Nobel Peace Prize winner Muhammad Yunus founded the Grameen Bank, a not-for-profit bank lending to the very poor.
Muhammud Yunus has done something revolutionary. He has founded a non-profit bank that lends only to the poor, many with terrible credit histories, without collateral at absurdly low interest rates. Not only that, the nation he chose to begin this venture is one of the most poverty-stricken countries in the world – Bangladesh.
Despite predictions of utter failure, the bank now has loans of over $6 billion, with an almost 99 percent repayment rate.
His creation, the Grameen Bank, has broken fresh ground in the money-hungry world of capitalism. In addition, it is helping millions in Bangladesh break the chains of abject poverty.
Yunnus, winner of the Nobel Peace Prize, described the evolution of the Grameen Bank January 14, 2008, to a crowd of several thousand in The Woodlands, Texas. He said he envisions a world where the only remnants of poverty would be in museums, and that every human being on the planet lived in relative comfort.
To Yunus, it’s not a dream. The concept of the Grameen Bank can be applied worldwide and can be successful.
Offering Micro-Credit to The Poor
First, the bank specializes in “micro-credit,” lending small amounts (sometimes as little as $15) to the poor. It sets up centers in villages and peer systems within those centers to encourage and help the members pay back their loans on easy terms with low interest rates.
Any interest accrued at the bank does not go to investors. Instead, the bank plows it back for more loans or for other projects. Some of these projects include a yoghurt factory (in cooperation with the Danon company) to provide extremely low-cost, highly nutritious yoghurt to children in Bangladesh.
Yunus found that families who had pulled themselves out of abject poverty through the efforts of Grameen Bank and their own industriousness tended to send their children to high school and college. Thus the bank introduced low-interest student loans, to cover entire college expenses of these students.
Housing loans, business loans and a variety of other lending outlets soon found function at Grameen Bank.
Grameen Bank "Social Capitalism"
Yunus explains that the Grameen Bank is not a charitable organization. Instead, he describes it as a “social business.”
The bank is owned by those who borrow from the bank.
Interestingly, Yunus points out that the Grameen principles can even be used in developed nations. He notes the high level of people in the U.S. who do not have health care insurance. The same principles could be used to provide these people with adequate medical insurance coverage.
The same goes for the usurious practice of payday loans, in which companies exploit people by charging 50 -70% and more.
Yunus believes that “social capitalism” could bring a new hope and a new way of living for a world beset with widening chasms between poverty and wealth, and provide a way for the poor to develop their own resources to become independent of charitable programs and state subsidies.
