“Give people the option to invest in social initiatives” – Tonya Surman
“Give people the option to invest in social initiatives” – Tonya Surman
Feb 7, 2018
Speaking to a packed room CSI Annex, Muhammad Yunus – founder of Grameen Bank and father of modern social entrepreneurship – shared his insights on how business can change the world.
A fervent believer in business structures imbued with “selflessness,” Yunus spoke with our CEO Tonya Surman as part of our Fireside Chat series to educate and connect social entrepreneurs.
By the end of the chat, it was clear the crowd was inspired by his story.
Beyond overcoming rumours, hurdles, and challenges – something all entrepreneurs have to go through – Yunus touched on scaling a business model that isn’t inherently profit-driven and explained how he believes capitalism should fundamentally shift.
Sexism and Grameen’s founding story
The Grameen Bank had humble beginnings. So humble, in fact, that it was not even an organization; it was simply a problem that Yunus thought he had a solution to.
He noticed, while teaching at a university in Bangladesh, that women entrepreneurs had a difficult time getting capital. Seeing that their only access to funds were loan sharks charging high interest, Yunus simply started loaning out his own money as micro-loans.
Yunus explained that, even from the beginning of this impulse that would become a movement, he didn’t want to give women money as charity because then the money could only be used once. Instead, he “took the objective of charity but put a business engine behind it.” That way, he explained, the money “goes out, does its job, and comes back,” able to be used again.
With this model his money grew, as did the impact he was able to make. Grameen was born.
Many women were keen to make use of the micro-loans, but some of their husbands felt disrespected. Loan sharks also grew angry about their lost profits. Yunus explained that the two groups worked together to spread a rumour that Grameen was actually an army of Christian missionaries, giving money out to eventually seduce locals to convert to Christianity. They said that Yunus offered money only to women because they are more gullible than men and thus could be made to convert more easily. Further, they said that a true Muslim would not allow a woman out of the house and in the markets, as that’s against religious practice.
“When you do something new, you invite trouble for yourself,” he joked.
Instead of pushing back against his attackers with an ad campaign extolling the virtues of his operating model, or trying to convince women to go against their husbands’ wishes, he reminded the public of how a good Muslim must follow the footsteps of the Prophet. He explained that the Prophet took a job under a business woman that was older than him.
“So if you wanted to be a good Muslim, you had to take a job under an older businesswoman,” he said. “And if you can’t find a businesswoman in your village, we have a lot of them.”
Lawyers and other corporate types
“Everything the traditional banks do, we do the opposite,” explained Yunus. “We go to the poor, not the rich. We go to small villages, not business centres, And we have no lawyers.”
Sharing a story that applies to any renegade business founder, profit-seeking or not, Yunus explained that the current banking infrastructure around the world is like a “super tanker” made for deep oceans and large expeditions. They are big and have to work with a lot of money to be successful. However, they don’t get to the shallow waters, where folks with not a lot of money aggregate.
That’s where Grameen goes, and it works. Grameen’s expansion is also unique when compared to many businesses. Instead of looking for outside capital to fund development, Grameen sends someone into a local community to get acquainted with the town. Their first task is to walk around the whole village and identify the core people and communities. From there, the individual proposes a Grameen branch, but only if the locality commits enough of their own money to make it happen.
Grameen’s expansion, then, is entirely based on localized money. “With localized money, you can make as many branches as you want,” said Yunus.
After founding what became Grameen in 1976 and becoming a formal, legal bank in 1983, Grameen grew to successfully operate in most villages across Bangladesh. Many would stop there, call Grameen a social entrepreneurship success story, and move on.
However, Yunus’ model took on a life of its own.
Capitalism and global expansion
Inspiration struck a Norwegian government worker who’d seen Grameen in action; she brought the Grameen model to remote fishing villages in Norway. Something similar happened in France, where a woman created a network of micro-credit programs in small towns. Even in New York City, Grameen boasts nearly ten branches in multiple boroughs.
This expansion came once again not from outside investors, but from localized capital. The Grameen model is community-focused from day one, based on Yunus’ belief that capitalism is fundamentally flawed.
“Capitalism assumes all human beings are driven by self-interest,” he said. “So the whole world becomes a selfish world… and everything we do is for selfish reasons. As a result, all the wealth of the world concentrates into a few hands.”
Far from being an anarchist who hates business, Yunus evangelizes using business structures to solve problems, because they are more scalable and repeatable than charity. He feels that a system that only allows selfishness can never solve problems like systemic poverty.
“Poverty is not created by poor people – it’s created by the system that we practice,” he said. “We need to bring in social business, powered by selflessness. Social business does not contribution to wealth centralization. All the wealth remains with the business, not the person.”
To enable this around the world, Yunus recommends a laser-focus on self-sustainability, ensuring each operating unit covers its own costs.
“If you know how to get five people out of unemployment [in a self-sustainable way], you can get five million out because it’s the same system [repeated over again],” he said.
While the tone of focusing on solving problems is attractive to any entrepreneur, some might want to still focus on profit-seeking work with a social mission versus a profit-neutral social business.
Further, many very wealthy people are incredibly philanthropic – Yunus cited Bill Gates’ billionaires pledge to donate at least half of your wealth upon your death as a prime example. Being profit-seeking does not mean one doesn’t care about changing the world for the better.
To Yunus, the idea of being profit-seeking with a social mission is great, too. The system just needs to be tweaked a bit.
“Don’t take capitalism away,” he said. “Just give people the option to invest in social initiatives over only giving to charity.”
“There are traditionally two ways to solve problems: create a business or create a charity,” he continued. “The problem [with business] is that people take advantage of problems to make their own money. But when you solve a problem with charity, the money goes out and doesn’t come back – you only have one time use of the money.”
“Instead, I built a social business: a non-dividend company built to solve problems.”
Want to hear more? Check out the livestream of the entire conversation: