give the free market capitalism a larger, nobler and a more fulfilling purpose. Its advantages over straightforward charity are many-efficiencies, continuous use with each turnover, competition with PMBs following the same rules, utilization of business innovations being some of the most important ones.

There can be two types of Social Business. Type One focuses on businesses dealing with social objectives only, as has just been mentioned. Type Two can take up any profitable business so long as it is owned by the poor and the disadvantaged, who can gain through receiving direct dividends or by some indirect benefits. There are various ways how the ownership can go to the poor. The two types can be mixed together in the same Social Business as has happened in the case of Grameen Bank. In a similar mixture of the two types, a socially beneficial rural toll road or bridge can be built by a company as a Social Business whose ownership will belong to the poor. On the other hand a huge project such as the Deep-Sea Mega Port in Bangladesh I have been advocating for, which will be used by several countries in the whole region and can potentially change the economic face of Bangladesh, can be built by a Social Business owned by the poor women of the country.

Is this an utopia? Will there be Social Businesses outside the realm of microcredit? Who will invest in such Social Businesses? I could answer these questions confidently in the book, not only because I have faith on my idea and on the ability of the entrepreneurs to have social motives as well as profit making motives; but also because I am seeing this actually to happen at this very moment. I have developed a good part of the book on the details of the first such Social Business we have started - Grameen Danone Company which went into operation in early 2007. The idea of the company was born over just a casual lunch I had with Franck Riboud, the Chairman and CEO of Groupe Danone, a large French corporation- a world leader in dairy products. It took just that time for me to convince him that an investment in a Social Business is a worthwhile thing for Danone shareholders. Even though it will not give any personal dividend to them, he believed that they would go for it when everything will be explained to them. However it took somewhat more time to fix up the modalities, the product (a fortified sweet yogurt for the poor malnourished children of Bangladesh as a price they can afford), the financing, tax and regulatory issues, new yard sticks for evaluating business and many other such details. And I have devoted many pages of the book on these details to show how all these things can be taken care of. The yogurt - ‘Shokti Doi’ (Energy Yugurt) is already in the market. The Grameen System has invested in a second Social Business- this time an Eye Hospital where the poor can have eye treatment and cataract operations at a very low cost and all others in the small town and the villages around will have an excellent medical facility where there was not any like that before.

Social Business is a new concept and its practice is just beginning. As my book reveals, it has to make a lot more explorations while gaining more experience. There are challenges to be faced and solutions to be made. For example, we had to invest a totally innovation marketing system to keep the market fragmented so that the low cost ‘Shokti Doi’ is reserved only for the poor children and does not disappear in the urban market for the well to do. I have also touched upon other issues such as how can the ownership of the Type Two Social Business be transferred to the poor, or how can the wonderful opportunities offered by IT be best deployed for the Social Business.

One thing is very clear to me- that with the Social Business taking off, the world of free market capitalism will never be the same again, and it then will really be able to put the deathblow on global poverty. I am sure, many business wizards and successful business personalities will apply their abilities to this new challenge- the challenge of creating a poverty-free world within a short time. At the moment we are seeing merely the line of horizon. Soon a good part of business genius of the world will devote itself to this new goal of social good. A whole new stock market with its new indices will thrive in the financial capitals of the world motivated by this new incentive. It will accelerate the process of poverty eradication to an unthinkable pace using the same market mechanism which accelerated the global prosperity for the rich in the first place.

Welcome to the new world of Social Business.

Muhammad Yunus at Commonwealth Institute in London on 11 March 2003

I am very honoured to have been invited to give the Commonwealth Lecture 2003. This is a great privilege for me. I would like to take advantage of this occasion to share my experiences, excitements, frustrations, and, of course, my thoughts with you. (If it makes sense to you, I hope you’ll use your capacity to do something about it. If it doesn’t make any sense, I don’t have to tell you what you should do. You are all experts on it.)

I have chosen to speak on the most daring of all Millennium Development Goals? halving poverty by 2015. I have chosen it for two reasons. First, this is the most courageous goal mankind ever set for itself. For the last two decades I have been talking about creating a world free from poverty. I talk about it not because it is unjust to have a world with poverty, which is, of course, true. I talk about it simply because I am totally convinced from my experience of working with poor people that they can get themselves out of poverty if we give them the same or similar opportunities as we give to others. The poor themselves can create a poverty-free world? all we have to do is to free them from the chains that we have put around them. Secondly, a feeling is getting stronger in me everyday that very few people are really serious about reaching the goal of halving poverty by 2015. Leaders who made this bold announcement went back to their other important commitments feeling happy that they have captured world’s imagination. As the decision has been taken at the highest level, they expect that actions will follow, and a well coordinated powerful machinery will get activated to get the job done. Unfortunately, so far it has not happened. Only the donor agency officials supported by thriving consultancy business are carrying the ball. What is emerging reminds us of the decade of nineties when the global goals were put in the form of “Education for all by the year 2000″, “Health for all by the year 2000″, “Everything else for all by the 2000″. My worry is that these courageous millennium goals may degenerate into a cut and paste job of the earlier edition, merely replacing the “year 2000″ by the “year 2015″, with appropriate changes in the text.

Please forgive me if I sound too pessimistic. I assure you that I remain a compulsive optimist despite all the bad signs that I see. I keep hoping that these signs will change.

I am an optimist because I am convinced that poverty is not as difficult a subject as the experts keep warning us about. This is not about space science, or about an intricate design of a complicated machine. This is about people. I don’t see the possibility of a human being becoming a ‘problem’ when it comes to his or her own well-being. All the ingredients for ending poverty of a person always comes neatly packaged with the person himself. A human being is born in this world fully equipped not only to take care of himself (which all other life-forms can do too), but also to contribute in enlarging the well-being of the world as a whole (that’s where special role of a human being lies). Then why should one billion plus people on the planet suffer through a life-time of misery and indignity and spend every moment of their lives looking for food for physical survival alone? We must find some explanations. This will help us achieve the 2015 goal.

Poverty is not Created by the Poor People

Here is my explanation. Poverty is not created by the poor people. So we shouldn’t give them an accusing look. They are the victims. Poverty has been created by the economic and social system that we have designed for the world. It is the institutions that we have built, and feel so proud of, which created poverty. It is the concepts we developed to understand the reality around us, made us see things wrongly. They took us down a wrong path, and caused misery for people. It is our policies borne out of our reasoning and theoretical framework, with which we explain interactions among institutions and people, that caused this problem for so many human beings. It is the failure at the top - rather than lack of capability at the bottom - which is the root cause of poverty.

The essence of my arguments here today is that in order to reduce, and ultimately eliminate, poverty we must go back to the drawing board. Concepts, institutions, and analytical frame conditions which created poverty, cannot end poverty. If we can intelligently re-work the frame conditions, poverty will be gone, never to come back again.

In this presentation I will draw your attention to five issues which need to be urgently revisited :

(a) widening the concept of employment
(b) ensuring financial services even to the poorest person
(c) recognising every single human being as a potential entrepreneur
(d) recognising social entrepreneurs as potential agents for creating a world with peace, harmony, and progress.
(e) recognising the role of globalisation and information technology in reducing poverty.

Let me narrate how I came to face these issues in the real world and how they impacted on me.

I became involved in the poverty issue not as a policymaker or a researcher. I became involved because poverty was all around me. I could not turn my eyes away from it. In 1974, I found it difficult to teach elegant theories of economics in the classroom in the backdrop of a terrible famine in Bangladesh. Suddenly I felt the emptiness of those theories in the face of crushing hunger and poverty. I wanted to do something immediate to help people around me. Not knowing what I could do, I decided to find a way to make myself useful to others on a one-on-one basis. I wanted to find something specific to do to help another human being just to get by another day with a little more ease than the previous day. That brought me to the issue of poor people’s struggle and helplessness in finding microscopic amounts of money in support of their efforts to eke out a living. I was shocked to discover a woman borrowing US $ 0.25 with the condition that the lender will have the exclusive right to buy all she produces at the price the lender decides! What a way to recruit slave labour. I decided to make a list of the victims of this money-lending “business” in the village next door to our campus. When my list was done it had the names of 42 victims. Total amount they borrowed was US $ 27! What a lesson for an economics professor who was teaching his students the Five Year Development Plan of the country with billions of dollars in investments to help the poor. I could not think of anything better than offering this US $ 27 from my own pocket to get the victims out of the clutches of the moneylenders. The excitement that was created by this action got me further involved in it. The question that arose in my mind was, if you can make so many people so happy with such a tiny amount of money, why shouldn’t you do more of it?

I have been trying to do just that ever since. First thing I did was to try to connect the poor people with the bank located in the campus. It did not work. The bank said that the poor are not creditworthy. After all my efforts over several months failed I offered to become a guarantor for the loans to the poor. I was stunned by the result. The poor paid back their loans every single time! But I kept confronting difficulties in expanding the programme through the existing banks. Several years later I decided to create a separate bank for the poor, to give loans without collateral. Finally in 1983 I succeeded in doing that. I named it Grameen Bank or Village bank. It now works all over Bangladesh, giving loans to 2.5 million poor people, 95 per cent women. The bank is owned by the borrowers. In a cumulative way the bank has given a total loan of about US $ 3.75 billion. Generally the repayment rate has been over 98 per cent. It makes profit. Financially, it is self-reliant? it has stopped taking donor money since 1995, stopped taking loans from domestic market since 1998. It has enough deposits to carry out its lending programme. It gives income generating loans, housing loans, and student loans to the poor families. More than half a million houses have been built with loans from Grameen Bank. Impact studies done on Grameen Bank by independent researchers find that 5 per cent of borrowers come out of poverty every year, children are healthier, education and nutrition level is higher, housing condition is better, child mortality declined by 37 per cent, status of women has been enhanced, ownership of assets by poor women, including housing, has improved dramatically. Now the obvious question that anybody will ask? if poor people can achieve all this through their own efforts within a market environment, why isn’t the world doing more of this? Some progress has been made. But much more could have been achieved. One difficulty may have arisen from a confusion.

Grameen’s banking methodology has become known as microcredit. But gradually the label of ‘microcredit’ got into general use for all types of small loans, including agricultural loans, cooperative loans, savings bank loans and rural credits, etc. This has created confusion in policymaking, institution-building, and in designing regulatory framework. If we now classify microcredit into different categories to sort this out, I think we can come out of this confusion. (I think we could have avoided the confusion, to some extent, if we had called it “micro-capital”. That’s what it really is. Bangla term that I use for it translates as “micro-capital”.)

Grameen type microcredit has spread around the world over the last two decades. Nearly 100 countries have Grameen type microcredit programmes. In 1997, a Microcredit Summit was held in Washington DC, which adopted a goal to reach 100 million poorest families with microcredit and other financial services, preferably through the women in those families, by 2005. At that time number of families reached with microcredit was only 7.5 million globally, of which 5 million was in Bangladesh. Today, I am guessing, this outreach has crossed 35 million. I am hoping it will cross half way mark, i.e. 50 million mark, by the end of this year.

But the biggest problem for expanding the outreach is not the lack of capacity, but strangely, the lack of availability of donor money to help microcredit programmes get through initial years until they reach the break-even level. Beyond that level, these programmes can expand their outreach with loans from the market or from deposits. In most countries microcredit NGOs are not allowed to take deposits by the regulatory bodies. If microcredit NGOs could open the doors for taking public deposits, expansion of outreach could be very rapid because this would free them from dependence on donor money. It is a very strange phenomenon in many countries to see that conventional banks with repayment rate of below 70 per cent are allowed to take huge amounts of public deposits year after year, but microcredit institutions with unbroken record of over 98 per cent recovery are not allowed to take public deposits. It is often argued that since microcredit programmes do not come under any law, it is highly risky to allow them to take deposits. This always seems to me a funny argument. Why don’t we create a law to bring the microcredit programmes under a legal cover, create special regulatory commission to regulate them and allow them to take public deposits? This will help local deposits in the villages to work for local poor people, instead of being siphoned off to the big cities to finance big businesses. This is the frustrating part of our experience. One feels like throwing one’s arms in the air and scream in protest.

Self-Employment is the Quickest Way

Most important step to end poverty is to create employment and income opportunity for the poor. But orthodox economic recognised only wage-employment. It has no room for self-employment. But self-employment is the quickest and easiest way to create employment for the poor. I have been arguing that credit should be accepted as a human right, because it is so important for a person who is looking for an income. Credit can create self-employment instantaneously. Why wait for others to create a job for you when a person can create his/her own job. And this is so much more convenient for women who would prefer to work out of their homes. We are so much influenced by orthodox economics that we forget that our forefathers did not wait for someone else to create jobs for them. They just went ahead in a routine manner to create their own jobs and income. They were lucky. They did not have to learn economic theories and end up with a mindset that the only way they can make a living is to find a job in the job market. If you don’t get a job, march on the street!

In the Third World countries, even if you march on the street there is no job for you. As a result the poor go out and create their own jobs. Since economics text-books do not recognise them, there is no supportive institution and policies to help them. That’s why money lending business thrives. Moneylenders’ business is as old as money itself. We read about the cruelty of moneylenders in our religious books, we condemn them as a part our religious duty. We read the great classics about making payment with a “pound of flesh” and get horrified by it, but we had done nothing significant about it in addressing that problem until Grameencredit came around.

While we keep hearing about the spread of microcredit around the world, about its 98 per cent repayment record, about poor people getting out of poverty with microcredit loans, about women empowerment ? all this has no impact whatsoever on conventional banking. These banks continue to practice the same old banking as they have been doing from the very start of their business? as if nothing new happened in the world! Probably they still shield themselves by arguing that the poor are not creditworthy.

It is a very strange world!

A big step towards eliminating poverty is to make sure that we offer financial services even to the poorest person, that no one is rejected by a bank on the ground that he/she is a poor person.

Each Person Is a Potential Entrepreneur

In some important ways our designing of the theoretical framework of economics or its misrepresentation of it is responsible for perpetuating poverty. Its conceptualisation of individual human being as “labour” took the rest of the theory on a completely a wrong track. Role assigned to human beings in economic theory is certainly not something a self-respecting person can celebrate. Economic theory in its simplification visualises people as providers of labour. They are born to take orders from a small group of very special kind of people known as ‘entrepreneurs’. These special people are the only people who can think, organise, and act. All other people simply fill in the work slots created by the thinking and driving people. Level of well-being of the working people depends on the level of their wages.

After creating a world overwhelmingly populated by uninteresting working people, economic theory gets busy with the interesting people? the entrepreneurs, because they are the movers and shakers of the economy. Taking the cue from the theory, powerful institutions are built, rebuilt, improved, support systems created, detailed legal systems developed, policies formulated, guidelines created, research undertaken all to ensure that the movers and shakers of the economy find it convenient to go in the direction they wish to go, and are able to utilize every last bit of their talent without any hindrance.

Try to imagine how the economists would have built their theory if they had started out with an axiom that all men and women are created equal that each of them is endowed with unlimited creativity, and each of them is a potential entrepreneur. I am sure you’ll agree with me, with this as a starting point, they would have built a very different economic theory, and we would have created a very different, and definitely much better, world as a result.

It will be an uphill task to end poverty in the world unless we create new economic thinking and get rid of the biases in our concepts, institutions, policies, and above all, our mindsets created by the existing orthodoxy. Unless we change our mindsets, we cannot change our world.

Missed a Great Opportunity

Economic theory took the second, and most damaging wrong turn when it came to explaining the driving force behind the competition among the entrepreneurs. It recognises profit-motive as the only motive behind this. Maximization of profit is the battle-cry. This explanation occupies such a central position in economic theory, and everything else has been built in such intricate details around it, that nobody dares to raise any question about it. Accepting this as the ultimate truth about capitalism, people who are not interested in making money stayed away from business and market in a capitalist world. For the same reason, people who enjoy making money headed straight for the market. So the market became an exclusive club of the fortune-seeker only. What a shame for missing a great opportunity!

Economic theory missed the most thrilling opportunity to change the fate of the world by completely ignoring the number and power of the people who are more interested in social gains than personal financial gains, and those passionately interested in making the world a better place to live in, rather than remain narrowly focused on their own personal benefits.

By restricting the driving force of the market to narrow self-interest, economics also missed the greatest opportunity to become a truly social science and escape from being a cut and dry dollar-and-cent science. Nobody doubts that an entrepreneur can set up a pharmaceutical company to make a big profit for himself or herself. But it can be equally plausible that a person sets up a pharmaceutical company to bring quality medicine at the lowest price possible so that even the poorest family can afford it. If economics could envisage two types of entrepreneurs, personal-gain driven and social-objective-driven, it would not only be more realistic, but it would have helped the world solve many of the problems that profit-driven market doesn’t solve today.

Behaviour Pattern of a Social Entrepreneur

The behaviour pattern of a social-objective-driven entrepreneur, i.e. a social entrepreneur is as follows:

• He or she competes in the market place with all other competitors inspired by a set of social objectives. This is the basic reason for his being in the business.
• He may earn personal profit as well. This personal profit may range from zero to a significantly large amount, even larger than his personal-gain-driven competitor. But in his case, personal profit is a secondary consideration, rather than the prime consideration. On the other hand a personal-profit driven entrepreneur may contribute in achieving some social objectives. But this will be a by-product of his business, or a secondary consideration in his business. This will not make him a social entrepreneur.
• The higher the social impact per dollar invested the higher will be the market rating of the social entrepreneur. Here ‘market’ will consist of the potential investors who are looking for opportunities to invest their money in social-objective-driven enterprises. Social investment dollars will move from low social impact enterprises to higher impact enterprises, from general impact enterprises to specific and visible impact enterprises, from traditional social enterprises to highly innovative and efficient enterprises.Social-objective driven investors will need a separate (social) stock market, separate rating agencies, separate financial institutions, social mutual funds, and social venture capitals, etc. Almost everything that we have for profit-driven enterprises will be needed for social-objective-driven enterprises, such as, audit firms, due diligence and impact assessment methodologies, regulatory framework, standardization, etc., only in a different context, and with different methodologies.

Because of the way orthodoxy of economics has given shape to the existing world, all the investment money now is locked up in only one category of investment? investment for making personal profit. This has happened because people have not been offered any choice. There is only one type of competition? competition to amass more personal wealth. The moment we open the door for making social impact through investments, investors will start putting their investment dollars through this door too. Initially some investors will divert a part, may be a small part, of their investment money to social enterprises, but if social entrepreneurs show concrete impact, this flow will become larger and larger. Soon new type of investors will be appearing on the scene who will put all or almost all their investment money into the social investments.

Some of the existing profit-driven entrepreneurs may start revealing another dimension of their entrepreneurial ability. They may successfully operate in both the worlds, as conventional profit-seekers in one, as dedicated social entrepreneurs in another.

If the social enterprises can demonstrate high impact and creative enterprise designs, a day may come when personal-profit driven enterprises will find themselves hard-pressed to protect their market share. They’ll be forced to imitate the language and style of social enterprises to stay in business.

I don’t think I need to work hard to convince anyone that there are millions of investors right now who would gladly put their money into a social enterprise if they can be assured that their investment will at least retain its original value, while making a significant impact on the lives of the poor people, deprived people, or any group of disadvantaged people. I receive many letters from people around the world asking me if they can invest in Grameen Bank. Obviously none of them are looking for an opportunity to make money by investing in Grameen Bank. Why has our business world failed to offer opportunities to people who want to invest for the benefit of the people?

If socially motivated people can dedicate their lives in politics to bring changes in their communities, nations, and to the world, I see no reason why some socially-motivated people will not dedicate their lives in building and operating social-objective-driven enterprises. So far they have not done so because neither the opportunity nor the supportive framework exists. We must change this situation.

A completely new world can be created by making space for the social entrepreneurs and the social investors in the business world. This is a very important agenda for all of us. Eliminating poverty will become so much easier if social entrepreneurs can take up the challenge of ending poverty, and social investors can put their investment money to support the work of the social entrepreneurs.

Who is a Social Entrepreneur?

Let me define a social entrepreneur in a broad way and then divide them into two categories: market based, and non-market.

Anybody who is offering his/her time and energy to address any social or economic problem of a group or community is a social entrepreneur (SE). Problem addressed may be a small local problem or a big global problem. Action of a SE may need money, may not need money. It may be a personal campaign for or against something. It may need cooperation and coordination with others.

It may need fund raising. It may be organised as a sustainable business, ensuring 100 per cent cost recovery. It can generate very attractive profit although making profit is not the goal of the enterprise. In terms of cost recovery a SE can work within a scale ranging from zero cost recovery to 100 per cent cost recovery and even far beyond cost recovery. If a SE distributes food to the hungry, he or she is operating at zero level of cost recovery. If he provides health services and charges a fee which covers a part of his cost, he is operating at a positive point on the cost recovery scale. Once he reaches 100 per cent cost recovery, he becomes a market compatible or sustainable social entrepreneur (mSE). This is the most critical point on the cost-recovery scale. If a SE can stay on the right side of this point he can become a legitimate player in the market place. He can grow as much as he wishes and has the capacity to manage. He can draw on the resources of the market. The more the SEs are in the category of mSEs, the more powerful they become as a business community. They can start accessing the trillions of dollars of market capitalisation money, part of which will find the mSEs just the right kind of investment.

SEs operating on the left side of this critical point are dependent on subsidies and philanthropy money to carry out their noble mission. We may call them non-market social entrepreneurs (nmSE). Size of their operation will always be limited by the size of the donor money they can access. Obviously, total donor money in the world is only a small fraction of the total business money. In addition, uncertainty about donor money and changing donor priorities and procedures always remain a big problem for the nmSEs.

From Non-Market to Market Social Entrepreneurs

Given all the limits of nmSEs it must be recognised that they have the longest tradition of social entrepreneurship, almost as old as human beings on this planet. mSEs have a lot to learn from them. Together both types of SEs can form a very strong coalition to bring changes in the ways people do things, policy-makers make policies, institutions treat people. Same SE may operate on both sides of the scale creating different types of socially-oriented programmes. Some nmSE will continue to operate at the same point on the scale all the time, because of their philosophy, availability of funds, or for other considerations. Some nmSEs would find it advantageous to move gradually rightwards, to get a better grip on their finances and reduce outside dependence. Some will make deliberate efforts to cross the critical point and become self-sustaining. Transforming from nmSE to mSE is almost like converting a bicycle into a race-car, one can go so much faster in reaching the goal.

But there may be some cost to this conversion. You may gain some, while you lose some. An SE has to be very skillful and innovative in this conversion process to retain the maximum of social agenda while gaining economic power to scale up and ensure large outreach.

Global efforts must be organised to help the interested nmSE to move to the right side of the critical point by giving it legal support, access to business money, marketing skill, technology, connecting it with mentors among the successful mSEs, and provide advisory services.

Social entrepreneurs are not characters in an economic fiction. They exist in the real world. But we refuse to recognise them because we have no place for them in our analytical framework. So they carry out their mission as some kind of misfits or freak characters. We should change that immediately and turn them into heroes of our economic endeavours.

Future of the world lies in the hands of the market-based social entrepreneurs. Leaving the business world exclusively in the hands of the personal-profit-driven entrepreneurs and investors will create more and more social and political tension within and among countries than ever before. With the advance of technology world is getting smaller, almost distance less. Businesses are getting bigger and more powerful, while governments are shrinking in power and prestige. Through globalisation the whole world is turning into a game table of the extra-ordinarily rich people and extra-ordinarily rich countries.

We cannot cope with the problem of poverty within the orthodoxy of capitalism preached and practised today. With the failure of many Third World governments in running businesses, health, education, and welfare programmes efficiently everyone is quick to recommend? “hand it over to the private sector”. I endorse this recommendation whole-heartedly. But I raise a question with it. Which private sector are we talking about? Personal profit based private sector has its own clear agenda. It comes in serious conflict with the pro-poor, pro-women, pro-environment agenda. Economic theory has not provided us with any alternative to this familiar private sector. I argue that we can create a powerful alternative? a social-consciousness-driven private sector, created by social entrepreneurs.

Globalisation and the Role of Social Entrepreneurs

Role of SEs become very important in the context of the race for globalisation. Globalisation should not turn into an open house for bulls to enter the china-shop. I am an ardent supporter of the process of globalisation. I think globalisation can bring more benefits to the poor than its alternative. But it would be naive to think that there is only one architecture of globalisation. We can easily divide all the options of globalisation into two broad classes: a) right globalisation and b) wrong globalisation in the context of a set of objectives. If one of our prime objectives is to bring quick reduction of poverty we must choose the architecture which ensures it. Unless we go through this exercise and make serious efforts to build it, the most likely architecture that will emerge is the anti-poor, anti-poor-economy globalisation. This dreadful outcome must be checked forthwith. That’s what anti-globalisation demonstrations are trying to tell us. The least the world should do is to set up a global regulatory body to stop globalisation from going in the ‘wrong’ direction and encourage and facilitate it to go in the ‘right’ direction. Globalisation needs traffic rules and traffic police. Without that, highways of globalisation will be littered with ugly sights.

We should initiate a global debate and generally agree on the features of a ‘right’ architecture of globalisation, rather than drift into terribly wrong globalisation in the absence of a framework for action. There may be many features of this architecture, but I would like to emphasize on some. They are:

a) Creation of level playing field for the rich countries and the poor countries, big powerful enterprises and small weak enterprises.
Rule of “Strongest takes it all” must be replaced by a rule that ensures everybody a place and a piece of action without being elbowed out by the stronger players. “Free trade” must mean freedom for the weakest. The poor must be made active players in the process of globalisation rather than become passive victims.
Globalisation must promote harmony and partnership between the big and the small economies, rather than become a vehicle for unhindered take over by the rich economies.

b) Globalisation must ensure easiest movement of people across borders.

c) Each nation must make serious and continuous efforts to bring information technology to the poor people to enable them to take maximum advantage of globalisation. This is particularly important for poor countries.

d) Social entrepreneurs must be supported and encouraged to get involved in the process of globalisation to make it friendly to the poor. Special privileges should be offered to them to let them scale up and multiply.

Globalisation, Knowledge Economy, Grameen Scholarships And Student Loans

Poor people are like bonsai trees. They could have grown into giant trees if they had been supported by the right environment for growth. It is the size of the pots on which they were made to grow that turned them into sad replicas of the real trees. In a similar way, poor people are sad replicas of the real persons hidden inside them. They cannot grow into their potential size because society does not offer them the social and economic base to grow on. Poor people are condemned to survive as Lilliputians in the land of super giants.

We should look at the emerging knowledge economy supported by the process of globalisation as an unprecedented opportunity for the poor and the poor countries. Future of nations will no longer be decided by the size of wealth of a nation, but by the quality of human resource it has. Information technology and education will make a big impact on the capacity of the poor and the poor nations to change their economic situation. A cluster of Grameen companies have been created to bring both information technology and education to the poor people of Bangladesh. Grameen Phone, Grameen Star Education, Grameen Cybernet, Grameen Information Highway, Grameen Software, Grameen IT Park are created to bring IT to the poor, and build IT capacity in Bangladesh.

Grameen Phone brings internet enabled mobile phones to the Grameen borrowers and make them “telephone ladies” of the villages. Today there are more than 21,000 telephone ladies selling telephone services in half the villages of Bangladesh. Many of these phones are powered by solar power because electricity does not exist in those villages. Soon these ladies can become “internet ladies” if we can design appropriate services for them. Technology is already in their hands. While extending tele-communication services to the poor Grameen Phone has also done very well as a business. It has expanded its services to become the largest mobile phone company in South Asia in five years of its operation.

Grameen Bank not only focuses on giving financial services, but it also promotes a strong social agenda. “Sixteen Decisions” adopted by Grameen Bank borrowers commit them to bring many non-economic changes in their lives, such as, keeping families small, sending children to school and making sure they stay in school, breaking away from the custom of giving dowry to the bride-groom’s family, making sure they drink clean drinking water, etc. Because of Sixteen Decisions, Grameen borrowers have taken great care to send their children to school. Today not only are all of them in school, but some of them are also in colleges, universities, and professional schools. Grameen Bank hopes to see that the second generation of the borrowers will grow up to take advantage of the knowledge economy and permanently shift away from poverty. Grameen Bank offers nearly 4,000 scholarships every year to leading students of Grameen families, gives student loans to 100 per cent of students who are in the institutions of higher education. Another Grameen Company, called Grameen Education, offers a scholarship management service. If a sponsor gives a recoverable grant of Tk 100,000 (US $ 1,724) a scholarship of Tk 500 (US $ 8.62) per month, or 6 per cent per year on the grant amount, is given to any poor student, Grameen or non-Grameen, up to perpetuity or as long as the money is kept with Grameen Education. Grameen Education is hoping to find hundreds of thousands of sponsors for these scholarships to prepare the poor boys and girls in Bangladesh for the knowledge economy and globalisation.

Information technology (IT) can be a big help. Supported by microcredit IT can open up doors for opportunities of innovative financing, connection with market, and getting direct information. IT can eliminate layers of middlemen between the poor and the market. Individual poor person is an isolated island by himself and herself. IT can end that isolation overnight. A poor person can be at the central shopping mall of the world accessing not only finance and market but also health, education, ideas and friendship. IT, with microcredit, can bring dramatic results in eliminating poverty if we design IT appropriately for the poor. It can be easily and sustainably done.

Social entrepreneurs, information technology and microcredit can play a key role in taking globalisation in the right direction and help halving poverty by 2015.

Commonwealth’s Role

The Commonwealth, with a combined population of 1.6 billion people, has been a low-key network of nations. While remaining low-key it can still find a significant niche for itself. As a family of very rich and very poor nations it may pick up halving the poor by 2015 among the Commonwealth nations as the agenda of highest priority. It can compile the roadmaps of each Commonwealth nation in achieving this goal, monitor quarterly or six-monthly progress country by country, and share these information with all the nations, and exchange experiences.

The Commonwealth can develop and implement its own code of conduct for rich and poor countries within the family to make absolutely sure that globalisation works for the benefit of the poor and the poor countries as much as it works for the rich and the rich countries. Family of the Commonwealth nations can demonstrate that this can be achieved? and it is not as difficult as it looks.

The Commonwealth can take up a big programme to promote social entrepreneurs and create supportive legislations and policies. This is one area where the Commonwealth can make a significant impact in the whole world. The Commonwealth nations have a long tradition of social entrepreneurs. It is nothing new for them. What is needed is to accept them as serious builders of economic and social future of our nations. Instead of thinking in terms of public sector and private sector, we should think in terms of public social sector, private social sector, and private profit sector. Since the Commonwealth is a “family” of nations, it must set an example of how family members work together for the common goal of sharing prosperity. World today needs good examples. The Commonwealth is well-placed to provide these examples.

The Commonwealth can set example in massive expansion of financial services for the poor to create self-employment and for preparing the poor to bring the benefits of globalisation to their homes. It can help the member nations to open up telecom and IT sector and bring these services to the poor. It can set example in preparing the youth of the poor families for the knowledge economy and open up doors to quality education and work experience. In the backdrop of September 11, doors of rich nations are either closing down to the young people of the south or getting narrower. This is a very ominous sign for the poor countries trying to get ready for globalisation.

While standing solidly against terrorism the Commonwealth may make it clear that terrorism is not something which can be conquered at the battlefield. We must address the root causes of terrorism to eliminate it. One of the major causes of terrorism is poverty. Achieving the 2015 goal of halving poverty becomes all the more important in this context. I’d like to see the Commonwealth always standing for peace; raising its voice and using its influence to avert war. Road to peace is slow, painful and frustrating. But it brings sustainable solutions and harmony among peoples. It brings out the best in human beings, while war brings out the worst.

Yes, We Can

Now, going back to the moot question? can we really reduce extreme poverty by half by 2015 ? My emphatic, unequivocal answer is, yes, we can. We can do more than that. We can set ourselves on a course to eliminate poverty from the world for all time to come. We can get ready to put poverty in the museum, where it belongs. Each human being is too resourceful and intelligent to suffer the misery of poverty. Poverty and the human species just do not go together. But in reality it has happened because we created wrong mindsets which did not allow poor people to know their own potential. All we have to do is to remove the heavy crust that keeps their abilities unknown to them.

Enabling people to explore their full potential is an agenda we must take up seriously, to make sure our efforts to reach 2015 goal become a thumping success. This goal of halving the poverty must be achieved by 2015? if we pride ourselves to be sensible, sensitive and creative beings.

Thank you.

Answer, By Making All Banking Very Much Cheaper

By- Mr Norman Macrae, Ex-reputy Editor of The Economist

If banks in rich democracies had been truly competitive institutions, at least one of them somewhere would have seized the main opportunity created by the computer. This main opportunity was to make all deposit-banking vastly cheaper than ever before. By this cheapening it should make such banking hugely more profitable. Then further competition would search for the cheapest ways to guide all the world’s saving into the most profitable (or otherwise most desirable) forms of capital investment, thus enriching all mankind.

Instead, during 2008 the total losses of banks in rich democracies – in North America, West Europe and Japan – soared into trillions of dollars. Fearful for their solvency, these banks virtually stopped lending. The issuance of corporate bonds, commercial paper, and many other financial products largely ceased. Hedge and insurance firms also crashed. Mankind is thus threatened in the 2010s with its longest great depression since the hungry 1930s.

Why? The strange answer seems to be that other happy consequences of modern technology promised to make this cheapening even faster. Call centres in Bangalore vastly undercut the middle class salaries of Midland bank clerk who until the 1950s expensively answered clients’ questions in their branches in the City of London. Cheap mobile phones kept village ladies in once miserable Bangladesh as fully in touch with market prices as is the chief research officer of the First National Bank of Somewhere in California. His weekly salary is still 1000 times greater than the previous annual earnings of that village lady. The cost-effective way of running the old Midland or First National then seemed to be to cut its total salary cost by something like 99%. This did not please Western welfare governments, or the decent chief executives of the old Midland or First National bank.

Awaiting the sensation of a short sharp shock
From a cheap and chippy chopper on a big black block
– WS Gilbert in The Mikado - why it is uncomfortable to work in an industry which needs 99% redundancies.

Western welfare governments have long preferred to run their banks in high cost cartels, and even invented reasons why this seems to be moral. Their deposit-banks have usually kept in cash only 10% of the total amount deposited with them. If 11% of depositors suddenly feared that their banks might go bust, this could accelerate a run that would send them bust indeed. Governments therefore thought that depositors would be less fearful if they were assured that the banks were officially and tightly regulated. Actually, this mainly meant that the banks had to hire ever more expensive lawyers so as to escape any crippling consequences from this regulation. The attached quote shows that Samuel Pepys understood this fact of life in his Diaries of July 21, 1662.

I see it is impossible for the King to have things done so cheaply as do other men
– Samuel Pepys on discovering an important commercial fact of life in his Diary, 21 July, 1662

The decent bosses of the deposit banks felt that the best way of avoiding sacking nine tenths of their staffs was by competing with a very different sort of financing called merchant banking whose earnings and bonuses were far more generous than those given to their own staff. These merchant banks were of peculiarly differing pedigree. In London, it was assumed that they could best be run by families like Barings who had done the job for over 200 years. In the 1990s, Barings went totally bust because one of its hired traders bet much of its money on a hunch that a bad earthquake in Japan meant that the shares of Japanese banks and insurance companies would become more profitable. In Zurich, merchant banks felt it most moral to keep the accounts of their depositors totally secret, especially if these accounts were being used to defraud their own countries’ tax authorities. In 2008 those secretive banks were then defrauded. In Wall Street, Goldman Sachs and Lehman Bros bid up their annual bonuses to millions of dollars for each partner. In 2008 even Goldman Sachs made a loss and Lehman Bros went bust.

A former chairman of the Federal Reserve argues that “fearful investors clearly require a far larger capital cushion to lend unsecured to any financial intermediary now”. He therefore thinks that taxpayers money should be ladled into them to make those investors less fearful. This seems far more likely to make depositors intermittently more terrified and cause any depression into the 2010s to linger on and on.

In the 1930s, the chief economic adviser to the government of Siam was called Prince Damrong. I try always to remember it
– quote from former director of International Monetary Fund.

One of the few big banks to make a profit in 2008 was the Grameen Bank (which means Village Bank) in that once basket-case country called Bangladesh. The sole staff in a branch serving several villages was once a woman student. It is now more usually someone who has learnt to use the computer in the right way.

The rest of this report will examine how this marvellously cost-cutting operation works. Perhaps the most relevant and terrifying analogy is to commercial airlines. In 1945, there were only a tiny number of passenger airmiles flown on them. In each successive year these increased hugely and in this slumptime 2009 there will be billions of passenger airmiles flown. In the late 1940s most governments therefore created national airlines and were confident they would flourish in this boom industry, with official regulation assuring they would be safe. Instead all proceeded to lose money, and later privatised but large airlines also did. The present trend is to cost cutting airlines like Ryan Air.

The same will happen to banks. Large banks mislending to the rich have run into losses that have created the slump. Politicians, thinking they are saving the world, are mislending huge sums to these mislenders and will eventually make the slump worst.

How to create cost-cutting banks? Begin the story with the crosshead below, peculiar as it may seem.

START IN A STARVING VILLAGE
The Nobel peace prize for 2006 was controversially awarded, in Oslo, to a “banker for the poor” in usually unfashionable Bangladesh. Since the microcredit system pioneered by this Dr Muhammad Yunus really has lifted record millions of Bangladeshi women from the world’s direst poverty, some of the world’s toughest tycoons have thrilled to his stated aim to “harness the powers of the free market to solve the problems of poverty”.

To his fans’ delight and astonishment, he is achieving exactly that. In the past quarter of a century, his Grameen Bank has lent (without collateral or lawyers) increasing billions of dollars to millions of poor women in the previously starving villages of Bangladesh, and got an extraordinary 99% repayment back. His often illiterate customers have started millions of successful small businesses in unimagined fields like mobile telephone ladies and saleswomen of the world’s cheapest yogurt. All these successes have been won by keeping costs incredibly low. A banking operation that would cost Goldman Sachs $100 in New York or London would cost Grameen in Bangladesh well under 100 cents.

This is a huge development in human history. Money can now be directly channelled into productive use by the world’s poorest people, while unsuccessful lending to the rich has caused a world slump. How do we switch custom to cost-cutting banks?

During Bangladeshi’s terrible famine year of 1974, Dr Yunus ( who had won his doctorate in economics in a free market American university, which most founders of banks have not done) came back to his 1940 birthplace of Chittagong, as professor of economics at the university there. He started lecturing on his republic’s 5 year plan, which like most 5 year plans was economic nonsense. In search of reality he took a field party of his students to one of the nearby famine threatened villages. His group analysed that all 42 of the village’s small businesses (such as tiny farm plots and market stalls) were indeed going bust unless they could borrow a tiny total $27 on reasonable terms.

The first thought was to give the $27 as charity. But Yunus lectured that a social business dollar, which had to be paid back after careful use in an income generating activity was much more effective than a charity dollar, which might be used only once and frittered away. The careful use of loans in very small quantities, says Yunus “means that you bring in a business model, you become concerned about the costs, the revenue, how to bring more efficiency, new technology, how to redesign, every year you review the whole thing. Charity doesn’t bring that whole package”.

Mercifully, all those first 42 tiny loans were fully repaid, and lent back. After 9 years of further experiments, Yunus in 1983 founded his Grameen Bank. Its priority was to make loans that were desperately needed by those of the poor that did repay them. Indeed, he argues that “access to credit is a human right so long as that credit is repaid”. This is the reverse of the usual banking priority, which is first (and in credit crunches only) to make the safest loans those to the rich that can provide collateral.

In these last 25 years, Grameen has provided increasing $billions of loans to poor people with that astonishing 99% repayment rate. In 2006, it had 7 million borrowing customers, 97% of them women, in 140,000 villages of Bangladesh. Microcredit had by then reached 80% of Bangladesh’s poorest rural families. Over half of Grameen’s own borrowers had successful small businesses. The women borrowers predominated because they usually are the poorest people in rural Islam and proved best in paying back.

When a Grameen bank manager goes to a new village, he has entrepreneurially to seek for poor but viable borrowers. He earns a star if he achieves 100% repayment of loans, and other stars if his customers are fulfilling most of the 16 guarantees that all customers are asked to pledge, ranging from intensive vegetable growing, through sending all their children to school, to renouncing dowries. A branch with no stars would be in danger of closing, so borrowers rally round with suggestions, such as which unreliable repayers to exclude. Borrowers from the bank who do repay are called owners of the bank and receive incentives such as opportunities for insurance, and for winning university scholarships for their children.

An early income generator was the profession of telephone ladies. They borrowed enough to buy a cheap mobile phone from a Grameen subsidiary. They draw fees for phoning to see if more profitable prices for crops are available in a neighbouring village, and from anybody who wants to hire the phone to contact the outside world. This is a job that could only become important in a microcredit setting. The owner of a mobile phone in richer suburbia would not find many customers to hire her set.

One special desire of Yunus was to improve the nutrition of poor children in Bangladesh , and he formed a social business with the largest French food multinational. This Grameen-Danone test marketed to find what sorts of fortified yogurt Bangladeshi children would like. Although Danone at first wanted large plants with refrigerated systems, Grameen won the debate to make them small plants which bought local milk. It hired very cheap local distributors who knew which families had children who might buy the yogurt at a few cents a cup. To keep the price that low, Danone had to agree not to pay any dividend from the sales of the yogurt in Bangladesh. but its $1 million investment remains returnable and it has learnt a lot about sales of a new product in poor countries.

A French water company is forming a similar social business with Grameen to remove arsenic from Bangladesh’s rural water supply. Some American computer tycoons (including Bill Gates) may help to find the best way to establish computer centres in remote villages. The telephone ladies will then face competition, but constant competition in new technology is one name of this game.

Nobody is suggesting that Goldman Sachs, when it recovers, should operate precisely in Yunus’ mode. But some competition in sharply cutting costs in most banks will have to be part of the world’s new banking system.

Microcredit will play a part in solving some problems that statesmen won’t yet believe. http://bankabillion.org

Microcredit could also best move poor Afghans off growing 93% of the world’s present supplies of heroin, while international aid to understandably corrupt governments in Kabul do the opposite. At present international drug barons buy the heroin from Afghan farmers at a few pence per gram, then sell that gram in Mayfair or East Glasgow for around £60 per gram. This is not a distribution system with the needed cheapness and efficiency at which microcredit excels. A Yunus-type of bank might set Afghans, like Bangladeshi, more profitably at selling yogurt instead. Before Helemand province specialised in heroin its main product was fruit; microcredit could lure it back to that. Dive-bombing Taliban, who guard the poppy fields has been a vulgar commercial mistake.

Yunus’ winning ways with Islamic women can be turned into exciting community exponentials in ending poverty in Africa. But at present Africa is held back from banking for the poor because so many of its children are dying with malaria and its adults with aids.

A large number of US congressmen of both parties are asking the World Bank for a flexible grant facility of $200 million per year to build the capacity to find what systems of microcredit work where. This could best be combined with Dr Yunus’ proposal that an investigator of poverty should study in which districts poverty is falling and in which it is increasing. The banks or other bodies working in the successful areas should then be copied in the unsuccessful ones. When banking in the rich world recovers, a similar investigator might well be asked to report on what new systems of lending are working there too, and to discontinue the sort of banking whose losses have landed us in world slump.

As a teenager, Norman began studying economics in (today’s) Bangladesh whilst waiting to navigate RAF airplanes in world war 2. His father-in-law was mentored for a quarter of a century by Gandhi, one Bar of London Barrister to another, on how to end Raj Imperialism. He went on to write over 2000 editorials from the microeconomics perspective of Free Markets & Entrepreneurial Revolution for The Economist, and in 1984 mapped what alternative futures micro versus macro economic worlds of the first networking generation will spin.

www.normanmacrae.com/netfuture.html www.erworld.tv

contact info@worldcitizen.tv

Washington DC bureau 301 881 1655

By: Muhammad Yunus

A Poverty Free World- When? How?

Vice Chancellor Dr John Hood, members of the faculty, students, distinguished ladies and gentlemen :

I am very honored to be invited to deliver the Romanes Lecture at the world famous Sheldonian Theater at Oxford. It is indeed a privilege for me to become a part of this great, hundred- year old tradition at Oxford University. Thank you for inviting me here.

I have chosen today as the title of my speech “A Poverty Free World- When? How?” because I believe that not only is poverty the most pressing issue of our time, I also believe, at the same time, that it is a problem that we have fully the capacity to tackle and overcome within the first half of this century - if only we choose to do so.

I am a compulsive optimist as far as poverty is concerned. I am an optimist because I am convinced that poverty is not as difficult or complex an issue as we are constantly told it is. After all, poverty is about people. I have always said that the ingredients for ending poverty comes neatly packaged within each person. A human being is born in this world fully equipped not only to take care of him or herself, but also endowed with the ability to enlarge the well being of others in the world.

Why is it then that more than a billion people on the planet suffer through a life-time of misery and indignity, spending every moment of their lives looking for food for physical survival alone?

Poverty is not created by Poor People

Poverty is not created by the poor people. Rather it is created by the economic and social system that we have designed for the world. It is created by the institutions that we have built, the concepts we have developed by the policies borne out of our reasoning and theoretical framework. In order to overcome poverty, we have to go back to the drawing board and redesign our concepts and institutions.

The Banking System

One major institution that needs to be redesigned is the financial institution. There is something fundamentally wrong with an institution that leaves out more than half the population of the world, because they are consider not credit worthy. This is what my work with Grameen Bank has been about, to design a banking method which can deliver the financial service to the people left out, particularly to the women, the most difficult to reach.

When I first started out and gave that 27 US$ to 42 families in that first village, I never imagined that I would one day create a bank, let alone that our efforts would grow to become a global movement to bring credit and financial services to poor people. When I got started I was trying to solve a local problem. I was shocked to learn that poor people are shackled because they do not have access to even a few dollars to invest or a grow a tiny income generating activity. That poor people were at the mercy of loan sharks in the village, who lent to the poor at exorbitant rates and then forced them to sell their goods to them at a price arbitrarily decided by them. This to me was a kind of slavery.

When I gave the first US$ 27, to try to free them from the clutches of the loan sharks, I didn’t know what would happen. Imagine my surprise when I saw the excitement that this created in them! It just made me want to do more of it. This is what led me to create Grameen Bank, after a long series of little steps. Grameen Bank has grown to become a nationwide bank. It has lent more than US$ 7.0 billion to 7.5 million people in Bangladesh. Our repayment rate is 98%. Our own internal survey show that our members are steadily crossing the poverty line every year, with 64 % of our borrowers, who have been with Grameen Bank for more than five years, have already crossed the poverty line. And now there are microcredit programs around the world, in nearly every country.

Capitalism and the Financial Crisis

Banks explain that poor people are not credit worthy. But the real question to ask is whether banks are people worthy. In the context of the total collapse of the financial system, this question becomes more relevant and urgent. We are still in the midst of the worst financial crisis of the century. In Grameen Bank there are no legal instruments between lender and borrower, no guarantees, no collateral. You can’t get riskier than that, and yet our money comes back while the prestigious banks all over the world are going down with all their intelligent paperwork, all their collateral, all the lawyers and legal systems to back up their lending. This contrast raises many questions in one’s mind.

In the last 50 years, capitalism has reigned supreme. Socialist economies have faded away and moved to capitalism. This has brought unprecedented wealth and prosperity to some countries and to some people. But billions are left out. In some places, the situation is getting worse and worse for those who are left out.

The financial crisis that has gripped the world economy illustrates the social failings of the existing capitalist system. It has been described in the media as casino capitalism or irresponsible capitalism. Credit markets were originally created to serve human needs—to provide business people with capital to start or expand companies, and to enable families to buy homes. In return for these services, bankers and other lenders earned a reasonable profit. Everyone benefited. In recent years, however, the credit markets have been distorted by a relative handful of individuals and companies with a different goal in mind—to earn unrealistically high rates of return through clever feats of financial engineering. They repackaged mortgages and other loans into sophisticated instruments whose risk level and other characteristics were hidden or disguised. Then they sold and resold these instruments, earning a slice of profit on every transaction. All the while, investors eagerly bid up the prices, scrambling for unsustainable growth; and gambling that the underlying weakness of the system would never come to light.

With the collapse of the housing market in the United States, the whole house of cards has come down. Millions of people around the world who did nothing wrong are suffering. And the worst effects, as usual, will be felt by the poor. As economies falter, as government budgets collapse, and as contributions to charities and NGOs dwindle, efforts to help the poor will diminish. With the slowing down of economies everywhere, the poor will lose their jobs and income from self-employment.

Bailout cannot be relied on as solution to market problems. In the long-run, self-protection is possible only when market can ensure that it will not allow a crisis to develop in the first place.

I suggest a mechanism to buy all potential toxic assets on a daily basis through a business created by the participation of all businesses, which engage in highly speculative business and make high profits. I suggest that the market must be equipped with a strong mechanism to detect bubbles at the very initial stage and an instantaneous reaction device to shoot it down.

Everyday the market must hunt down the potential toxic assets and these must be bought off by a company created for this purposes. Capitalization of this company may be made from requiring companies to pay a percentage of gains made from highly speculative transactions at a progressive rate. Market must be developed as a self-correcting system. It cannot be left as a wild party of some money-hungry people, and organizations.

I believe we can tackle some of these challenges within the free market system of capitalism provided we design appropriate built-in mechanism to protect the system.

Capitalism is Half-Done Structure

Even if we can overcome the problem of financial crisis, we’ll still be left with some fundamental questions about the effectiveness of capitalism in tackling many other unresolved problems In my view the theoretical framework of capitalism that is in practice today is a half-done structure.

The theory of capitalism holds that the marketplace is only for those who are interested in making money, for the people who are interested in profit only. This interpretation of human being in the theory treats people as one-dimensional beings. But people are multi dimensional. While they have their selfish dimensions at the same time they also have their selfless dimensions. Capitalism, and the marketplace that has grown up around the theory, makes no room for the selfless dimensions of the people. If some of the self sacrificing drives and motivations that exist in people could be brought into the business world to make impact on the problems that face the world, there would be very few problems that we could not solve.

Present structure of the economic theory does not allow these dimensions of people to play out in the market place. I argue that given the opportunity, people will come into the market place to express their selfless urges by running special types of businesses, let us call them social businesses, to make a change in the world. In the absence of such opportunity in the market place people express their selflessness through charities. Charitable efforts have been with us always, and they are noble, and they are needed. But we have seen that business is able, to innovate, to expand, to reach more and more people through the power of the free market. Imagine what we could achieve if talented entrepreneurs and business executives around the world devoted themselves in ending, say, malnutrition, without any intention to making money for themselves or the investors.

CSR vs Social Business

Corporate social responsibility (CSR) is considered to be a part of company policy nowadays. CSR usually means let us make money, and then use part of that wealth to help society. This is an important development in the business world. But this still does not let business people to express their selfless urges within the framework of the market. Just as an individual person who makes money in business then gives away a part of his income into charity, similarly now a company, a legal person, does the same—make money and give part of it into charity.

I am proposing a different structure of the market itself; I am proposing a second type of business to operate in the same market along with the existing kind of profit maximizing business. I am not opposed to the existing type of business (although I call for many improvements in it like many others do.) I am proposing a new business in addition to the existing one. This new type of business I am calling “social business,” because it if for the collective benefit of others.

This is a business whose purpose is to address and solve social problems, not to make money for its investors. It is a non-loss non-dividend company. Investor can recoup his investment capital. Beyond that there is no profits to be taken out as dividends by the investors. These profits remain with the company and are used to expand its reach, improve the quality of the product or service it provides, and design methods to bring down the cost of the product or service. If the efficiency, the competitiveness, the dynamism of business could be harnessed to deal with specific social problems, the world would be a much better place.

The concept of a social business crystallized in my mind through my experience with Grameen companies. Over the years, Grameen created a series of companies to address different problems faced by the poor in Bangladesh. Whether it is a company to provide renewable energy or a company to provide healthcare or yet another company to provide information technology to the poor, we were always motivated by the need to address the social need. We always designed them as profitable companies, but only to ensure its sustainability so that the product or service could reach more and more of the poor - and on an ongoing basis. In all these cases the social need was the only consideration, making personal money was no consideration at all. That is how I realized that businesses could be built that way, from the ground up, around the specific social need, without motive for personal gain.

The idea of social business got a boost when we launched a joint venture with Danone. Grameen has teamed up with Danone to bring nutritious fortified yogurt to the undernourished children of rural Bangladesh. The aim of this social business is to fill the nutritional gap in the diet of these children. We sell the yogurt to the poor children to make the company self sustaining. Beyond the investment capital, neither Grameen nor Danone will make money from this venture, by agreement. We have one plant operating in Bangladesh, and we hope to have 50 such plants throughout the country.

We have built an eye care hospital on the social business principle. We have created a joint-venture with Veolia of France to deliver safe drinking water in the villages of Bangladesh. Under the company we are building a small water treatment plant in a rural part of Bangladesh to bring clean water to 100,000 villagers, in an area where existing supply of water is highly arsenic contaminated. We will sell the water at a very affordable price to the villagers to make the company sustainable, but no financial gain will come to Grameen or Veolia. Now more and more companies are coming forward to partner with us to set up new social businesses. We feel excited in creating a series of examples of social businesses, which, hopefully will encourage others to join in.

Some people are skeptical. Who will create these businesses? Who will run these businesses? I always say that, to begin with, there is no dearth of philanthropists in the world. People give away billions of dollars. Imagine if those billions could be used in a social business way to help people. These billions will be recycled again and again, and the social impact could be all that much more powerful. CSR money of the companies could easily go into social businesses. Each company can create its own range of social businesses.

Once the concept of social business is included in the economic theory, millions of people will come forward to invest in the social business because they all have those social dreams in their hearts. We will need to create social stock markets to channel these funds to appropriate social businesses.

Information Technology Can Help End Poverty

The other area where huge strides are being made is in the area of information technology. The advances being made are happening at such a rate that it is difficult to keep up. All manners of gadgets, devices are being created, making those that have come before obsolete in very short periods of time. Websites and online platforms are transforming the way we communicate, do business and interact with each other. The world is getting smaller, but only for those who can afford the technology, and for those who are trained to use it. Unless it is properly directed, the way these advances are taking place , it will go on to deepen the digital divide.

I have been arguing for years that technology could play a powerful role in closing the gaps between the rich and the poor, in a way that other things cannot do. If we could channel some of this brilliant creativity and innovation into creating IT solutions to the problems of the poor, we would succeed much more quickly in our race to end poverty. From e-healthcare and mobile phone banking to online market places to sell the products and services of the poor around the world, we are beginning to see what the possibilities are.

The future of poverty as I see it, will be decided by the technological devices and services that are designed a priori for poor people. These will be designed with their needs in mind, rather than those created for the well off and adapted for the poor. We have the technology, but we have to transform it into the digital genie for the poor.

A broad range of technology has a fundamental role to play in the current global food crisis that we are seeing today. The poor countries like Bangladesh are facing the brunt of this crisis. The shortage of food will wreak havoc in the lives of millions of the poor. As populations rise, their incomes and expectations rise, the global demand of food will continue to rise steadily. We need new technological revolution in agriculture, to ensure that we can have a much higher output of food, grown on the finite amount of land that is available to us. With all the advances taking place today, there is no question that we can come up with breakthroughs in agricultural production, in terms of both yield and quality.

It’s disheartening to see many of the world’s poorest falling back toward poverty just when we thought the planet was ready for a big step forward. We had thought food shortages were a thing of the past, but now they are back—not due to any lack of productive capacity on the part of the world’s farmers, and certainly not due to lack of effort by the farmers themselves, but due to forces that could have been averted—the economic crisis and the world’s failure to address the need to improve agricultural technology to increase yields. We have to focus our attention at the global level to tackle this great new challenge to the world’s poorest.

Globalisation

We live in a globalized world, for better or for worse. What we do in one part of the world has a direct impact on another. We are now connected and inter dependent in an unprecedented way. This can be a good thing, this can be a bad thing. Good waves spread quickly. So are the bad waves. Collapse of the financial system in the USA was immediately transmitted globally. The whole world now has to suffer for something which happened in the USA.

Wrong doings of the rich world impacts on the lives of the poor people very heavily. Blunders of the North can make lives in the South unsustainable.

The issue of climate change and how this will affect the earth, and how human beings will continue to survive on this planet is a very good example of this.

The world has many resources but much of it is non renewable. We have to understand that the patterns of our consumption, and the path to development that the world is taking could seriously endanger our future on this planet. The food crisis is in part caused by changes in climate patterns caused, scientists believe, due to global warming.

Bangladesh is singled out very often as a country that will be most affected, and most quickly, by the effects of climate change. As we all live in the same world, we have to understand that we all have to share this world with everyone today, and also with future generations.

There has to be a new approach.

It is up to your generation, the compassionate and creative young generation, to make a break with this past, and create a new future. We recognize how all of us, wherever we are in the world, are connected by a common fate and destiny in the natural world that we share.

Millennium Development Goals

We started the new millennium with grand hopes for a new world. In 2000, the world pledged in one voice to achieve the Millennium Development Goals.

The most important of those goals was the goal to reduce poverty by half by 2015. All the countries and peoples of the world agreed to these goals, the most bold, the most noble of goals ever set for mankind.

Bangladesh is an example of a country that has made tremendous progress towards the MDGs. The poverty rate has fallen from an estimated 74 percent in 1973 to 57 percent in 1991, to 49 percent in 2000, and then to 40 percent in 2005. Though still too high, it continues to fall by around 2 percent a year, with each percentage point representing a meaningful improvement in the lives of millions of Bangladeshis. The country is on track to achieve the Millennium Development Goal of reducing poverty by half in 2015. Even more remarkably, Bangladeshis rapid economic growth has been accompanied by little increase in inequality.

The sharp drop in poverty is reflected in changes in economic growth, employment patterns, and the structure of the economy. Growth has averaged 5.5 percent since 2000, while per-capita growth has increased to 3.5 percent currently.

Population growth, major problem in Bangladesh, one of the most densely populated countries on earth has fallen sharply from an annual average of 3 percent in the 1970s to 1.5 percent in 2000

The decline in population growth has been driven, in large part, by improvements in health care. During the 1990s, the percentage of Bangladeshi mothers receiving prenatal health care doubled. Partly as a result, infant mortality rates in Bangladesh fell almost by half between 1990 and 2005.

Educational opportunities for children have also improved. The 1990s witnessed a tripling in the number of children attending secondary school. More girls now attend secondary schools than boys, a feat unmatched in South Asia and a remarkable achievement given the fact that, in the Bangladesh of the early 1990s, there were three times as many boys as girls in secondary schools.

The problems of poverty in Bangladesh, though improved, are far from being solved. Bangladesh is still one of the poorest countries in the world, with tens of millions of people living at a level barely above subsistence. But the social and economic trends are moving in the right direction.

Despite all the obstacles and difficulties Bangladesh has made great progress. If Bangladesh can do it, so can any other country. Bangladesh is a reason we should not abandon the MDGs. If we go village by village, city by city, district by district, country by country to achieve these goals, it can be done. I believe it can be done. We must all believe it can be done, and work hard with a commitment to achieve them all.

Poverty can be overcome

The thought that always energizes me is that the poverty is not created by the poor people. Poverty is an artificial imposition on the people. Poor people are endowed with the same unlimited potential of creativity and energy that any human being in any station of life, any where in the world. It is a question of removing the barrier in front of the poor people to unleash their creativity to solve their problems. They can change their lives, only if we give them the same opportunity that we get. Creatively designed social businesses in all sectors can make this unleashing happen in the fastest way.

We are fortunate enough to have been born in an age of great ideas and great technologies. A lot will rely on your asking yourself “What use do you want to make of your creative talent?” Do you want to focus exclusively on making money by using your talent? If you must, go ahead; but while making money through profit maximizing businesses do make sure that your businesses make positive impact in people’s lives, at least, it does not make any negative impact. Alternatively, you could use some or all of your talent to change the world by harnessing the power of creative social businesses to address human and social needs? You can devote yourself exclusively to social business or do both types of businesses. Doing both is an attractive idea too. Making money through responsible profit-maximizing businesses could be the means, while using that money for social businesses could be the exciting end. The solutions to many of our world’s pressing problems could be accelerated through the creation of social businesses.

I always insist that poverty does not belong in civilized society. Poverty belongs only in the museum where our children and grandchildren can go to see what inhumanity people had to suffer, and where they will ask themselves how there ancestors allowed such a condition to persist for so long.

You the next generation, have to decide that poverty no more! We overcame slavery. We overcame apartheid. We have done other things that people once thought impossible. We have put persons on the moon, into space to explore far away worlds. We can overcome poverty, if only we decide that this does not belong to the world that you want to create. It is up to your generation to decide the world you choose to live in will not contain the scourge of poverty.

Distinguished Principal, distinguished members of the faculty of Glasgow University, students, distinguished ladies and gentlemen :

I am very honored to be invited to deliver the Adam Smith lecture here at Glasgow University. It is an honor and a privilege for me to be here as part of the celebrations to mark the 250th Anniversary of Adam Smith’s The Theory of Moral Sentiments. Thank you for inviting me here.

Adam Smith provided the conceptual framework of capitalism. It has been improved and elaborated throughout its long history. In the meantime the world has changed enormously. The need for reviewing the basic structure of capitalism has been felt on many occasions. But it has never been felt as strongly as it is being felt today. Capitalism is in serious crisis. Even so, no-one is calling for it to be abandoned in favor of some other system, such as socialism, because everybody is convinced that, with all its faults, capitalism is still the best economic system known to humanity.

Still, in light of the current crisis, there is strong support for a major overhaul of the system. I’ll try to explain in my lecture today why I think one major change in the theoretical framework of capitalism is necessary. It’s a change that will allow individuals to express themselves in multi-dimensional ways and address the problems left unsolved or even exacerbated by the existing conceptual framework. And although my proposal may be viewed as a significant change in the structure of capitalism, it is actually very consistent with what Adam Smith elaborated so brilliantly 250 years ago in his Theory of Moral Sentiments.

Rude Awakening

We are living in a time of unparalleled prosperity, fuelled in part by revolutions in knowledge, science, and technology, particularly information technology. This prosperity has changed the lives of many, yet billions of people still suffer from poverty, hunger, and disease. And now, several major crises have combined forces to bring even greater misery and frustration to the world’s bottom 3 billion people.

Few people foresaw these crises. The twenty-first century began with high hopes and idealistic dreams, encapsulated in the UN initiative known as the Millennium Development Goals. Many of us were convinced that the coming decades would bring unprecedented wealth and prosperity, not just for a few but for all people on this planet.

Sadly, however, 2008 will go down in history as the year of a rude awakening about the gross weaknesses in our capitalist system. It has been the year of the food price crisis, the oil price crisis, the financial crisis, and the ever-worsening environmental crisis. In combination, these crises are causing a profound loss of faith among people who thought they had full understanding of and control over the global system.

The Food Crisis

Early in 2008, the United Nations World Food Programme (WFP) reported dreadful news — more than 73 million people in 78 countries were facing the reality of reduced food rations. We saw headlines reporting news of a sort many people assumed we would never experience again: skyrocketing prices for staple foodstuffs like grains and vegetables (wheat alone having risen in price by 200 percent since the year 2000); food shortages in many countries; rising rates of death from malnutrition; even food riots threatening the stability of countries around the globe.

Since the latest peak in global food prices (which occurred in June, 2008), prices have gone down, bringing a bit of short-term relief to millions. But continuing high food prices have created tremendous pressure in the lives of poor people, for whom basic food can consume as much as two-thirds of their income.

And while short-term relief efforts are essential to stave off the immediate effects of food shortages and prevent widespread famine, it’s also important to step back and take a look at the broader causes of the crisis. We need to consider how the evolution of the world economy and, in particular, of the system whereby food is produced and distributed has led us to today’s dilemma. Perhaps surprisingly, the economic, political, and business practices of the developed world have a profound impact on the availability of food in the poor nations of the world. Thus, solving the global food problem will require a redesign of international framework, not merely a series of local or even regional reforms.

The Green Revolution of the 1950s and 1960s increased crop yields in Asia and Latin America and made many countries that had been reliant on food imports self-sufficient. Rates of hunger and malnutrition dropped significantly. The high-yield grain production made possible by the Green Revolution has been credited with saving the lives of up to a billion people.

Now, however, a series of interrelated trends has partially reversed the gains that the Green Revolution produced.

Part of the problem has been the way in which globalization of food markets has been managed over the past three decades. I am a strong proponent of free trade; I believe that encouraging people and nations to exchange goods and services with one another will, in the long run, lead to greater prosperity for all. But like all markets, global markets need reasonable rules that will allow all participants an opportunity to benefit.

Today’s global markets, unfortunately, are only partly free, and some of the restrictions and distortions that have been left in place have had devastating consequences for poor nations.

The imbalances caused by this semi-free trade are distorting markets, raising prices, and even destroying agriculture in poor countries that once boasted enormous food surpluses.

Fuel or Food ?

Subsidies for ethanol in countries like the U.S. are one example of this problem. Intended to encourage the growth of corn and soy to partially replace fossil fuels in gasoline, these subsidies may have made sense when oil cost $20 a barrel. They were designed to make it economically viable to use biofuels as a partial substitute for relatively cheap and abundant oil — and they worked as intended, as shown by the fact that, in 2007, fully one quarter of the maize (corn) crop in the U.S. was used to manufacture ethanol. But these same subsidies cannot be justified when oil is at over $50 a barrel — nor can the continuing subsidies for oil production enjoyed by large, highly profitable firms like ExxonMobil. Both sets of subsidies distort markets, lead to unintended ecological, social, and economic consequences, and should be phased out as quickly as possible. Otherwise, they will continue to drive up the price of basic foodstuffs both directly and indirectly, including by diverting farmland and other agricultural resources to the production of fuel rather than food.

Food Versus Feed

Increased demand for meat has also distorted food price structures and contributed to worldwide food shortages. Growing prosperity in some of the world’s poorest nations is, of course, a wonderful thing. Over the past three decades, millions of people have been able to lift themselves out of poverty. The credit goes to increased access to free markets, technological developments, and programs such as microcredit that make capital for investments available to those who were once shut out of the capitalist system.

But prosperity is bringing its own challenges. The amount of meat eaten by the typical Chinese citizen has increased from 20 kilograms per year in 1958 to over 50 kilograms today. Similar increases have been seen in other large countries such as India, Indonesia, and Bangladesh, which together with China make up nearly half the world’s population. Not only can more and more people in these countries now afford meat, but they are shifting to meat (and away from more traditional, low-meat diets) as part of their adoption of a “modern, prosperous” lifestyle.

Unfortunately, meat-eating is a relatively inefficient use of natural resources. The number of nutritious calories delivered by meat is far lower than the calories humans can enjoy through direct intake of grains. Yet today, more and more grain and other foodstuffs are being used to feed cattle rather than human beings. By some measures, up to a third of the world’s grain production, as well as third of the global fish catch, is being used to feed livestock. And more and more of the planet’s farmlands are being diverted from the production of food for human consumption and toward the growing of grains for cattle feed. These changes add several costly steps to the process by which human life will ultimately be sustained.

As a result of dysfunctional agricultural choices such as the decision to shift land use toward ethanol and meat production, even basic foods are becoming more expensive.

There are still other factors worsening the current food crisis for the developing nations. One of these is the growing difficulty for farmers in poor nations to compete in the increasingly global food markets.

In effect, small farmers in the developing nations are suffering from the necessity to compete against large-scale producers in the developed nations. It’s a one-sided battle that, so far, has led to devastating results for the poor farmers of the world.

Increasing corporate control of agricultural resources is also harming farmers in the developing world. As large agribusinesses take near-monopoly control over seed stocks as well as control over supplies of costly synthetic fertilizers and pesticides, more and more small farms are driven out of business, unable to afford the supplies they need to compete in the new global food market. The rising cost of oil is a significant factor here, too. For example, many fertilizers are petroleum-based, which means that every increase in the cost of a barrel of oil drives up the cost of fertilizer. The World Bank reports that, over the past five years, fertilizer prices have risen by 150 percent. Of course, high oil prices also drive up the cost of irrigation, running farm equipment, delivering goods to market, and shipping foods to and from processing plants.

All of these economic and social problems are growing worse just as global environmental trends are threatening the future of agriculture around the world. Climate change, drought, and deforestation are turning vast areas that were once fertile farmlands into deserts. The UN reports that, every year, an area equivalent to the entire country of Ukraine is lost to farming because of climate change. What’s more, if current global warming trends continue, over the next century, rising sea levels can be expected to flood almost one third of the world’s farmland. It is easy to imagine what is happening to Bangladesh, the world’s most densely populated country, which is a flat country with 20% of its land less than one-meter above sea level. As the sea-level keeps rising, flooding grows steadily worse and more destructive. It is an emerging case of environmental disaster leading immediately to human disaster.

Financial Crisis

On top of the food crisis, the oil price crisis, and the environmental crisis, came the biggest crisis of all — the crushing collapse of the US financial system. Giant financial institutions along with major manufacturing firms like the auto-makers are going bankrupt or being kept alive with unprecedented government bailout packages. Many reasons have been suggested for this historic economic collapse: excessive greed in the market place, the transformation of investment markets into gambling casinos, the failure of regulatory institutions, and so on. But one thing is clear: the financial system has broken down because of a fundamental distortion of its basic purpose.

Credit markets were originally created to serve human needs—to provide business people with capital to start or expand companies. In return for these services, bankers and other lenders earned a reasonable profit. Everyone benefited. In recent years, however, the credit markets have been distorted by a relative handful of individuals and companies with a different goal in mind — to earn unrealistically high rates of return through clever feats of financial engineering. They repackaged mortgages and other loans into sophisticated instruments whose risk level and other characteristics were hidden or disguised. Then they sold and resold these instruments, earning a slice of profit on every transaction. All the while, investors eagerly bid up the prices, scrambling for unsustainable growth and gambling that the underlying weakness of the system would never come to light.

In time, the inevitable happened. The house of cards came tumbling down. And because of globalisation, this financial tsunami is spreading all over the world. Stock-markets all over the world are reporting daily about losses in the trillions of dollars. But the rich will not be the worst sufferers from this financial crisis, rather it will be the bottom 3 billion people on this planet, despite the fact that they are not responsible in any way for creating this crisis. While the rich will continue to enjoy a privileged life style, the bottom 3 billion people will face job and income losses that, for many, will make the difference between life and death.

We have only seen the beginning of these crises in 2008; it is going to be a long and painful period ahead. The combined effects of the financial crisis, the food crisis, the energy crisis, and the environmental crisis will continue to unfold in the coming months and years, affecting the bottom 3 billion with special force.

Over the past three months, world leaders have been particularly focused on the emergency situation on the financial front. This is quite understable. But it should not be seen as a problem of high finance only. This narrow view of the financial crisis is likely to create global social and political problems. The human aspect of the financial crisis must be integrated into all policy proposals. The appropriate thing would be to treat all four crises as one crisis, since all are linked together. So far, governments have kept themselves busy coming up with super-size bail-out packages for the financial institutions which were responsible for creating the financial crisis, yet no bail-out package of any size has even been discussed for the victims of the crisis — the 3 billion bottom people and the planet that sustains us all.

For this reason, I have been repeatedly urging that this mega-crisis be taken as a mega-opportunity to redesign the existing economic and financial systems.

Capitalism is a Half-Built Structure

Even if we can overcome the immediate crises we face, we will still be left with fundamental questions about the effectiveness of capitalism in tackling such unresolved problems as persistent poverty, lack of access to health care and education, and epidemic diseases. In my view, the theoretical framework of capitalism that is widely accepted today is a half-built structure—one that preventsAdam Smith’s “invisible hand” from operating as he believed it should.

In a sense, we have chosen to disregard half of Smith’s message. His Wealth of Nations has drawn all the attention while The Theory of Moral Sentiments has been largely ignored. This book could have provided the foundation for the other, missing half of the market — the half of the market that caters to the social consciousness of the people.

The present theory of capitalism holds that the marketplace is only for those who are interested in profit only. This interpretation treats people as one-dimensional beings. But people are multi dimensional, as Adam Smith saw two and a half centuries back. While they have their selfish dimension, at the same time, they also have their selfless dimension. The theory of capitalism, and the marketplace that has grown up around the theory, makes no room for the selfless dimension of the people. If the altruistic motivation that exists in people could be brought into the business world, there would be very few problems that we could not solve.

Adam Smith’s Theory of Moral Sentiments begins with the assertion that “How selfish so ever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it. Of this kind is pity or compassion, the emotion we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrows of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous or the humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.”

Smith then asks that most fundamental question: Why do we regard certain actions or intentions with approval and condemn others? At the time, opinion was divided: some held that the only standard of right and wrong was the law and the sovereign who made it; others, that moral principles could be worked out rationally, like the theorems of mathematics.

Smith took the view that people are born with a moral sense, just as they have inborn ideas of beauty or harmony. Our conscience tells us what is right and wrong: and that conscience is something innate, not something given us by lawmakers or by rational analysis. And to bolster it we also have a natural fellow-feeling, which Smith calls “sympathy”. Between them, these natural senses of conscience and sympathy ensure that human beings can and do live together in orderly and beneficial social organizations.

With these ideas in mind, we can see that Smith’s other great book, The Wealth of Nations, has probably been misinterpreted. Smith’s thesis in that book is generally summarized as an argument that all will be well if people are allowed to follow “self-interest”. The world has interpreted “self-interest” as equal to profit maximization. But with human beings as they are, driven by conscience and sympathy as well as the desire for profit, we see that “self-interest” includes both profit maximization and social contribution. That’s what Adam Smith elaborated in The Theory of Moral Sentiments, which attached great importance to justice and other moral virtues, perhaps to clarify the boundaries of “self-interest”.

The present structure of economic theory does not allow these other dimensions of people to play out in the market place. I argue that, given the opportunity, people will come into the market place to express their selfless urges by running special types of businesses specifically designed to improve the lot of humanity in general. In the absence of such an opportunity in the market place, people will express their selflessness through charities. Charitable efforts have always been with us, and they are noble, and they are needed. But we have seen that business has a greater ability than charity to innovate, to expand, and to reach more and more people through the power of the free market. Imagine what we could achieve if talented entrepreneurs and business executives around the world devoted themselves to goals such as ending malnutrition, providing shelter for the homeless, and eradicating disease.

Social Business

With this in mind, I am proposing a second type of business to operate in the same market along with the existing profit maximizing businesses. I call this new type of business “social business,” because it exists for the collective benefit of others.

A social business is a business whose purpose is to address and solve social problems, not to make money for its investors. It is a non-loss non-dividend company. The investor can recoup his investment capital, but beyond that no profit is to be taken out as dividends by the investors. These profits remain with the company and are used to expand its out reach, to improve the quality of the product or service it provides, and to design methods to bring down the cost of the product or service. If the efficiency, the competitiveness, and the dynamism of the business world can be harnessed to deal with specific social problems, the world will be a much better place.

The concept of social business crystallized in my mind through my experience with the Grameen companies. Over the years, Grameen has created a series of companies to address different problems faced by the poor in Bangladesh. Whether it is a company to provide renewable energy, a company to provide healthcare, or yet another company to provide information technology to the poor, we were always motivated by the need to address the social need. We designed these businesses as profitable companies, but only to ensure their sustainability so that the products or services they provided could reach more and more of the poor - and on an ongoing basis. In all these cases, the social need was the only consideration; earning a profit was no consideration at all. That is how I realized that businesses could be built that way, from the ground up, around specific social needs, without relying on the motive of personal gain.

The concept of social business got international attention when Grameen Bank launched a joint venture with Danone, a multinational company from France. Grameen teamed up with Danone to bring nutritious fortified yogurt to the undernourished children of rural Bangladesh. The aim of this social business is to fill the nutritional gap in the diet of these children. We sell the yogurt to the poor children at an affordable price, charging just enough to make the company self sustaining. Beyond the return of the original investment capital, neither Grameen nor Danone will make any money from this venture, by agreement. We have one yogurt plant already operating in Bangladesh, and in time we hope to have 50 such plants throughout the country.

Grameen Danone is just the first social business we have launched. We also have built an eye care hospital on social business principles. And we have created a joint-venture with Veolia of France to deliver safe drinking water in the villages of Bangladesh. This joing venture is building a small water treatment plant to bring clean water to 50,000 villagers, in an area of Bangladesh where the existing water supply is highly arsenic contaminated. We will sell the water at a very affordable price to the villagers to make the company sustainable, but no financial gain will come to Grameen or Veolia. Now more and more companies are coming forward to partner with us to set up new social businesses. We feel excited about creating a series of examples of social businesses, which, hopefully, will encourage others to join in.

Some people are skeptical when I describe the concept of social business. Who will create these businesses? Who will run these businesses? Why would anyone devote time, energy, and money to projects with no hope of personal gain? I always say that, to begin with, there is no dearth of philanthropists in the world, no dearth of donor countries giving grants. People give away billions of dollars every year. So do donor countries. Imagine if those billions could be used by social businesses to help people. These billions would be recycled again and again, and the social impact could be all that much more powerful. In the same way, money allocated by companies to corporate social responsibility projects could easily go into social businesses. Each company would create its own range of social businesses. We can also create Social Business Funds to pool funds from many sources and invest them in social businesses. The opportunities for launching social businesses are really limitless.

Business Owned By the Poor

Even profit maximizing companies can be social businesses if they are owned by the poor. This constitutes a second type of social business. Grameen Bank falls under this category of social business. It is owned by its poor borrowers.

The borrowers buy Grameen Bank shares with their own money, and these shares cannot be transferred to non-borrowers. A committed professional team does the day-to-day running of the bank. Every year, dividend checks are sent to the borrowers, representing their share of the bank’s profits.

Bilateral and multi-lateral donors interested in supporting economic development could easily create social businesses of this type. When a donor wants to gives a loan or a grant to build a bridge in the recipient country, it could create instead a “bridge company” owned by the local poor. A committed management company could be given the responsibility of running the company. Part of the profits earned by the company would go to the local poor as dividends, while part would go towards building more bridges. Many infrastructure projects, like roads, highways, airports, seaports, and utility companies could be built in this manner.

Once the concept of social business is included in economic theory, thousands of people will come forward to invest in social businesses because of the social dreams they have in their hearts.

Social Stock Market

To connect investors with social businesses, we will need to create a social stock market where only the shares of social businesses will be traded. An investor will come to this stock-exchange in ordee to find a social business, which has a mission to his or her liking, just as someone who wants to make money goes to the existing stock-market.

To enable a social stock-exchange to perform properly, we will need to create rating agencies, standardization of terminology, definitions, impact measurement tools, reporting formats, and new financial publications, such as, The Social Wall Street Journal, and new electronic media, such as, Social Bloomberg. Business schools will offer courses and business management degrees to train young managers how to manage social businesses in the most efficient manner, and, most of all, to inspire them to become social business entrepreneurs themselves.

Globalisation

We live in a globalized world, for better or for worse. What we do in one part of the world has a direct impact on another. We are now connected and inter dependent in an unprecedented way. This can be a good thing, this can be a bad thing. Good waves spread quickly. So do bad waves. The shock-waves from the collapse of the financial system in the USA are being transmitted globally. The whole world now suffers for something which happened in the USA.

The wrong doings of the rich world impact heavily on the lives of the poor. The life-style of the North can make lives in the South unsustainable.

The issue of climate change is a very good example of this.

The world has many resources but many of the most important resources are non renewable. We have to understand that the patterns of our consumption, and the path to development that the world is taking could seriously endanger our future on this planet. The food crisis is in part caused by changes in climate patterns produced, scientists believe, by human activity.

My country, Bangladesh is one of the countries that will be most affected, and most quickly, by the effects of climate change. But in the long run, every country will suffer the consequences of global warming. We have to understand that we all have to share this world with everyone today, and also with future generations.

We have to design a new global economic architecture to make sure that one person’s enjoyment of life does not take away another person’s right to survival, and that one generation’s enjoyment of life does not put another generation in peril.

The Role of Social Business in Globalization

I support globalization and believe it can bring more benefits to the poor than any alternative. But it must be the right kind of globalization. To me, globalization is like a hundred-lane highway criss-crossing the world. If it is a free-for-all highway, its lanes will be taken over by the giant trucks from powerful economies. Bangladeshi rickshaws will be thrown off the highway. In order to have win-win globalization, we must have traffic rules, traffic police, and a traffic authority for this global highway. The rule of “strongest takes all” must be replaced by rules that ensure that the poorest have a place and a piece of the action, and are not elbowed out by the strong. Globalization must not become financial imperialism.

Powerful multi-national social businesses can be created to capture a share of the benefits of globalization for poor people and poor countries. Social businesses will either bring ownership to poor people, or keep the profit within poor countries, since taking dividends will not be their objective. Direct foreign investment by foreign social businesses will be exciting news for recipient countries. Building strong economies in poor countries and protecting them from plundering companies will be a major area of interest for social businesses.

The Worst Crises Offer the Best Opportunities

Most important, the current mega-crisis should not distract donors and world leaders from the search for long-term global solutions. Instead they should see this as a mega opportunity to address long-term problems in their integrated solution packages.

The current multiple-crises offer us all a valuable lesson in the inter-connectedness of the human family. The fate of Lehman Brothers and that of poor sisters working in the garment factory in Bangladesh are linked together. The fate of a rice farmer in Bangladesh, a maize farmer in Mexico, and a maize farmer in Iowa are all intertwined; and while short-term trends may appear to benefit a few of us at the expense of many others, in the long-run, only policies that will allow all the peoples of the world to share their progress are truly sustainable.

In the coming months the multiple-crises will reveal more of their ramifications in economic and human terms. This is the time to bring the world together to face this crisis in a well planned and well managed way; to take this crisis as the best opportunity to design and put in place a new economic and financial architecture so that this type of crisis will never recur again, long-standing global problems will be addressed decisively, and the incoherence and deficiencies of the current economic and financial order will finally be removed.

The most important feature of this new global economic architecture will be to bring the half-built theoretical framework of capitalism to completion by including the second type of business, the social business, in the market place. Once it is included in the framework, it can play a very important role in solving the financial crisis, the food crisis, the energy crisis, and the environmental crisis. I It will also provide the most effective institutional mechanism for addressing the unresolved problems of poverty and ill-health. Social business can address all the problems which are left behind by the profit-making businesses, at the same time as it tones down the excesses of the profit-making businesses.

We can start introducing social businesses in the bail-out packages for the bottom 3 billion people, by creating a global social business fund to provide loans and equity for :

a) Expanding microcredit programs

b) Supporting other poverty reduction programs

c) Providing technology infrastructure for the poor

d) Improving agriculture in the developing world (through programs such as agricultural credit; local, national, and international marketing; storage; introduction of new technology; insurance;price and wage guarantees, and so on)

e) Providing healthcare and health insurance

f) Protecting the environment and providing renewable energy

g) making globalisation work for the poor

Poverty can be overcome

As we devote ourselves in crafting a new economic and social architecture, what should members of the younger generation, like you, be getting ready for ? I see one exciting option for you — to list all the features of the new world you want to create, and then work for it. I hope among all the features in your wish-list an important one will be to create a world without poverty.

The thought that always energizes me is that the poverty is not created by poor people. Poverty is an artificial imposition on the people. Poor people are endowed with the same unlimited potential for creativity and energy of any human being in any station of life, any where in the world. It is a question of removing the barriers faced by poor people to unleash their creativity to solve their problems. They can change their lives, if we only give them the same opportunities that we have . Creatively designed social businesses in all sectors can make this happen in the fastest way.

I always insist that poverty does not belong in civilized society. Poverty belongs only in a museum where our children and grandchildren will go to see what inhumanity people had to suffer, and where they will ask themselves how their ancestors allowed such a condition to persist for so long.

You, the next generation, have to make a pledge that it will be your generation that will ensure the elimination of poverty from this planet. We overcame slavery. We overcame apartheid. We have done other things that people once thought impossible. We have put human beings on the moon. We can overcome poverty, if we only decide that poverty does not belong to the world that you want to create. It is up to your generation to decide that the world you choose to live in will not contain the scourge of poverty.

You Can Make it Happen

We are fortunate enough to have been born in an age of great ideas and great technologies. A lot will rely on your asking yourself, “What use do I want to make of my creative talent?” Do you want to focus exclusively on making money? If you must, go ahead; but while making money through profit maximizing businesses do make sure that your businesses make a positive impact on people’s lives, or at least, make no negative impact. Alternatively, you could use your talent to change the world by harnessing the power of creative social businesses to address human and social needs.

Of course, you can do both types of businesses. Making money through responsible profit-maximizing businesses could be the means, while using that money for social businesses could be the exciting end.

The solutions to many of our world’s pressing problems could be accelerated through the creation of social businesses.

It is up to you to make it happen.

If you choose this path, paying attention to your conscience and to human sympathy as well as to the design for wealth, you will be the true economic person Adam Smith had in mind.

Thank you.

Muhammad Yunus on 4 February 2006

Now we are at the outset of a new year which is going to be a critical year for Bangladesh democracy. Whole country is abuzz with one single question: Can we hold a peaceful and fair election on schedule as required by the constitution and desired by the nation? We see many bad signs. They upset the citizens. Despite all the bad omens, the nation must express its resolve by saying: “We shall hold the election on time. We shall make it more peaceful, more credible than any other election ever held in the past. Despite all shortcomings still remaining, we shall accept the result of the election and move on to build the nation unitedly.”

Election is the overriding agenda

Let holding a peaceful and fair election be the overriding agenda for 2006 for our nation. Holding the national election on time is a necessary condition to keep the process of democracy alive and strong. Any derailment from this course will be a disaster for the nation. Getting derailed is easy and, sometimes, attractive, but it becomes costlier by the day to stay derailed. Getting back on the rail is an extremely painful and slow process, and exhausts the nation by consuming all the energy and attention of the nation.

Despite outstanding accomplishments recorded by Bangladesh, people of Bangladesh feel unsettled, unhappy and frustrated. Our politics is killing our spirit. It has led to our major national crises: 1) limitless corruption, 2) rise of unprecedented terrorism, and 3) fast deterioration of the public service structure. They are all inter-connected and linked to politics.

From all indications, it is absolutely clear that Bangladesh has quietly and steadily built a very strong foundation to make the big leap forward. But our non-stop political bickering does not give a respite to celebrate or get inspired by our enormous successes to prepare ourselves to reach out to still higher levels of accomplishments. We are ready to launch ourselves into a path to cross $1,000 per capita income, 8 percent GDP growth rate, and reducing poverty level to under 25 percent in the near future. But our political attention remains riveted to day to day party politicking rather than strategic national issues.

Lucky to have two giants as our neighbours

India and China are almost there. They have already reached the 8 percent growth rate and 25 percent poverty level. They are becoming such political powers and economic power-houses that the whole world is gathering around them to get their attention.

Bangladesh is lucky to have two globally sought-after giants as her next door neighbours. These giants are not sleeping giants. They are super-active, and growing very fast. We must learn how to take advantage of fast growing giants. We must assess our best interest in building our relationship with them. In their turn, they’ll assess their best interest in having us as their neighbour.

Obviously, they will look at us as their market, their competitor, their partner, and also as a potential trouble-maker. From our side we must make it absolutely clear that we have no intention to be trouble-maker for our neighbours, nor do we want to see them as trouble-maker for us.

But a section of our politics finds it a very attractive theme to impress on the common people of Bangladesh that India is behind all the terrible things that happen in Bangladesh. If you don’t vote for our party, India will turn Bangladesh into her client state.

Countries are not made of saints only or angels only. There are bad people in India, who can dedicate themselves to do bad things to Bangladesh. Similarly, there are bad people in Bangladesh committed to do bad things to India. Both countries must remain vigilant to catch the bad people and punish them forthwith to uphold the friendship between the two countries.

Growing up with giants

When our giant neighbours bring the whole business world to their door-steps, our door-steps come very near to the business world. Visibility and contacts are very important factors in business. They come to us easily because of having important neighbours. If we play our cards right, our economy can pick up the speed of our neighbours.

Growing neighbours are also sources of technology and experience. Expanding economies keep moving towards more and more high-profit products and services, leaving behind low- profit, labour intensive items. This creates opportunities for neighbours. This is not to suggest that Bangladesh has to satisfy herself only with the markets and the products which giant neighbours are not interested in. What Bangladesh can do will depend on our level of efficiency and management skill. Bangladesh can find niche to provide high value specialised products and services to her giant neighbours.

I am emphasising on the fact that having two fast growing giant neighbours is a great boon for us. Let us dispel the fear that living between two giants is a scary prospect — that we may be stepped on from any side, any minute! On the contrary, we’ll be the beneficiary of coasting effect of having two giants next to us. We can get a ride on the fast train with them.

An open-door, open-arm country

Future of Bangladesh lies in being an open-door, open-arm country. We must not live under the fear of the Indian wolf. We must get the constant fear of the Indian wolf out of our system. If it is a real threat, we’ll have to prepare for it and get on with our lives. If it is imaginary, we’ll have to get our minds cleansed out. Frequent cries of Indian wolf is a sign of our political emptiness.

In the world today domination does not come through sneaky conspiracies. Domination comes from economic power. If we remain a poor country, everybody will dominate us, not just India. Moving up the economic ladder quickly is the best protection from all dominations. Let us not confuse this issue.

In order to move up the ladder quickly we should open all our doors, invite everybody in, encourage our people to spread themselves all over the wide world, show their talents and win over the confidence and appreciation of the whole world. Hiding behind closed doors is no protection at all.

Let’s make Bangladesh the cross-roads of the region

Let’s envision Bangladesh as the cross-roads of the region, if not the world. Let people, products, investments from all over the world flow into Bangladesh, and out of Bangladesh, with utmost ease, safety, and efficiency. Let’s make our laws, institutions, bureaucracy, travel and transportation facilities, financial system most friendly to the movement of people, investments, goods and services in and out of Bangladesh. Let’s build everything in Bangladesh in such a way that Bangladesh becomes the natural first choice of hard-nosed investors and traders. Let Bangladesh be Bangladesh International. Let us all agree on this vision and then move forward unitedly to make it a reality at the fastest possible speed.

To make Bangladesh an international cross-roads we’ll have to address the following:

i) Reduce corruption level drastically.
ii) Provide reliable electricity all over the country.
iii) Open up ICT and make Bangladesh a very attractive country in terms of state-of-the-art ICT.
iv) Build a mega-port in a suitable location along the Chittagong coastline capable of serving the following countries: Bangladesh, Nepal, Bhutan, Eastern India, Myanmar, and South-Western China.
v) Build highways to connect the mega-port with all six countries.

We must visualise Bangladesh as the ICT, industrial and trading hub of the region. On the first day of 2006 we have signed a document which has the potential to change the economy of SAARC region. The document we signed was the document relating to SAFTA agreement. Now Bangladesh should take the lead, rather than wait for initiatives to come from other countries, to move SAFTA forward. We can be smart, open our doors, convert disadvantages into opportunities, and change our destiny.

Geographically, Bangladesh is strategically located to provide access to international shipping to Nepal, Bhutan, Eastern India, Myanmar, and South-Western China. We should start making appropriate preparations, in consultation with these countries, to create facilities for access. Again, it’ll to be our call to draw attention of our neighbours. We’ll have to do our home-work well to show them the benefits accruing to them by opening up the access to the sea-routes through Bangladesh, and doing business with Bangladesh. We’ll have to resolve formidable political and technical issues with India. Remaining passive is not at all to our interest. It is actually very costly in terms of gains foregone. True leaders not only have visions, they have to have the burning drive to push through the solid walls of obstacles to make their visions come true. Vision must be backed up by hard work and dedication.

Mega-port at Chittagong

Mega-port at Chittagong is the key to making Bangladesh the cross-roads of the region. With the economy of the region growing at a sustained high speed, demand for the access to a well-equipped well-managed port will keep on growing. A region, which includes two giant economies, will be desperately looking for direct shipping facilities to reach out to the world. Chittagong will offer the region the most attractive option. Even today, despite the problems of present Chittagong port, Kunming is requesting permission to utilise this facility.

With global competition becoming more fierce shorter and shorter lead time for delivery will become the magic formula to attract business. An efficient mega-port at Chittagong will be in high demand. This port can be built and owned by a national or international company with government participation in equity. It can contract out the management of the port to a professional port management company.

International airport

Mega-port may support an international airport in its proximity. With appropriate aircraft servicing facilities and hotels, this airport can become an airline hub. It has the advantage of cutting distances to many Asian cities like Tokyo, Osaka, Beijing, Shanghai, etc, and taking off the pressure from important SAARC airports.

Highway network

During the SAARC Summit held in Dhaka recently, Dr. Manmohan Singh, Prime Minister of India, proposed to build a highway network to connect the SAARC countries. We should enthusiastically welcome this proposal and offer our plan to build highways connecting Nepal, Bhutan, Eastern India, and Pakistan. We should make sure that our highway network extends upto Cox’s Bazar, so that it can be connected with Myanmar, Thailand, and China in the eastern side.

Regional water management plan

With borders opening up, highways criss-crossing the region, businesses growing, we can create mutual trust among our neighbours, leading to right kind of political climate to engage them to work towards preparing a regional water management plan in conjunction with the plan for regional production and distribution of electricity. Fortunately, this region has an enormous capacity to produce hydro-electricity. With political understanding Bangladesh can meet her ever growing electricity need from a mutually beneficial arrangement with Nepal, Bhutan, and India.

$100 lap-tops for school children

Bangladesh has a very young population. Half the population is under the age of 18! If we pay serious attention to them we can create a dramatically different next generation. Some countries are already signing up with MIT Media Lab to provide $100 lap-top to each school student, just like text books. Lap-top to a child gives a message. Message is: Discover yourself, discover the world, create your own world. There is no reason why we cannot sign up with MIT Media Lab to do exactly the same and give lap-tops to our students. Let us not miss this world-changing opportunity.

One way to let all children, poor or rich, boy or girl, urban or rural, feel equal is to ensure access to computer and internet. This connectivity also takes off some of the unevenness in our educational facilities. We have already witnessed a telecommunication revolution. Within a short span of five years mobile phones have reached every village in Bangladesh. At the end of 2006, one in every eight persons in Bangladesh will have a telephone! With $100 lap-top, every school student will have access to internet telephony.

Our young people can be role model

I meet many Bangladeshi young people when I am visiting foreign countries. Many of us are used to meeting Bangladeshis in New York. But it is a quite different experience to meet young Bangladeshis in a small town of Spain, or in an island in Italy, or in Argentina, Chile, Columbia. They show up to meet me at the hotel or in the conference where I am speaking. They discover my presence in the town from the newspaper reports. They come individually. They come in groups. Among everything else they express their worry about the political situation in the country. I ask them how they got there. Each tells a horror story. Each time it is a story of perseverance, tenacity, and high risk adventure. It is quite an experience to hear them tell the story of how they moved from one country to the next, how they switched from one livelihood to another. They are doing well now. They have learnt the local language and understand the local way of life. They are at ease with local people. Story one gets from a migrant worker working in an Asian country is different, but not too different. It is the story of how they are cheated by the man-power agents, and how they are mistreated by the airport officials at the time of departure as well as at the time of visits.

Bangladeshi young people reached out to all corners of the world with basically individual and family initiative, using network of friends and relatives. Government has built some facilities to help them by making it easy for them to go out. But you hear more about the harassment, bribes, extortion and unresponsiveness of the government officials than nice things about these arrangements. These young people who live under extreme difficulties are making a big contribution to the national economy. They have been sending a very substantial amount of money as remittances.

Overseas remittance

The piece of information that amazed me is: in 2004, Bangladesh received $3.4 billion in remittances, compared to India’s $21.7 billion (and China’s $21.3 billion). That is quite an achievement! With nine times larger population, India’s share would have been $30.6 billion if she had received the same per capita remittance. Bangladesh remittance earning rate compares well with Pakistan too ($3.9 billion). Total remittance to Bangladesh constituted one-third of the total foreign exchange earnings of the country. Despite all the problems faced by Bangladeshi migrant workers, this is a very significant chunk of foreign exchange earning contributed by them.

More important than the quantum of foreign exchange earning, remittances go directly into poverty reduction. The World Bank Global Economic Prospects Report says this remittance inflow has helped cut poverty by 6 percent in Bangladesh and given a boost to the rural economy.

Building up respectability as a nation

Bangladesh is a rather new name in the list of nations. It came to world’s media attention mostly through disasters — floods, cyclones, tidal-waves, etc. Reporting on disasters always highlights poverty, and helplessness. That’s the image of Bangladesh that sticks in people’s mind. Two recent negative images have been added to that. One, Bangladesh has been repeatedly found to be the most corrupt country in the world, and two, suicide bombers are killing innocent people in Bangladesh.

Image of a country is very important when it comes to dealing with the world. The better the image a country has, the better is the deal it gets. To be successful in international relationships we’ll have to build up respectability as a nation. Luckily for us Bangladesh has a very strong positive side which counters the negative image to a large extent.

Bangladesh is enormously respected globally for being the birth place of microcredit. Every country in the world feels the need for microcredit. No country can ignore it. They study microcredit in academic institutions, discuss it in meetings, conferences and workshops. Most countries, rich or poor, have active microcredit programs. They all pay respect to Bangladesh for being the originator country. Bangladesh, microcredit, Grameen have become synonymous in the minds of people around the world.

Bangladesh is remembered as the country which gave the world oral saline to combat diarrhea.

Bangladesh earned respectability by demonstrating her skill and efficiency in disaster management. World media publicly suggested that tsunami affected countries and the US, after devastating Katrina, should learn from Bangladesh in disaster management.

Bangladesh is cited as a success story in producing enough food to feed her people despite doubling the population in 35 years.

In terms of human development indicators Bangladesh is third from the top

Bangladesh birth rate has declined significantly. Fertility rate declined from 6.3 percent in 1975 to 3.3 percent in 1999 - 2000, reduced almost to half. This is cited as a global success story.

Economic performance and human development indicators of Bangladesh have been moving upwards since early 1990s. GDP growth has been over 5 per cent during this period.

Bangladesh has very impressive performance in terms of the human development indicators. In terms of these indicators Bangladesh came out in number three position in the developing world, after China and Cave Verde.

Life expectancy of women in Bangladesh used to be lower than men. Now it is higher than men, a better performance compared to South Asia as a whole.

Female labour force participation rate increased dramatically between 1983 and 2000, both for rural and urban, with sharper increase in rural, than in urban. Female labour force participation rate in rural area increased from 7 per cent in 1983-84 to 22 per cent in 1999-2000. Urban rate increased from 12 per cent to 26 per cent during the same period.

Child and infant mortality have been falling at more than 5 percent a year, malnutrition among mothers has fallen from 52 percent in 1996 to 42 percent in 2002. Primary school enrolment rates have reached 90 percent, up from 72 percent in 1990. Enrolment in secondary education has been rising. Bangladesh has already eliminated gender disparity in primary and secondary school enrolment and has made remarkable progress in providing universal basic education.

In the past decade, Bangladesh reduced infant mortality by half, at a rate faster than any other developing country has done, increased adult literacy rates by 8 per cent for women, and 6 per cent for men.

In terms of infant mortality rate and female primary enrolment, Bangladesh is ahead of West Bengal, Punjab, and Uttar Pradesh of India.

Progress towards achieving millennium development goals (MDG) in Bangladesh is surprisingly on track. According to data on current trends, Bangladesh has either met or is expected to meet most of the MDG targets. If right policies are pursued dedicatedly there is a good chance that Bangladesh will reduce poverty by half by 2015.

Capacity has been built, we are ready to go

Bangladesh has outstanding accomplishment in reducing child labour. According to UNICEF, percentage of child labour in Niger is the highest (66 percent). Bangladesh has one of the lowest percentages (7 percent). Nepal is 31 percent, India 13 percent.

The list of our accomplishments is long and very impressive. We notice the admiring eyes of international delegates focused on Bangladeshi delegates when we attend international conferences, be it microcredit, disaster management, health, education, renewable energy, environment, women empowerment, or child labour.

When we visit capitals of SAARC countries we are always asked: “How did you do it? What must we do to catch up with you?”

I am not saying that Bangladesh is on top of everything. Far from it. Our list of failures is much longer than the list of successes. I bring up the list of successes to point out how wrong we are when we throw up our hands in the air to say in frustration that we’ll never make it. This list of successes will convince anybody that not only will we make it, we have already made it in many respects, and will do better than many others around us, and like us.

Good news that comes out from these successes is that we have created the capacity to address all our problems roundly and solidly. Not only we have gained self-confidence, we are ready to earn the confidence of the world. Soon a Bangladeshi passport can bring out admiration and respect from others, rather than suspicion and disrespect.

It is hard work to score points in respectability. It is easy to lose points. One tiny incident, one tiny misstep, one tiny callous decision can push us down quite a bit in respectability. Let us hold on to what we already have, and add to it, as much as we can. It is our very precious capital in facing the world.

Here are our two most important tasks at the moment: we must combine all our efforts: 1) to make sure we hold our election on time with the participation of all major political parties, and 2) make sure we reduce corruption sharply and immediately.

Voters must unite to say no to corrupt candidates

Yes, Bangladesh has done very well so far. We may thank our luck for it. But let us not get used to relying on our luck alone. If we do, everything around us will crumble soon.

This year, 2006, is the year for the nation to sit up and make a desperate attempt to put our house in order. People have to wake up to the fact that they are the boss. People have to make their minds known to the politicians who want their votes to run the country on their behalf. This is the election year. This is the best time to get heard. Voters should not allow themselves to be treated as absentee owners who do not have any knowledge of their own properties. All that the absentee owners are offered by their employees, is to sign on the dotted lines. No question is allowed.

Voters must refuse to sign on the dotted line. When political parties nominate their candidates, they do not consult the voters. Voters are not given any real choice, such as a choice of voting for an honest person, for a person who is committed to work for people, for someone who is not known to have amassed wealth by using his power as a member of parliament or as a party official or a worker. Only choice voters are given, is the choice of voting or not voting.

Voters want to vote, and want to vote for a person they admire, rather than be compelled to vote out of party loyalty, or on some other considerations. Voters must create their own choice. If political parties offer corrupt candidates, people will put up their own clean candidates. If we don’t do that we’ll continue to be the most corrupt country in the world, and our dreams will never get a chance.

Voters can organise campaign for clean candidates

I propose that this year the voters create their own option. They tell the political parties who is to be nominated in their constituency. Supporters of each political party or alliance of political parties will organise themselves to prepare a three member panel of clean candidates of their choice, in order of their priority, and give it to the political party/parties to nominate one out of them. If none of their candidates are nominated voters will be free to submit blank ballots as a protest, unless they actually ask one of their candidates to run as an independent candidate. Similarly, voters who do not vote on party lines will organise themselves and suggest to all parties who they should nominate.

Voters must start speaking out their minds from now on. Rather than speculating about who is going to get which party’s nomination, party supporters and independent voters have to start speaking out who they think should be nominated. This year people should get themselves heavily involved in the nomination process. This will be the only way to get the bad people out, and good people in.

Core agenda of the voters and non-voters this year will be to eliminate corrupt candidates from the ballot-paper. If they still get on the ballot-paper, it has to be ensured that they’ll not be the only ones on the ballot-paper. Honest persons as protest candidates will be put on the ballot-paper as people’s choice. The loudest message the voters must give to the political parties is : “We shall not give votes to a candidate who is known to be corrupt, who is known to have amassed wealth by misusing his power and authority or using his power to terrorise people.”

All civic groups, associations, professional bodies (teachers, doctors, journalists, etc.), youth groups, farmer groups, women groups, business groups, student groups, political parties, individuals, both voter and non-voters, can prepare and submit their panels to the political parties. They can make a panel for each alliance of political parties. Groups can share these panels among each other, can come up with common panels to make their cases stronger. If the clean candidates within the party do not want to run against the party candidates, voters can select an independent clean candidate to run.

When sending the chosen names for party nominations to respective party, voters should give those names also to the press. Voters should keep lobbying with the parties to let them know how strongly they feel against the potential party candidate and promote the case of their own candidate. Voters should tell the party that if they nominate the person that voters reject, then that candidate will not get their vote. Voters will vote for their own candidate instead. Even if their candidate does not win, voters will have a tally of protest votes. If these protest votes add up to be a significant number, it may have an impact on the outcome of the election. Some protest candidates may even win.

I invite the media to launch their own Clean Candidate Campaign. They can start a series of reports identifying and highlighting at least three potential clean candidates for each contesting political party, in each constituency. They may refrain from publishing speculative news about possible nomination of non-clean candidates who are usually considered as front-runners. Media can play a decisive role in bringing out support for clean candidates, and destroy the chances of non-clean candidates in getting nominated or elected.

Students can play a vital role in this Campaign for Clean Candidates. But they’ll have to start building up the campaign organisation right from now. They can work in the constituencies where they appear as voters or volunteer in other constituencies. Electing clean people to the parliament is very important task this year.

A proposal to resolve election impasse

Opposition parties have put some conditions for their participation in the next general election. These conditions can be discussed and resolved if the two opposing sides can sit face to face. But given the past history, we do not expect this to happen.

Here is my proposal. I request both sides to find a Respected Person, accepted by both sides, who will come up with a solution package in consultation with both sides. He will be given 30 days. If both sides agree time can be extended. The Respected Person can co-opt two persons of his choice to help him prepare the solution package.

There may be other proposals to resolve this impasse. Let us all put them on the table to see if any one of them can interest both the parties. Although ruling party’s position on those conditions is clear and constitutionally correct, there is nothing wrong or unconstitutional about making attempts to bring all parties on board to hold a peaceful, credible national election.

Our media, and individual or groups of citizens can suggest names of the possible Respected Person. Ruling and opposition alliances can come up with their own choices and pass on to the other side.

Important thing is to hold the election in the right manner, and right mood, to uphold our democracy and move forward.

Tremendous energy waiting to be mobilised

World is changing very fast. If we are late by a day we’ll fall behind by years. We have come a long way and we are ready to go forward with speed. Bangladesh has the fire in her belly to keep pace with her giant neighbours. Let us not allow ourselves to slow down. We need the right politics and the right leadership to mobilise the tremendous energy in Bangladeshi young people.

Let us think and work hard to make it happen.

]]> http://yunusforum.net/?feed=rss2&p=55 http://yunusforum.net/?p=24 http://yunusforum.net/?p=24#comments Sun, 23 Nov 2008 02:29:20 +0000 admin http://yunusforum.net/?p=24 Muhammad Yunus won the Nobel Peace prize in 2006. Here is the full text of his nobel lecture.

Nobel lecture presented by Prof Muhammad Yunus at the Nobel Peace Prize ceremony on Dec 10, 2006 in Oslo

– Your Majesties, Your Royal Highnesses, Honorable Members of the Norwegian Nobel Committee, Excellencies, Ladies and Gentlemen.
Grameen Bank and I are deeply honoured to receive this most prestigious of awards. We are thrilled and overwhelmed by this honour.

Since the Nobel Peace Prize was announced, I have received endless messages from around the world, but what moves me most are the calls I get almost daily, from the borrowers of Grameen Bank in remote Bangladeshi villages, who just want to say how proud they are to have received this recognition.

Nine elected representatives of the 7 million borrowers-cum-owners of Grameen Bank have accompanied me all the way to Oslo to receive the prize. I express thanks on their behalf to the Norwegian Nobel Committee for choosing Grameen Bank for this year’s Nobel Peace Prize. By giving their institution the most prestigious prize in the world, you give them unparalleled honour. Thanks to your prize, nine proud women from the villages of Bangladesh are at the ceremony today as Nobel laureates, giving an altogether new meaning to the Nobel Peace Prize.

All borrowers of Grameen Bank are celebrating this day as the greatest day of their lives. They are gathering around the nearest television set in their villages all over Bangladesh , along with other villagers, to watch the proceedings of this ceremony.

This years’ prize gives highest honour and dignity to the hundreds of millions of women all around the world who struggle every day to make a living and bring hope for a better life for their children. This is a historic moment for them.

Poverty is a Threat to Peace
Ladies and Gentlemen:

By giving us this prize, the Norwegian Nobel Committee has given important support to the proposition that peace is inextricably linked to poverty. Poverty is a threat to peace.

World’s income distribution gives a very telling story. Ninety four percent of the world income goes to 40 percent of the population while sixty percent of people live on only 6 per cent of world income. Half of the world population lives on two dollars a day. Over one billion people live on less than a dollar a day. This is no formula for peace.

The new millennium began with a great global dream. World leaders gathered at the United Nations in 2000 and adopted, among others, a historic goal to reduce poverty by half by 2015. Never in human history had such a bold goal been adopted by the entire world in one voice, one that specified time and size. But then came September 11 and the Iraq war, and suddenly the world became derailed from the pursuit of this dream, with the attention of world leaders shifting from the war on poverty to the war on terrorism. Till now over $ 530 billion has been spent on the war in Iraq by the USA alone.

I believe terrorism cannot be won over by military action. Terrorism must be condemned in the strongest language. We must stand solidly against it, and find all the means to end it. We must address the root causes of terrorism to end it for all time to come. I believe that putting resources into improving the lives of the poor people is a better strategy than spending it on guns.

Poverty is Denial of All Human Rights
Peace should be understood in a human way ? in a broad social, political and economic way. Peace is threatened by unjust economic, social and political order, absence of democracy, environmental degradation and absence of human rights.

Poverty is the absence of all human rights. The frustrations, hostility and anger generated by abject poverty cannot sustain peace in any society. For building stable peace we must find ways to provide opportunities for people to live decent lives.

The creation of opportunities for the majority of people ? the poor ? is at the heart of the work that we have dedicated ourselves to during the past 30 years.

Grameen Bank
I became involved in the poverty issue not as a policymaker or a researcher. I became involved because poverty was all around me, and I could not turn away from it. In 1974, I found it difficult to teach elegant theories of economics in the university classroom, in the backdrop of a terrible famine in Bangladesh. Suddenly, I felt the emptiness of those theories in the face of crushing hunger and poverty. I wanted to do something immediate to help people around me, even if it was just one human being, to get through another day with a little more ease. That brought me face to face with poor people’s struggle to find the tiniest amounts of money to support their efforts to eke out a living. I was shocked to discover a woman in the village, borrowing less than a dollar from the money-lender, on the condition that he would have the exclusive right to buy all she produces at the price he decides. This, to me, was a way of recruiting slave labor.

I decided to make a list of the victims of this money-lending “business” in the village next door to our campus.

When my list was done, it had the names of 42 victims who borrowed a total amount of US $27. I offered US $27 from my own pocket to get these victims out of the clutches of those money-lenders. The excitement that was created among the people by this small action got me further involved in it. If I could make so many people so happy with such a tiny amount of money, why not do more of it?

That is what I have been trying to do ever since. The first thing I did was to try to persuade the bank located in the campus to lend money to the poor. But that did not work. The bank said that the poor were not creditworthy. After all my efforts, over several months, failed I offered to become a guarantor for the loans to the poor. I was stunned by the result. The poor paid back their loans, on time, every time! But still I kept confronting difficulties in expanding the program through the existing banks. That was when I decided to create a separate bank for the poor, and in 1983, I finally succeeded in doing that. I named it Grameen Bank or Village bank.

Today, Grameen Bank gives loans to nearly 7.0 million poor people, 97 per cent of whom are women, in 73,000 villages in Bangladesh. Grameen Bank gives collateral-free income generating, housing, student and micro-enterprise loans to the poor families and offers a host of attractive savings, pension funds and insurance products for its members. Since it introduced them in 1984, housing loans have been used to construct 640,000 houses. The legal ownership of these houses belongs to the women themselves. We focused on women because we found giving loans to women always brought more benefits to the family.

In a cumulative way the bank has given out loans totaling about US $6.0 billion. The repayment rate is 99%. Grameen Bank routinely makes profit. Financially, it is self-reliant and has not taken donor money since 1995. Deposits and own resources of Grameen Bank today amount to 143 per cent of all outstanding loans. According to Grameen Bank’s internal survey, 58 per cent of our borrowers have crossed the poverty line.

Grameen Bank was born as a tiny homegrown project run with the help of several of my students, all local girls and boys. Three of these students are still with me in Grameen Bank, after all these years, as its topmost executives. They are here today to receive this honour you give us.

This idea, which began in Jobra, a small village in Bangladesh, has spread around the world and there are now Grameen type programs in almost every country.

Second Generation
It is 30 years now since we began. We keep looking at the children of our borrowers to see what has been the impact of our work on their lives. The women who are our borrowers always gave topmost priority to the children. One of the Sixteen Decisions developed and followed by them was to send children to school. Grameen Bank encouraged them, and before long all the children were going to school. Many of these children made it to the top of their class. We wanted to celebrate that, so we introduced scholarships for talented students. Grameen Bank now gives 30,000 scholarships every year.

Many of the children went on to higher education to become doctors, engineers, college teachers and other professionals. We introduced student loans to make it easy for Grameen students to complete higher education. Now some of them have PhD’s. There are 13,000 students on student loans. Over 7,000 students are now added to this number annually.

We are creating a completely new generation that will be well equipped to take their families way out of the reach of poverty. We want to make a break in the historical continuation of poverty.

Beggars Can Turn to Business
In Bangladesh 80 percent of the poor families have already been reached with microcredit. We are hoping that by 2010, 100 per cent of the poor families will be reached.

Three years ago we started an exclusive programme focusing on the beggars. None of Grameen Bank’s rules apply to them. Loans are interest-free; they can pay whatever amount they wish, whenever they wish. We gave them the idea to carry small merchandise such as snacks, toys or household items, when they went from house to house for begging. The idea worked. There are now 85,000 beggars in the program. About 5,000 of them have already stopped begging completely. Typical loan to a beggar is $12.

We encourage and support every conceivable intervention to help the poor fight out of poverty. We always advocate microcredit in addition to all other interventions, arguing that microcredit makes those interventions work better.

Information Technology for the Poor
Information and communication technology (ICT) is quickly changing the world, creating distanceless, borderless world of instantaneous communications. Increasingly, it is becoming less and less costly. I saw an opportunity for the poor people to change their lives if this technology could be brought to them to meet their needs.

As a first step to bring ICT to the poor we created a mobile phone company, Grameen Phone. We gave loans from Grameen Bank to the poor women to buy mobile phones to sell phone services in the villages. We saw the synergy between microcredit and ICT.

The phone business was a success and became a coveted enterprise for Grameen borrowers. Telephone-ladies quickly learned and innovated the ropes of the telephone business, and it has become the quickest way to get out of poverty and to earn social respectability. Today there are nearly 300,000 telephone ladies providing telephone service in all the villages of Bangladesh . Grameen Phone has more than 10 million subscribers, and is the largest mobile phone company in the country. Although the number of telephone-ladies is only a small fraction of the total number of subscribers, they generate 19 per cent of the revenue of the company. Out of the nine board members who are attending this grand ceremony today 4 are telephone-ladies.

Grameen Phone is a joint-venture company owned by Telenor of Norway and Grameen Telecom of Bangladesh. Telenor owns 62 per cent share of the company, Grameen Telecom owns 38 per cent. Our vision was to ultimately convert this company into a social business by giving majority ownership to the poor women of Grameen Bank. We are working towards that goal. Someday Grameen Phone will become another example of a big enterprise owned by the poor.

Free Market Economy
Capitalism centers on the free market. It is claimed that the freer the market, the better is the result of capitalism in solving the questions of what, how, and for whom. It is also claimed that the individual search for personal gains brings collective optimal result.

I am in favor of strengthening the freedom of the market. At the same time, I am very unhappy about the conceptual restrictions imposed on the players in the market. This originates from the assumption that entrepreneurs are one-dimensional human beings, who are dedicated to one mission in their business lives ? to maximize profit. This interpretation of capitalism insulates the entrepreneurs from all political, emotional, social, spiritual, environmental dimensions of their lives. This was done perhaps as a reasonable simplification, but it stripped away the very essentials of human life.

Human beings are a wonderful creation embodied with limitless human qualities and capabilities. Our theoretical constructs should make room for the blossoming of those qualities, not assume them away.

Many of the world’s problems exist because of this restriction on the players of free-market. The world has not resolved the problem of crushing poverty that half of its population suffers. Healthcare remains out of the reach of the majority of the world population. The country with the richest and freest market fails to provide healthcare for one-fifth of its population.

We have remained so impressed by the success of the free-market that we never dared to express any doubt about our basic assumption. To make it worse, we worked extra hard to transform ourselves, as closely as possible, into the one-dimensional human beings as conceptualized in the theory, to allow smooth functioning of free market mechanism.

By defining “entrepreneur” in a broader way we can change the character of capitalism radically, and solve many of the unresolved social and economic problems within the scope of the free market. Let us suppose an entrepreneur, instead of having a single source of motivation (such as, maximizing profit), now has two sources of motivation, which are mutually exclusive, but equally compelling ? a) maximization of profit and b) doing good to people and the world.

Each type of motivation will lead to a separate kind of business. Let us call the first type of business a profit-maximizing business, and the second type of business as social business.

Social business will be a new kind of business introduced in the market place with the objective of making a difference in the world. Investors in the social business could get back their investment, but will not take any dividend from the company. Profit would be ploughed back into the company to expand its outreach and improve the quality of its product or service. A social business will be a non-loss, non-dividend company.

Once social business is recognized in law, many existing companies will come forward to create social businesses in addition to their foundation activities. Many activists from the non-profit sector will also find this an attractive option. Unlike the non-profit sector where one needs to collect donations to keep activities going, a social business will be self-sustaining and create surplus for expansion since it is a non-loss enterprise. Social business will go into a new type of capital market of its own, to raise capital.

Young people all around the world, particularly in rich countries, will find the concept of social business very appealing since it will give them a challenge to make a difference by using their creative talent. Many young people today feel frustrated because they cannot see any worthy challenge, which excites them, within the present capitalist world. Socialism gave them a dream to fight for. Young people dream about creating a perfect world of their own.

Almost all social and economic problems of the world will be addressed through social businesses. The challenge is to innovate business models and apply them to produce desired social results cost-effectively and efficiently. Healthcare for the poor, financial services for the poor, information technology for the poor, education and training for the poor, marketing for the poor, renewable energy ? these are all exciting areas for social businesses.

Social business is important because it addresses very vital concerns of mankind. It can change the lives of the bottom 60 per cent of world population and help them to get out of poverty.

Grameen’s Social Business
Even profit maximizing companies can be designed as social businesses by giving full or majority ownership to the poor. This constitutes a second type of social business. Grameen Bank falls under this category of social business.

The poor could get the shares of these companies as gifts by donors, or they could buy the shares with their own money. The borrowers with their own money buy Grameen Bank shares, which cannot be transferred to non-borrowers. A committed professional team does the day-to-day running of the bank.

Bilateral and multi-lateral donors could easily create this type of social business. When a donor gives a loan or a grant to build a bridge in the recipient country, it could create a “bridge company” owned by the local poor. A committed management company could be given the responsibility of running the company. Profit of the company will go to the local poor as dividend, and towards building more bridges. Many infrastructure projects, like roads, highways, airports, seaports, utility companies could all be built in this manner.

Grameen has created two social businesses of the first type. One is a yogurt factory, to produce fortified yogurt to bring nutrition to malnourished children, in a joint venture with Danone. It will continue to expand until all malnourished children of Bangladesh are reached with this yogurt. Another is a chain of eye-care hospitals. Each hospital will undertake 10,000 cataract surgeries per year at differentiated prices to the rich and the poor.

Social Stock Market
To connect investors with social businesses, we need to create social stock market where only the shares of social businesses will be traded. An investor will come to this stock-exchange with a clear intention of finding a social business, which has a mission of his liking. Anyone who wants to make money will go to the existing stock-market.

To enable a social stock-exchange to perform properly, we will need to create rating agencies, standardization of terminology, definitions, impact measurement tools, reporting formats, and new financial publications, such as, The Social Wall Street Journal. Business schools will offer courses and business management degrees on social businesses to train young managers how to manage social business enterprises in the most efficient manner, and, most of all, to inspire them to become social business entrepreneurs themselves.

Role of Social Businesses in Globalization

I support globalization and believe it can bring more benefits to the poor than its alternative. But it must be the right kind of globalization. To me, globalization is like a hundred-lane highway criss-crossing the world. If it is a free-for-all highway, its lanes will be taken over by the giant trucks from powerful economies. Bangladeshi rickshaw will be thrown off the highway. In order to have a win-win globalization we must have traffic rules, traffic police, and traffic authority for this global highway. Rule of “strongest takes it all” must be replaced by rules that ensure that the poorest have a place and piece of the action, without being elbowed out by the strong. Globalization must not become financial imperialism.
Powerful multi-national social businesses can be created to retain the benefit of globalization for the poor people and poor countries. Social businesses will either bring ownership to the poor people, or keep the profit within the poor countries, since taking dividends will not be their objective. Direct foreign investment by foreign social businesses will be exciting news for recipient countries. Building strong economies in the poor countries by protecting their national interest from plundering companies will be a major area of interest for the social businesses.

We Create What We Want
We get what we want, or what we don’t refuse. We accept the fact that we will always have poor people around us, and that poverty is part of human destiny. This is precisely why we continue to have poor people around us. If we firmly believe that poverty is unacceptable to us, and that it should not belong to a civilized society, we would have built appropriate institutions and policies to create a poverty-free world.

We wanted to go to the moon, so we went there. We achieve what we want to achieve. If we are not achieving something, it is because we have not put our minds to it. We create what we want.

What we want and how we get to it depends on our mindsets. It is extremely difficult to change mindsets once they are formed. We create the world in accordance with our mindset. We need to invent ways to change our perspective continually and reconfigure our mindset quickly as new knowledge emerges. We can reconfigure our world if we can reconfigure our mindset.

We Can Put Poverty in the Museums

I believe that we can create a poverty-free world because poverty is not created by poor people. It has been created and sustained by the economic and social system that we have designed for ourselves; the institutions and concepts that make up that system; the policies that we pursue.

Poverty is created because we built our theoretical framework on assumptions which under-estimates human capacity, by designing concepts, which are too narrow (such as concept of business, credit- worthiness, entrepreneurship, employment) or developing institutions, which remain half-done (such as financial institutions, where poor are left out). Poverty is caused by the failure at the conceptual level, rather than any lack of capability on the part of people.

I firmly believe that we can create a poverty-free world if we collectively believe in it. In a poverty-free world, the only place you would be able to see poverty is in the poverty museums. When school children take a tour of the poverty museums, they would be horrified to see the misery and indignity that some human beings had to go through. They would blame their forefathers for tolerating this inhuman condition, which existed for so long, for so many people.

A human being is born into this world fully equipped not only to take care of him or herself, but also to contribute to enlarging the well being of the world as a whole. Some get the chance to explore their potential to some degree, but many others never get any opportunity, during their lifetime, to unwrap the wonderful gift they were born with. They die unexplored and the world remains deprived of their creativity, and their contribution.

Grameen has given me an unshakeable faith in the creativity of human beings. This has led me to believe that human beings are not born to suffer the misery of hunger and poverty.

To me poor people are like bonsai trees. When you plant the best seed of the tallest tree in a flower-pot, you get a replica of the tallest tree, only inches tall. There is nothing wrong with the seed you planted, only the soil-base that is too inadequate. Poor people are bonsai people. There is nothing wrong in their seeds. Simply, society never gave them the base to grow on. All it needs to get the poor people out of poverty for us to create an enabling environment for them. Once the poor can unleash their energy and creativity, poverty will disappear very quickly.

Let us join hands to give every human being a fair chance to unleash their energy and creativity.

Ladies and Gentlemen,

Let me conclude by expressing my deep gratitude to the Norwegian Nobel Committee for recognizing that poor people, and especially poor women, have both the potential and the right to live a decent life, and that microcredit helps to unleash that potential.

I believe this honor that you give us will inspire many more bold initiatives around the world to make a historical breakthrough in ending global poverty.

Thank you very much.