Muhammad Yunus: The original social entrepreneur: his story and lessons learnt
May 20, 2014
He is known the world over for what he has become but did you know where this grandfather and sage of social entrepreneurship came from?
The third of nine children, Yunus was born on 28 June 1940 to a Muslim family in the village of Bathua, by the Boxirhat Road in Hathazari, Chittagongin the Bengal Presidency of the British Raj, which today forms modern Bangladesh. His father was Hazi Dula Mia Shoudagar, a jeweler, and his mother was Sufia Khatun. His early childhood was spent in the village. In 1944, his family moved to the city of Chittagong, and he moved from his village school to Lamabazar Primary School. By 1949, his mother was afflicted with psychological illness.
Later, he passed the matriculation examination from Chittagong Collegiate School ranking 16th of 39,000 students in East Pakistan. During his school years, he was an active Boy Scout, and travelled to West Pakistan and India in 1952, and to Canada in 1955 to attend Jamborees. Later while Yunus studied at Chittagong College, he became active in cultural activities and won awards for drama. In 1957, he enrolled in the Department of Economics at Dhaka Universityand completed his BA in 1960 and MA in 1961.
After his graduation, Yunus joined the Bureau of Economics as a research assistant to the economics researches of Professor Nurul Islam andRehman Sobhan. Later, he was appointed lecturer in economics in Chittagong College in 1961. During that time, he also set up a profitable packaging factory on the side. In 1965, he received a Fulbright scholarship to study in the United States. He obtained his PhD in economics from the Vanderbilt University Graduate Program in Economic Development (GPED) in 1971. From 1969 to 1972, Yunus was assistant professor of economics at Middle Tennessee State University in Murfreesboro.
During the Bangladesh Liberation War in 1971, Yunus founded a citizen's committee and ran the Bangladesh Information Centre, with other Bangladeshis in the United States, to raise support for liberation. He also published the Bangladesh Newsletter from his home in Nashville. After the War, he returned to Bangladesh and was appointed to the government's Planning Commission headed by Nurul Islam. However, he found the job boring and resigned to join Chittagong University as head of the Economics department.
After observing the famine of 1974, he became involved in poverty reduction and established a rural economic program as a research project. In 1975, he developed a Nabajug (New Era) Tebhaga Khamar (three share farm) which the government adopted as the Packaged Input Programme. In order to make the project more effective, Yunus and his associates proposed the Gram Sarkar (the village government) programme. Introduced by President Ziaur Rahman in the late 1970s, the Government formed 40,392 village governments as a fourth layer of government in 2003. On 2 August 2005, in response to a petition by Bangladesh Legal Aids and Services Trust (BLAST) the High Court had declared village governments illegal and unconstitutional.
His concept of microcredit for supporting innovators in multiple developing countries also inspired programs such as the Infolady Social Entrepreneurship Programme.
In December 1976, Yunus finally secured a loan from the government Janata Bank to lend to the poor in Jobra. The institution continued to operate, securing loans from other banks for its projects. By 1982, it had 28,000 members. On 1 October 1983, the pilot project began operation as a full-fledged bank for poor Bangladeshis and was renamed Grameen Bank ("Village Bank"). Yunus and his colleagues encountered everything from violent radical leftists to conservative clergy who told women that they would be denied a Muslim burial if they borrowed money from Grameen. By July 2007, Grameen had issued US$6.38 billion to 7.4 million borrowers. To ensure repayment, the bank uses a system of "solidarity groups". These small informal groups apply together for loans and its members act as co-guarantors of repayment and support one another's efforts at economic self-advancement.
In the late 1980s, Grameen started to diversify by attending to underutilized fishing ponds and irrigation pumps like deep tube wells. In 1989, these diversified interests started growing into separate organizations. The fisheries project became Grameen Motsho ("Grameen Fisheries Foundation") and the irrigation project became Grameen Krishi ("Grameen Agriculture Foundation").In time, the Grameen initiative grew into a multi-faceted group of profitable and non-profit ventures, including major projects like Grameen Trust and Grameen Fund, which runs equity projects like Grameen Software Limited, Grameen CyberNet Limited, and Grameen Knitwear Limited, as well as Grameen Telecom, which has a stake in Grameenphone (GP), the biggest private phone company in Bangladesh. From its start in March 1997 to 2007, GP's Village Phone (Polli Phone) project had brought cell-phone ownership to 260,000 rural poor in over 50,000 villages.
The success of the Grameen microfinance model inspired similar efforts in about 100 developing countries and even in developed countries including the United States. Many microcredit projects retain Grameen's emphasis of lending 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 devote their earnings to their families.
For his work with Grameen, Yunus was named an Ashoka: Innovators for the Public Global Academy Member in 2001. In the book Grameen Social Business Model, Rashidul Bari shows how Grameen's social business model (GSBM)- has gone from being theory to an inspiring practice adopted by leading universities (e.g., Glasgow), entrepreneurs (e.g., Franck Riboud) and corporations (e.g., Danone) across the globe. Through Grameen Bank, Rashidul Bari claims that Yunus demonstrated how Grameen Social Business Model can harness the entrepreneurial spirit to empower poor women and alleviate their poverty. One conclusion from Yunus' concepts is that the poor are like a “bonsai tree”, and they can do big things if they get access to the social business that holds potential to empower them to become self-sufficient.
What are four lessons that a professional can learn from Muhammad Yunus? Writer Katharine Esty:
1. Focus on Women Yunus learned in Bangladesh back in the 1980s that women, even poor women, have enormous potential as entrepreneurs. He observed that when women received small loans, they did not squander their money on snacks or luxuries as many men did. Instead, they used their funds to buy some chickens, a cow or some seeds and were able over time to improve their families’ diet or pay for school for their kids, contributing to the cycle of poverty alleviation.
2. Start Small and Go Slowly According to Yunus, many new ventures fail because they try to expand too quickly. Having started 40 companies and taken some of them, including the Grameen Bank andGrameenPhone, to scale, Yunus understands the importance of starting small and expanding companies carefully and slowly. Today Grameen Bank has over eight million borrowers while GrameenPhone is the largest telecommunications provider in Bangladesh. As I related in my recent book, Twenty-Seven Dollars and a Dream, Yunus took decades to grow the Grameen Bank, modifying his model along the way as times changed and learning by trial and error as he went along.
3. Create Partnerships To start any kind of new business including a social business, resources are required. The best way to get the necessary resources is through forming partnerships, as Yunus did consistently at the Grameen Bank. Both his yogurt company and the Veolia Water Company were partnerships with French corporations.
4. Use Competition to Identify the Best Ideas There are always more people with ideas for new businesses looking for funding than there are available funds. Yunus discovered that a competitive process was the best way to identify the most promising ideas for social businesses. In Albania, YSB launched a national Social Business Plan Competition (in partnership, this time, with the Albanian Investment Development Agency, UNDP, and UNWomen). A panel of judges selected the winners with two banks – Deutsche Bank and International Commerce Bank – provided coaching as they moved from concept to implementation.
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