A conversation with Muhammad Yunus
Muhammad Yunus, the economist who founded Bangladesh's Grameen Bank, visited Mumbai recently where he spoke to India Ink about his vision of "social businesses" his forced departure from Grameen and the recent controversies that have dogged micro-finance in India and elsewhere.
This is an edited, condensed version of the interview by Neha Thirani:
Q: The microfinance industry has gone through an existential crisis in the last few years. Why did the industry fall from grace?
A: See, it's because everybody jumped at it, because it's such a well known, such a respected thing. The moment you say microfinance everybody wants to help you. So, they took advantage of that and turned it around to make money for themselves. That
is where all the problems were created. It is not the basic concept of microcredit that has a problem; when it is dedicated to the poor people, to help them, solve their problems.
In the business world growth is the key word, if you want to put an I.P.O. and so forth. They say: "Oh growth rate is so high, fantastic, we'll do it all over India." You are attracting people to make lot of money with your impressive growth rate. So in order to show growth rate in your performance record you constantly need to push people to do things.
Q: What was is about the circumstances in Andhra Pradesh, which caused microfinance to fail there? What was different about that state?
A: SKS [Microfinance]. The key is that the whole thing was triggered by SKS. They were the ones who kind of overdid things in a big way. The aggressiveness that it brought into the picture created all the problems. And then he [Vikram Akula, the founder and former chairman of SKS] made personal money out of it. That also irritated the people. That you are saying that you are helping the poor people but I see you are making personal money out of this. Several other reasons as well. One is overcrowding. Andhra Pradesh was a leading microfinance state, if I'm not wrong almost a third of microcredit in India is in Andhra Pradesh. So that's kind of put everybody in the picture, all the companies, all the MFI's that operate. That created overcrowding, which led to overlapping; same person given loans by several people. And then politicians got into the picture. Because they said this is too much, we'll give you cheaper. Even some politicians probably said they would give you interest free loans and so on and so forth. They asked not to pay back. All this happened within one state and created a big mess.
Q: Could share your thoughts about being forced out of Grameen Bank?
A: Well, this is kind of a painful thing. What can I say more than that? It was totally unnecessary. It makes no sense. There is no meaning to it. But it puts Grameen Bank at risk, and that's what worries us. My departure is not an issue. I already told the government that I want to go. I said can you put me as the chairman of the board so it'll be easy for people to accept my departure because I'm not completely leaving. I'm simply moving from an executive position to a non-executive position.
So, government has another plan. They removed me and still they couldn't find a replacement. We're worried about the future of the bank. Because, after all, this bank is owned by poor people. The borrowers own 97% of the shares of the bank and the government owns only 3%.
Q: How would you characterise your relationship with Sheikh Hasina, the prime minister of Bangladesh?
A: She never explained so I don't understand what went on, just speculation of various types in the press. One is that she feels I'm a political threat, I don't know why I'm a political threat. This is again speculation. She never said that I'm a political threat. Probably she would say: "Why should I think he's a political threat, he's not in politics. Who is he? He is nothing." You cannot explain. We've never had a face-to-face meeting, although I've tried to seek her appointment so I could see her, but it never happened.
Q: In 2007, you considered joining Bangladeshi politics by announcing a new party named Nagorik Shakti, or Citizen Power. What made you change your mind?
A: That was very special circumstances because there was a caretaker government running the country at the time. They put all the top leaders in jail, including Hasina. So, there was a political vacuum, and both parties who were in power before disintegrated because many of their leaders were in jail. And elections were coming. So people were getting nervous, what will happen, who will run the country. So, people kept coming to me -- all the leading people -- that you should join politics so that you can lead the next election. I said, I'm not a politician, I don't know. And they put pressure and finally I said okay, I'll join politics and I'll create a party. And then gradually people said what kind of political party and so on, I tried to answer. Within two months I announced that no, I'm not going to create a party. That's all -- I never created a party.
Q: What are you working on now?
A: Social business. There's lots of new ventures that have come in. Some are still in the discussion stage, formulation stage and at that time I'm not supposed to mention names. Some we have announced. One is Watami, a famous restaurant chain in Japan. What we are trying to do is to create a social business in Bangladesh, a joint venture to create restaurants for common people. Good, healthy food at affordable prices so that people don't have to opt for food that is unhealthy and unhygienic. Another one we are doing with Felissimo, a Japanese textile company. They use handloom products of Bangladesh in other products they make. For instance, they make handbags; they put a piece of handloom on top of it. So it will help promote Bangladeshi handloom. Another one is Uniqlo, one of the largest chain stores in Japans. We produce sanitary napkins for women in the villages who never used sanitary napkins, and as a result are prone to a lot of infections and so on. They are produced in Bangladesh with a joint venture, and made very cheap, reusable, and easily available. We are already selling these door to door.
Q: Given the recent controversy, do you wish you had done anything differently at Grameen?
A: No, I don't think so. Grameen Bank has done the right thing. The thing is with hindsight you can always say I could have done this a little better, or that, but in general what we have done I think we did the right thing. The only thing probably I would say is, if we could help the second generation to all become job holders faster. If we could expedite that, focus on that as a separate initiative, I would feel much better. But at least we brought the first generation here, and the second generation we have really taken away out from poverty.
This interview was first published in
New York Times online