Small Incomes, Big Economies

Introduction
Dr. Muhammad Yunus has once said: “One day our grandchildren will have to go to museums to see what poverty was like”. At first, such a statement seems improbable and absurdly optimistic, but Yunus can indeed back his claim with real life evidence collected from years of working with the poor villagers. Born in the small, rural town of Chittagong, Bangladesh, he witnessed the struggle of the poor firsthand. Later in his life, his readiness to trust people, selflessness, and strong leadership definitely made him a hero to people in Bangladesh and to the world’s poor eventually. In addition, Yunus was a champion of change, a man of great vision, and a role model to countless other people—including me. Dr. Muhammad Yunus remained defiant and persistent to his beliefs, that even the poorest deserved an equal opportunity to lead a successful life. Thus, Yunus insisted that loans should be extended to everyone and poor villagers deserved to be considered potential customers even they have no collateral. However, bank managers doubted the ability of the poor to save, work together, and start businesses since banks considered to be anti-poor. Undeterred, Yunus started his own bank, which he named Grameen—meaning ‘poor villagers’. Since its founding in 1983, Grameen Bank has improved the lives of millions of villagers. For instance, Sufia is one such villager. After the death of her husband and a lack of land and money thrust Sufia into the vicious cycle of poverty, reducing her to begging in order to feed her two children. Fortunately, one day she noticed other women in her village, Jobra, applying for loans from a new bank ‘Grameen’. Bank representatives who came weekly to visit the village explained that The bank specifically targeted poor, landless women—people who society typically viewed as “useless.” Instead of depositing collateral, Sufia learned, borrowers formed small groups of five members. At first, only two people received loans, but the other members became eligible once the first two had repaid. Mustering her courage and dispersing her hesitation, Sufia joined a group and soon received her first loan of 25 taka—less than $2! With it, she bought some bangles, soap, and hairpins to sell around the village. Once she paid off the first loan, she applied for a second one, and she now manages a profitable business. While before, her only desire was to have enough to eat, she now dreams of sending her grandson to school. Yunus’s great faith in the poor and immense fervent style provided villagers like Sufia with not only loans but also with self-reliance, dignity, and hope. Through his acts of trust, his work was recognized internationally later on in his career winning the Nobel Peace Prize in 2006. The poor villagers of Bangladesh endured great amount of suffering, and in order to alleviate the situation, Muhammad Yunus managed selflessly to devote his time and money for others’ benefit rather than his own. For instance, a terrible famine struck the country in 1974 that took approximately a million lives. Though he tried to ignore it in the beginning, it became impossible to look away as the famine intensified. Accordingly, “Skeleton-like people” started showing up in the capital, Dhaka. Then the “trickle” turned to a “flood.” Meanwhile, Yunus was teaching complex economic theories to his students at Chittagong University. However, he recognized an ironic disparity between the theories and the real-life economics of a poor person’s existence. Then, shortly afterwards, Yunus learned of women selling beautiful bamboo baskets but earning only two cents a day because of local moneylenders’ high rates. Yunus immediately gave them (42 women) the money ($27) they needed out of his own pocket. Out of this event, Yunus formed the idea of microcredit and also embarked on a new career as activist for the poor, a career that spans three decades so far and one that he is still pursuing. While another person in his situation could have easily chosen to remain in the secure position of university professor, or even stay in America where he received his PhD in economics, this noble man forsook the prestigious title in order to aid those living in poverty.
A capable and effective leader of change, Muhammad Yunus combated poverty with new, unconventional programs now used in countries all over the world. Microcredit, the most famous of his plans, began in response to the ridiculously high interest rates: as much as 120% annually! Practical and self-sustainable, microcredit serves the poor in over twenty countries—in Africa, Asia, Europe, and including the United States. Without such an innovative and empowering leadership on Yunus’s part, though, none of this would have occurred, and some six million people would still be living at or below the poverty level. Muhammad Yunus proved that inspiring people is not just about selfish achievements. But instead, he succeeded to make the poor feel part of the plan and without them this whole thing will be impossible. This is indeed a thoughtful, creative leadership that led to extraordinary results.
While Yunus’s vision of complete poverty eradication will not be easily reached, Yunus certainly has the capability to accomplish such a goal. He already defied the skeptics once, with his unbending faith in the poor; he can do it again. For instance, his opponents have learned the importance of being a pioneer, an innovator, a leader and—even more importantly—using that talent to help others. Furthermore, they recognized the significant impact of treating all people, even those not typically favored by society, with trust and respect. Through his commitment to the cause of decreasing poverty, Yunus brought about a wave of permanent social change. He showed the world that true heroes are not the superhuman kind but are ordinary people who care—and very few cared more than Muhammad Yunus.
Leadership
Dr. Yunus has adapted a humanitarian portrait to his leadership style that emphasized mainly on empowering poor villagers and especially women. His unique approach to fully win his followers by raising their awareness to their current miserable situation, hence, alerting them to reconsider their options in life with much focus on their self-worth and usefulness. If anyone could exemplify the meaning of a true vision and leadership inspiration, Dr. Yunus personifies a true leader in terms of inspiring his followers and the rest of us. Also, in terms of coping with adversity while leading and emphasizing change to lift up people out of poverty. As an economics professor, he managed to apply his vast knowledge to help people survive Bangladesh’s brutal famine. He worked restlessly and continuously to convey his strong clear vision that people shouldn’t die from starvation. Yunus believed that the poor deserved a fair share in society despite the devastating period Bangladesh was going through at that time, after its independence from Pakistan that shattered the entire structure of the nation, and there was no room for sympathy especially towards the poor who were entirely overwhelmed. Historically, Bangladesh is one of the poorest countries in the world. The country has received more than thirty billion dollars in foreign aid since its independence, but it has not succeeded to overcome the barrier of structural poverty until Dr. Yunus implemented his ingenious project of the Bank of the Poor. Moreover, post-war reforms become priority number one for any nation and it’s a much complicated task for third world countries such as Bangladesh. The focus is directed towards infrastructure, hospitals, and schools mainly. However, when everyone seemed terrified, petrified, and even stupefied by the overwhelming chaotic state of Bangladesh, one man stood against all the odds and defied all the skeptics when he shifted his focus and the entire nation’s attention to socio-economic reform. Fortunately, his consciousness was his dark shadow that triggered a sense of responsibility vis-à-vis his fellow countrymen, which sparked so many lives eventually. Therefore, he first initiated the idea of ‘Change is a Must’. Then he constructed a clear vision with his group of students and colleagues to help his people to overcome poverty by all means. His vision consisted of a careful plan to fight poverty by thorough program based on social consciousness. In a sense, Yunus was against the idea of charity since he believed that short-term solutions are not the answer to poverty. According to Dr. Yunus, “Poverty is a chronic illness. It cannot be cured with ad hoc measures. There can be short term support measures, but one has to count on a long term strategy that achieves tactical gains for whom “hand-outs” and “charity” are actions that have destructive effects”.
Therefore, his leadership encouraged his followers to be committed to his cause through the credit system incentives. He embedded a sense of reliability and trust within the groups he formed for loan acquisitions. Borrowers felt needed and Yunus made sure that without them helping and being part of this journey, this idea or project will be impossible. Hence, villagers became motivated and they start seeing a bright future for their children through Dr. Yunus honest and candid leadership. He made sure that the transition from change avoidance to change acceptance by villagers was done attentively to gain trust and support. Accordingly, there are five major steps accompanying change:
· Denial: villagers could not foresee or picture any major changes to their current financial crisis, and thus they refused to engage in change.
· Anger: villagers were frustrated especially women who saw Yunus as any other moneylender or as their abusive husbands. Yunus and his team were violently attacked and disrespected at times.
· Bargaining: the poor village women engaged in negotiations with their husbands to convince them to allow them to borrow money and be part of Grameen bank to keep everyone happy.
· Depression: once villagers realized that it worth a try to be part of Grameen, they start hearing rumors about how anti-Islam is the whole concept, and hence, they became skeptical and depressed.
· Acceptance: the reality and the truth were revealed after first borrowers spread the word about how secure and reliable is Grameen’s loan.
Dr. Yunus illustrates throughout his experience a set of splendid leadership approaches that I have learned in ‘Leading Change’ course such as, the challenges of change, empowerment, and leading change precisely. With this being said, one can clearly see a socio-economical entrepreneurial leadership that has been developed by Dr. Yunus in the context of empowering villagers and others through his innovative methodology of credit system ‘microfinance’. Accordingly, microfinance or micro-lending is simply the extension of small loans to the poor and the ability to lend money to poor entrepreneurs and people who are considered unbankable. Yunus believed that economies are founded on the well being of women as family caretakers, as all will suffer if they remain in continued poverty or effective enslavement via exploitation. He considers women as privileged actors in development and criticizes the sexism in the banking systems of Bangladesh where they ask women if they have consulted their husbands about the decision to take out a loan. Basically, Yunus defends his firm stand on women by arguing that the cultural norms are against the female gender, and he believes that poor women adapt better and faster to the process of self-help than men do. For instance, money earned through women brought more benefit to the household than money earned through men. Hence, Yunus proved that women demonstrate better perseverance, efficiency, and are more attentive in their work. He is regarded as a business leader who implemented organizational socialization in rural Bangladesh by the use of personality traits such as adaptability, resilience, willingness to take risks, as well as habits that reflect a need for achievement such as continuous learning, egocentric desire for achievement, and the ability to regulate internal and expressed emotions.
Grameen Bank
The functioning of the Bank of the Poor is based on a simple system that guarantees the repayment of the loans. The level of trust in the clients is clear and there is no policing mechanism included in the system. The bank representatives meet with clients at their respective villagers where all the banking transactions are done. Essentially, this approach was encouraged by Dr. Yunus he sensed a state of panic and intimidation if the poor were to go to banks and wait in lines to fill out forms that they cannot since they were illiterate. The Grameen Bank never turns to justice to recover money. In this sense, a commitment is based on the relations between human beings not among papers; therefore, no legal contract is signed between the bank and its clients and most of the clients are shareholders of Grameen.
Dr. Yunus argues that the traditional conventional banking system was institutionally constructed on the basis of mutual distrust. In contrary, Grameen presumed that every borrower is honest and worthy of bank privileges. Many times Grameen has been accused of being naïve, but this trust has had a positive effect in ninety-nine percent of the cases. Yunus explains: “The bad payers represent barely few percents of our clients. In these situations, Grameen does not conclude that the borrower is dishonest. We think rather that their situation is so difficult that they could not repay the small loan. In these conditions, why run to the lawyers that will give us blue, yellow, and pink papers. Only 0.5% of loans are not repaid. This is a risk inherent to our job and in addition, it creates a record of what we need to improve upon in order to have more success.”
The repayment system was designed as follows:
· Loans of duration of one year.
· Weekly payments of a fixed amount.
· Repayment is effective one week after the loan’s concession.
· The interest rate is 20%.
· The repayment is a weekly 2% over 50 weeks.
· The interest represents the sum of 2 takas per week for a loan of 1,000 takas.
Some of the secrets and results of Grameen Bank:
· Group interaction that allows for the regeneration of credit.
· Groups that act morally in solidarity in that they guard profits so others may receive credit.
· The quantity of funds lent is small; it is an amount that allows the borrower to buy the basic materials for a day of work.
· More than 96% of the loans are repaid quickly and therefore makes use of the system of transfer day by day.
· In the system of micro-credits envisioned by Muhammad Yunus, 94% of the beneficiaries are women.
Conclusion
In my eyes, Dr. Yunus is a possibilitarian because no matter how dark things seemed to be he always found a way to make things better and inspire people around him to do so as well. He even left it all behind when he was enjoying his life in the United States and decided to go back to Bangladesh and be part of the change, if not the main source of change. Mainly, he felt a patriotic sense of urgency to return and make things possible and easier for his fellow countrymen by helping them out to overcome poverty and live a descent life. Thus, he invented his special credit system and started lending small amounts of money to farmers and the very poor people (he even defined poor and poorest under his own terms) who were waiting to die starving any minute simply because they couldn’t earn a living. The book ‘Banker to the Poor’ goes on and on about how he succeeded on his plan and made his vision come true. In essence, Dr. Yunus defied the conventional banks policies and regulations and proved that impossible is possible with his outstanding success implementing the concept of microfinance. Today, this concept is used all over the world and had secured the lives of millions of families. Grameen has caught the attention of the biggest prosperous financial institutions and partnered with eventually. Also, this concept is being taught in economics in universities as well.
Yunus is people’s hero and his leadership style and natural ability to charismatically influence his followers have created a new inspiration for our generation and the ones to come. He is indeed a true real champion of change and a great role model to the human race.
Last, Dr. Muhammad Yunus was awarded the Nobel Peace Prize for his efforts to create and develop economic and social reform within below. And he has written several books on world poverty eradication and micro-lending as well as he is chief advisor at the United Nations.

Yours Truly,
Nouaman Khaimi