Muhammad Yunus was born in 1940 to a Muslim family in Chittagong, which is now in Bangladesh but was then the Bengal Province of British India. While he was studying Chittagong College, he became active in cultural activities and won awards for drama acting. By 1960 he’d completed a BA and MA in economics at Dhaka University, going on to become a lecturer in economics at Chittagong College in 1961. During that time he also set up a profitable packaging factory on the side.
Little did he know at that time, (nor did the rest of the world), that the potent combination of his knowledge, background and entrepreneurialism would change the world. But it did…
Across the seas and back
Muhammad was awarded a Fulbright scholarship in 1965 to study in the United States. He obtained his Ph.D. in economics in 1971 and became an assistant professor of economics at Middle Tennessee State University.
During the 1971 Bangladeshi Liberation War, Yunus founded a citizen’s committee and co-ran the Bangladesh Information Center with other Bangladeshis living in the US, to raise support for liberation. He also published the Bangladesh Newsletter from his Nashville home. Yunus returned to Bangladesh after the war and was appointed to the government’s Planning Commission but got bored and joined Chittagong University as head of the Economics department.
Microcredit: Loans for the Poor
In 1976, Muhammad visited the poorest households in the village of Jobra near Chittagong University, and discovered that very small loans could make a disproportionate difference to a poor person. Jobra women who made bamboo furniture had to take out high interest loans for buying bamboo, and then repay their profits to the moneylenders. His first loan of USD 27.00 from his own pocket, was made to 42 women in the village, who made a net profit of BDT 0.50 (USD 0.02) each on the loan.
The original concept of providing credit to the poor as a tool of poverty reduction belongs to Dr. Akhtar Hameed Khan, founder of the Pakistan Academy for Rural Development (now The Bangladesh Academy for Rural Development). Yunus, an admirer of Dr. Hameed took it one step further when saw what was happening in Jobra and decided an institution needed creating to lend to those who had nothing.
Traditional banks didn’t believe in granting tiny loans at reasonable interest rates to the poor – they insisted it carried high repayment risks but Yunus believed that given the chance the poor would repay the loans, making microcredit could be a viable business model.
He was right.
In 1976, he finally secured a loan from the Janata Bank to lend to the poor in Jobra. The institution continued to operate by securing loans from other banks for its projects. By 1982, the bank had 28,000 members. In October 1983 the pilot project began operations as a full-fledged bank and was renamed the Grameen Bank (Village Bank) to make loans to poor Bangladeshis.
The Grameen Bank
By July 2007, Grameen Bank had loaned US$ 6.38 billion to 7.4 million borrowers. To ensure repayment, the bank uses a system of “solidarity groups” who apply for credit together. Group members act as co-guarantors on repayments and support each another’s efforts at economic self-advancement.
The Grameen Bank started to diversify in the late 1980s and today the Grameen initiative is a multi-faceted group of profitable and non-profit ventures, including major projects the Grameen Fund, which encompasses Grameen Software Limited, Grameen CyberNet Limited, and Grameen Telecom, which has a stake in Grameenphone (GP), the largest private sector phone company in Bangladesh. One GP project, The Village Phone (Polli Phone) has brought cell-phones to 260,000 rural poor in over 50,000 villages since March 1997.
The success of the Grameen model of microfinancing has inspired similar initiatives in over 100 countries throughout the developing world and even in industrialized nations such as the USA.
Many microcredit projects lend specifically for women. More than 94% of Grameen loans have gone to women, who are said to suffer disproportionately from poverty and are considered more likely than men to spend their earnings on their families.
In 2006, Muhammad Yunus and the Grameen Bank were jointly awarded the Nobel Peace Prize, “for their efforts to create economic and social development from below.”
Did you know…?
Muhammad Yunus has two daughters: the eldest, Monica Yunus is a successful Bangladeshi-Russian American soprano singer!
