"We can create a poverty-free world"

Professor Muhammad Yunus with Grameen Bank
loan holders, mostly women.

Here's an extract from the Nobel Lecture delivered in Oslo on 10 December 2006 by Muhammad Yunus, recipient of the Nobel Peace Prize for 2006.

The full text of the lecture is available here.

The video version is available here. Professor Yunus starts his Nobel Lecture with a few words in Bangla.


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.

Photo: © Grameen Bank Audio Visual Unit, 2006.

Microcredit, Macro Problems

by Walden Bello

The awarding of the Nobel Peace Prize to Muhammad Yunus, regarded as the father of microcredit, comes at a time when microcredit has become something like a religion to many of the powerful, rich and famous. Hillary Clinton regularly speaks about going to Bangladesh, Yunus's homeland, and being "inspired by the power of these loans to enable even the poorest of women to start businesses, lifting their families - and their communities - out of poverty."

Like the liberal Clinton, the neocon Paul Wolfowitz, now president of the World Bank, has also gotten religion, after a recent trip to the Indian state of Andhra Pradesh. With the fervor of the convert, he talks about the "transforming power" of microfinance: "I thought maybe this was just one successful project in one village, but then I went to the next village and it was the same story. That evening, I met with more than a hundred women leaders from self-help groups, and I realized this program was opening opportunities for poor women and their families in an entire state of 75 million people."

There is no doubt that Yunus, a Bangladeshi economist, came up with a winning idea that has transformed the lives of many millions of poor women, and perhaps for that alone, he deserves the Nobel Prize. But Yunus - at least the young Yunus, who did not have the support of global institutions when he started out - did not see his Grameen Bank as a panacea. Others, like the World Bank and the United Nations, elevated it to that status (and, some say, convinced Yunus it was a panacea), and microcredit is now presented as a relatively painless approach to development. Through its dynamics of collective responsibility for repayment by a group of women borrowers, microcredit has indeed allowed many poor women to roll back pervasive poverty. However, it is mainly the moderately poor rather than the very poor who benefit, and not very many can claim they have permanently left the instability of poverty.

Likewise, not many would claim that the degree of self- sufficiency and the ability to send children to school afforded by microcredit are indicators of their graduating to middle-class prosperity. As economic journalist Gina Neff notes, "after 8 years of borrowing, 55% of Grameen households still aren't able to meet their basic nutritional needs - so many women are using their loans to buy food rather than invest in business."

Indeed, one of those who have thoroughly studied the phenomenon, Thomas Dichter, says that the idea that microfinance allows its recipients to graduate from poverty to entrepreneurship is inflated. He sketches out the dynamics of microcredit: "It emerges that the clients with the most experience got started using their own resources, and though they have not progressed very far - they cannot because the market is just too limited - they have enough turnover to keep buying and selling, and probably would have with or without the microcredit. For them the loans are often diverted to consumption since they can use the relatively large lump sum of the loan, a luxury they do not come by in their daily turnover." He concludes: "Definitely, microcredit has not done what the majority of microcredit enthusiasts claim it can do - function as capital aimed at increasing the returns to a business activity."

And so the great microcredit paradox that, as Dichter puts it, "the poorest people can do little productive with the credit, and the ones who can do the most with it are those who don't really need microcredit, but larger amounts with different (often longer) credit terms."

In other words, microcredit is a great tool as a survival strategy, but it is not the key to development, which involves not only massive capital-intensive, state-directed investments to build industries but also an assault on the structures of inequality such as concentrated land ownership that systematically deprive the poor of resources to escape poverty. Microcredit schemes end up coexisting with these entrenched structures, serving as a safety net for people excluded and marginalized by them, but not transforming them. No, Paul Wolfowitz, microcredit is not the key to ending poverty among the 75 million people in Andhra Pradesh. Dream on.

Perhaps one of the reasons there is such enthusiasm for microcredit in establishment circles these days is that it is a market-based mechanism that has enjoyed some success where other market-based programs have crashed. Structural-adjustment programs promoting trade liberalization, deregulation and privatization have brought greater poverty and inequality to most parts of the developing world over the last quarter century, and have made economic stagnation a permanent condition. Many of the same institutions that pushed and are continuing to push these failed macro programs (sometimes under new labels like "Poverty Reduction Strategy Papers"), like the World Bank, are often the same institutions pushing microcredit programs. Viewed broadly, microcredit can be seen as the safety net for millions of people destabilized by the large-scale macro- failures engendered by structural adjustment.

There have been gains in poverty reduction in a few places - like China, where, contrary to the myth, state-directed macro policies, not microcredit, have been central to lifting an estimated 120 million Chinese from poverty.

So probably the best way we can honor Muhammad Yunus is to say, Yes, he deserves the Nobel Prize for helping so many women cope with poverty. His boosters discredit this great honor and engage in hyperbole when they claim he has invented a new compassionate form of capitalism - social capitalism or "social entrepreneurship" - that will be the magic bullet to end poverty and promote development.

The author is professor of sociology and public administration at the University of the Philippines and executive director of Focus on the Global South.

Nobel Peace Prize 2006

Amidst all the hype and hoopla over the Nobel Peace Prize for 2006, I came across the following piece by Taj Hashmi from Canada.


This award proves again the Goebbels-ian dictum that a lie uttered a thousand times becomes more credible than truth. This Nobel Peace Prize for Yunus and his bank, on a "Friday the 13th", is a slap in the face of those who have been trying to bring the Third World out of the strangling grip of the global hegemons -- the IMF, World Bank and others -- who hate to see the Third World slipping out of their grip to become self-reliant with good accountable governments, rule of law and respect for human rights.

The NGO business is the biggest business in the Third World. The IMF and World Bank, and most multi-nationals do not want too many Chinas, Taiwans, Malaysias, Thailand, Venezuelas, or even Singapores and South Koreas. They love countries like Bangladesh, Philippines, Egypt, Indonesia and Pakistan, who either buy arms, technology and expertise from the West, or do not build industrial infrastructure and good governance. There is NO substitute for good (honest and efficient) and accountable government. Why did the Asian dragons and tigers not adopt NGOs and microcredit for development - is the billion dollar question.

Having written this, I am happy for Bangladesh; this Nobel Prize (given for the wrong reason though) will bring a good name for the country, which is unfortunately only known for its poverty and corruption.

I pose the following questions to those who unnecessarily glorify Dr Yunus and his bank:

Do you know in most cases it is the husband / father/elder brother who controls the Grameen loan taken in the name of his wife/daughter/sister? Do you know the bank charges around 30% interest? Do you know that Grameen borrowers lend the borrowed money at 80% to 100% interest to fellow villagers? Do you know any other business where someone can still make a living by borrowing at 30% interest rate? Do you know in some villages (especially in Sylhet) men take three/four wives to get Grameen loan to run their lucrative money-lending business? Do you know that the poorest of the poor (as touted by Yunus, Clinton and others) are not eligible for Grameen loan as they cannot repay their loans in 52 instalments at 30% interest? Do you know that only middle peasants (with some lands or assets) are eligible for the credit?

Had there been such business, one would have borrowed thousands of dollars through credit cards to become rich overnight. I would like to recommend for the Nobel Peace Prize (why not the Economics prize?!) for all the credit card companies, as they charge around 18 -20% and nothing happens to the defaulters. There are many people in the lower income group who somehow survive through credit cards, by borrowing and paying off the debts. And we have no reason to celebrate the performance of Amex, Visa or Master Card for their "noble and humane" acts of "empowering the poor through credit". It is a "shame" that credit card companies who charge less than 20% interest on average are never considered for any prize anywhere in the world!

While Grameen defaulters have to part with their ornaments, tin sheds, goats or cattle or even utensils, many credit card defaulters simply get away with by paying nothing. After staying four or five years in the state of bankruptcy, they again become credit-worthy. All these assertions by me are buttressed by hard evidence from my field work and personal experience in Bangladesh.

Why do you think Monsanto, the giant US corporation, engaged in marketing genetically modified seeds (disastrous in the long run as farmers will have to buy the seeds before every sowing season), is a big promoter of microcredit? Why does Grameen Bank pay NO income tax to Bangladesh? Why did Grameen Phone ( a joint Bangladesh-Norway cell phone company) pay no income tax till this year? This is the largest cellphone company in Bangladesh, charging for local incoming calls as well. Is there a link between this award and Grameen Phone's (Dr Yunus's cellphone company) partnership with the Norweigian telephone company, Nortel? Do you know that Nortel has been siphoning off millions of dollars to Norway without paying any income tax to Bangladesh? And all this money laundering is done in the name of charity?

What a shame, what a disgrace!

Instead of jointly robbing Bangladesh through this Shylockian project of mega lending to rip off the poor in Bangladesh, in collaboration with the Grameen Bank, had the donor agencies (the real vultures in the production-growth-development arena) been really sincere in developing poor countries like Bangladesh, they would have helped to modernize the Bangladesh government run tele-communication system. But then Nortel, for obvious reasons, found it convenient to invest in the Grameen cellphone company in Bangladesh. And sadly, this happened through the active collaboration of Dr Muhammad Yunus.

Why did Dr Yunus try to introduce Monsanto seeds in Bangladesh? And finally he had to scrap this project due to opposition.

If micro-credit could alleviate poverty, why on earth do hundreds of thousands of Bangladeshis go to Dubai, Saudi Arabia, Kuwait or Singapore, borrowing hundreds of thousands of takas (two hundred thousand per head, on average) to work in menial jobs? If borrowing fifty or sixty dollars could alleviate poverty, why are they doing this? Are they stupid?


To read the discussion on Dr Yunus and Grameen Bank winning the Nobel Peace Prize 2006 go here, here and here.

Using the poor ...

I had been thinking about the irony of a Muslim from a Muslim country being awarded the peace prize for a scheme to give loans to the poor at high rates of interest.

As a socio-economist, I am entirely in favour of the Islamic stricture against interest. I see this as socially revolutionary. In essence, this means that the lender of capital becomes a risk-taking entrepreneur, earning profits. In practice, in a poverty context, it would mean genuinely socialising the economy, through bringing capital flow into pro-poor concerns.

But something like this is yet to happen.

I know there are associations, journals, and institutes devoted to Islamic banking. Recently I learnt about such an institute in Malaysia. I would be glad to read critiques of the "microcredit revolution" from such quarters.

Regarding microcredit, I am disturbed that this has become a high interest-profit earning means for banks, and there's a rush of companies to enter this fray. This has also become a means for middle-class individuals to gain well-paying jobs in NGOs. So if there's any benefit to the poor, that has to be weighed in absolute and relative terms against the real benefits to the non-poor.

Even within the microcredit framework, the potential that exists to empower and enrich the poor, through making them the real stakeholders in the profits of the operation - is never pursued. Rather they are purely instrumental, in enabling the benefits for the non-poor. At root, there needs to be a commitment to allying unequivocally with the poor, and empowering and enriching them. When that is lacking, then a means like the microcredit scheme initiated by Grameen Bank to reach credit to the poor gets taken over for other non-poor goals.

Banks and NGOs are the ones most blessed by this award.

Nevertheless, for what its worth, despite the reality behind the media hype, this Nobel peace award in the name of poverty, the attention on Bangladesh (and consequently, I hope, on its real human development achievements relative to India, and especially the state of West Bengal, Bangladesh's neighbour) - are of some positive worth.