 "Why Bangladesh’s Muhammad Yunus won a Nobel Peace Prize")
After the storm, comes the calm. And that’s what Bangladesh — which has seen violence and protests, leading to the ouster of Prime Minister Sheikh Hasina — is hoping from Muhammad Yunus as he takes the oath as the head of the interim government.
Known as the ‘banker of the poor’, 84-year-old Yunus , who also holds the honour of being the 2006 Nobel Peace winner, will aim to bring stability to the southeast Asian nation, which has been wracked by student anger.
Yunus being sworn in as head of the interim government comes after his name was first proposed for the top job by the coordinators of the student movement that led to Hasina’s ouster. But the question that many are asking is if 84-year-old Yunus is up for the challenge.
Scholar and academic
Born in 1940 in Chattogram, a seaport city in Bangladesh, Yunus was one of nine children in a family of merchants. At 25, he travelled to the United States to study under a Fulbright scholarship, received his PhD from Vanderbilt University in the United States and taught there briefly before returning to Bangladesh in 1971 — the same year the country won its independence from Pakistan in a brutal, bloody war.
On his return, he was elected to head Chittagong University’s economics department, and soon became passionately involved with combatting the famine that ravaged Bangladesh in the mid-70s.
Impact Shorts
More Shorts“I became involved in the poverty issue not as a policymaker or a researcher,” he said in a 2005 lecture at the Commonwealth Institute in London. “I became involved because poverty was all around me. “I could not turn my eyes away from it… I wanted to do something immediate to help people around me.”
Microcredit and the Grameen Bank
It was under these conditions — the famine led to a high mortality rate in the country — that Yunus noted that banks were not giving loans to victims of the famine if they did not have any collateral damage. He then lent a loan of $27 to 42 families with the belief that such loans would greatly contribute to stimulation of businesses thus improving the financial conditions of the poor.
He held the opinion that the poor were not fundamentally unworthy of credit, reasoning that the poor were lacking in resources but not in trustworthiness or financial sensibility. He believed they would be able and inclined to honour loans, if only given a reasonable interest rate. This belief lay at the heart of the Grameen Bank’s business model.
Taking this belief forward, in 1983, he launched the Grameen Bank with the aim of providing small loans to those who would not normally qualify to receive them. As the Madras Courier writes in one report, the Grameen Bank’s philosophy of advancing credit was founded not on collateral but on the trust of the local community of borrowers.
Speaking on the same, Yunus once claimed that microcredits were both a human right and an effective means of emerging from poverty: “Lend the poor money in amounts which suit them, teach them a few basic financial principles, and they generally manage on their own.”
The Grameen Bank also adopted the model of solidarity group lending wherein a loan is divided among several recipients. Moreover, collective lending ensured that loans are being repaid on time.
Success of Yunus’ Grameen Bank
The Grameen Bank soon became a buzzword in Bangladesh. It also came up with the “16 Decision” — which was later updated to “18 Decisions” — in which borrowers vowed to follow certain codes on receiving a loan. For instance, a borrower vows to ensure the education of their children and follow a healthy lifestyle by drinking only tube well water.
The loans granted by Grameen Bank saw women becoming more empowered, primary school enrollments increasing, households maintaining better hygiene and sanitation and even infant mortality reducing.
The BBC notes that the Grameen Bank became so successful that even beggars had been able to borrow money under his scheme.
In 2006, the Nobel Peace Prize Committee also recognised the impact that Yunus’ Grameen Bank had on Bangladeshi society and awarded him and the institute the prestigious award that year.
Today, over 40 years since, the institute began, it has reached out to nearly 45 million people through its 10.6 million borrower members. Additionally, as of June 2024, it had disbursed loans worth $38 billion, maintaining a recovery rate of 96.3 per cent.
However, despite its success, the Grameen Bank is not without criticism. There are some who have criticised the concept of micro-financial institutions, saying they charge exorbitant interest rates and use coercive debt collection methods. On this, Yunus’ response has been that the Grameen Bank doesn’t aim to earn money but to help the poor and empower small businesses.
Yunus’ ouster from Grameen Bank
Interestingly, as the Grameen Bank’s reputation became stronger, it was Prime Minister Sheikh Hasina who fired Yunus as managing director saying that at 73, he had stayed on past the legal retirement age of 60.
She also accused the bank of “sucking blood of the poor” and claimed Yunus treated the institution as his “personal property.”
Inspiration for other institutions
The success of the Grameen Bank can also be gauged from the fact that several such micro-financing institutes (MFIs) have emerged across the world. The Centre for Development Policy and Practice notes that several MFIs have emerged in India. For instance, Bandhan in India was established in 2001 and started its operations in West Bengal as a non-profit organisation with the motive of providing women empowerment and financial inclusion. It became the largest microfinance institution in India by 2010 and it currently has more than 4,000 banking outlets and 1,000 branches across India.
Now, the question is: Will Yunus be able to steer Bangladesh as he did with the Grameen Bank? Only time will tell. But as a quote on his website states: “If you imagine, someday it will happen. If you don’t imagine, it will never happen.” May be it’s time for him and the people of Bangladesh to imagine better days.
With inputs from agencies
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