Muhammad Yunus is a banker and economist, best known for his work in developing the concept of microcredit, and extending it to the poor in Bangladesh. After receiving his Ph and teaching in the US, he worked at the Bureau of Economics as a research assistant, and ran the Bangladesh Information Center during the Liberation War of Bangladesh. After the war, he returned to Bangladesh, was appointed to the government’s Planning Commission, and later became Professor of Economics at Chittagong University, where he first started to apply microcredit, the extension of small loans, to workers and entrepreneurs too poor to qualify for a bank loan. He founded the Grameen Bank and Grameen Foundation to further this concept, and was later awarded the Nobel Peace Prize for his work in alleviating poverty in small Bangladeshi villages. He has also served on the board of directors of the United Nations Foundation, is a founding member of Global Elders, and is a member of the Africa Progress Panel.
Yunus first became involved with poverty reduction after observing the famine of 1974, and established a rural economic program as a research project, a scheme that was adopted by the government.
In 1976, during visits to the poorest areas near Chittagong University, he realized that very small loans could make a disproportionate difference to alleviating poverty.
He started making micro-loans to women in a nearby village who were making bamboo furniture, but had to take out expensive loans to buy the bamboo, and then pay the profit back to the moneylenders.
His first loan was US$27 to 42 women in the village. He soon realized it would be necessary to create an institution which specialized in giving credit to poor people if the project was to develop.
In 1976, he secured a loan from the government’s Janata Bank, specifically for offering loans to the poor. By 1983, the bank had 28,000 customers, and the pilot project grew into a fully-fledged bank, renamed the Grameen Bank.
The microcredit revolution continued to develop and, by 2007, the Grameen Bank had issued over US$6 billion to 7.4 million borrowers.
Yunus encountered resistance to his scheme, from politicians, clergy, and some of the men in the villages.
The conventional banking system had been reluctant to give credit to people with no collateral to guarantee a loan.
His concept of microcredit was based on the belief that poor people will repay loans if they are given the opportunity to commercialize their ideas, making microcredit a viable business model.
To ensure repayment, the bank uses a system of small informal groups which apply together for loans, and its members act as co-guarantors of repayment and support one another’s efforts.
Many microcredit projects lend specifically to women—more than 94% of Grameen loans have gone to women, who suffer disproportionately from poverty, and who are more likely than men to give their earnings to their families.
The concept has also been applied in industrialized nations, including the US, where Yunus has helped introduce microcredit schemes to some of the poorer communities in Arkansas, working with Bill and Hillary Clinton.
“Poor people are not asking for charity. Charity is not a solution for poverty.”Muhammad Yunus
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