Muhammad Yunus is a social entrepreneur, economist, and pioneer in the realms of microcredit and microfinance, earning him both a Nobel Peace prize and the moniker “Banker of the Poor”.
Born in 1940 in Chittagong in what is now Bangladesh, he earned a degree in economics from Dhaka University.
After graduating in 1961 and taking up a position at Chittagong college, Yunus showed his entrepreneurial side by setting up a profitable packaging factory while he was a teacher.
In 1965 he was awarded the Fulbright scholarship to study in the US, and earned his PHD in economics from Vanderbilt University in 1971.
Yunus returned to Bangladesh in 1972 where he became head of the economics department at Chittagong University. After observing the effects of the 1974 famine, he became involved in poverty reduction and established a rural economic program as a research project.
During 1976 he visited poor households in Jobra, a village near the university. He saw that women who made a subsistence living building bamboo furniture had to take unfair loans in order to buy the bamboo, and would end up paying almost all their earnings in interest. He realised that small loans would make a disproportionate difference to the very poor. Banks were uninterested in lending small amounts to poor people due to the risk of default. But Yunus believed that if given the chance the poor would repay their loans, and do so proudly.
He started microlending by loaning US$27 of his money to 42 women in the village. He saw that the tiny amount was enough to allow them to finance their own enterprises and allow them to escape the loan sharks.
Incorporating that into his existing research programme, the project was able to secure a government loan at the end of 1976. Microloans continued to be issued as part of a pilot programme and by 1982 the programme had 28,000 members. In 1983, Grameen Bank (literally “Village Bank”) was formed, after special legislation was passed to allow for its creation.
Yunus and his colleagues faced opposition from everyone from traditional banks to conservative Muslim leaders who said that women who borrowed from Grameen Bank would be denied a Muslim burial. In the face of that the bank succeeded, expanding to other parts of Bangladesh.
Grameen requires no collateral but relies on each borrower having a support group of five people who can encourage the borrower’s work.
In the late 1980s Grameen began to diversify and has grown into a network of profit and non-profit ventures helping the poor with everything from fishing to cellphones.
Yunus’s work on microfinance and the Grameen Bank has inspired microloan enterprises in over 100 countries. In 1997 Yunus was a founding board member of the Grameen Foundation to facilitate microloan banks around the world.
By 2007 Grameen Bank had issued US$6.3 billion dollars in microloans to 7.4 million borrowers. 94% of loans are to women who have traditionally been less able to borrow money then men, and who disproportionately suffer from poverty.
In 2006 Yunus and Grameen Bank shared the Nobel Peace Prize for their efforts to create economic and social development. The Nobel Committee said “Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty.”