The 2006 Nobel Peace Prize conferred on Bangladeshi economist Mohammad Yunus and the Grameen Bank he founded is indeed an acknowledgement of his supreme achievement of lifting millions out of poverty. The way he worked to do this is no less than almost a miracle and a breakthrough of the highest order in the banking practices.
Conventional theory and wisdom told us about the working of an economic system and the functioning of the banks within the system in a particular fashion, but his training as an economist did not limit his thinking faculties. The beauty of his mission and style of working was that he used the familiar tool of banking for a cause which was altogether different and supremely worthy.
Like an armchair intellectual, he did not lecture or write books to earn money but ventured into the practical world and dirtied his hands to achieve his mission in a particular way to prove that poverty could be really reduced if one is fired with the mission to do it. Fortunately, the Nobel Peace Prize winner is still with us with the promise of making poverty history. Born in 1940 in Chittagong, Yunus was the son of a goldsmith, one of 14 children, five of whom died at birth.
As a young Economics Professor at the University after completing his higher education in the US, he had a date with destiny when a devastating famine swept through Bangladesh in 1974. "While people were dying of hunger on the streets, I was teaching elegant theories of Economics", he told a journalist in a somber manner and took the plunge in 1976 when he lent the equivalent of 27 dollars to women in a village near his home.
These women were in hock to money lenders charging extortionate rates and Yunus's persuasion failed to convince the local bank manager to offer them regular credit because it was not possible without a guarantee. Yunus set out to prove the established system wrong and has never looked back since then. By now, Grameen Bank has made over 5.7 billion dollars in tiny loans to poor Bangladeshis, providing a lifeline for millions and a banking model that has been copied in more than 100 nations from the United States to Uganda. The Bank now disburses tens of millions of dollars a month to numerous borrowers, of which 96 percent are women.
The most distinguishing feature is that Grameen Bank recovers nearly 99 percent of its loans even though borrowers are not required to put up any collateral and have to pay a 20 percent interest rate on income generating loans, which are always for one year.
Yunus's philosophy is to help the poor to help themselves: give a man a fish and you feed him for a day but by teaching him how to fish you feed him for life. Our world, according to his model, would be a more peaceful place when there is less poverty and hunger.
Yunus's work, without a shadow of doubt, has shattered some of the popular myths about banking. Contrary to the common belief in the banking industry, the poor and particularly women could be a better credit risk. The banks do not have to rely upon collateral as the only way to recover their loans. The knowledge of borrowers' needs, staying close to them, and helping them out when the conditions turn adverse are the critical factors for ensuring recovery. Litigation and chasing the borrowers in courts could be counter-productive.
A question is often asked if Pakistan can replicate the experience of Grameen Bank with success. The short answer is "no chance". The country is a graveyard of schemes like Yellow Cabs, YIPs, Green Tractors and various kinds of co-operatives. The present government is still trying to reduce poverty and overcome unemployment through this seemingly good looking method but without any worthwhile impact. Reasons for lack of success are not far to seek.
Sitting mostly in air-conditioned offices, officers disburse the loans on political grounds or by taking a cut while the borrowers have usually no intention to pay back the loans right from the very beginning. A complete change in philosophy and a thorough overhaul are needed to reach somewhere near the success level achieved by Grameen Bank.
Alternatively, the country has to produce another Yunus but, unfortunately, the ground appears to be infertile and living legends like him are not born very often. At best, we can hope for his career and character to serve as a source of inspiration for our younger generation.