Muhammad Yunus: Lifting People Worldwide out of Poverty

What began with a loan of $27 to 42 women in a small village 33 years ago has grown into a global microcredit movement that has changed the lives of millions of poor people around the world. Muhammad Yunus, founder and managing director of Bangladesh’s Grameen Bank, was the guest speaker at Wharton’s MBA commencement on May 17 and the recipient of an honorary doctor of laws degree during the University of Pennsylvania’s commencement on May 18. Yunus spoke with Knowledge@Wharton about his successes, challenges and upcoming initiatives.

An edited version of the transcript follows.

Knowledge@Wharton: Our guest today is Muhammad Yunus, winner of the 2006 Nobel Peace Prize and founder of the microcredit movement — based on the idea of making very small loans to the world’s poorest people, thereby giving them the opportunity to raise themselves and their families out of poverty. Thank you for joining us.

Yunus: Thank you.

Knowledge@Wharton: People often associate good works and worthwhile causes with non-profit institutions. But you have emphasized that your model is a for-profit one, not a non-profit one. Can you briefly describe that model and tell us why the distinction is so important to you?

Yunus: We are not trying to create a non-profit. That was not our intention. Our intention was to persuade the bankers to lend money to poor people, so my struggle was always with the bankers. Initially, I offered myself as a guarantor, and then took the money from the bank and gave it to people. So it was an extension of the bank’s activities. When we saw that it was working well and the banks were not as enthusiastic as we were, we thought maybe we should have a separate bank created for this purpose. Finally we did that in 1983 — called Grameen Bank or the “village bank.” So we became a bank because it is a bank’s activity. We lend money to the poor. People sometimes refer to us as an NGO. We have to explain that we are not an NGO. It’s not that we are belittling NGOs…. I’m simply stating that people get confused, thinking that because we work with the poor, we must be an NGO. I say, no, we are a bank and it is owned by the poor people. The owners of the bank are the borrowers of the bank. That’s the distinction that we want to make, to clarify what we are.

Knowledge@Wharton: Grameen Bank has grown dramatically since the time that you founded it. I’ve read that you now have operations in more than 100 countries, and you have seven million borrowers in Bangladesh alone. But your success with Grameen has led to a lot of other people entering the microcredit area. Some of them are commercial banks. Some are funded by venture capitalists. How has that changed the microcredit model, and can you explain some of the issues that have come up as a result of that?

Yunus: Just a little clarification: We work — or at least the main idea has been working — in almost all the countries of the world. So now it’s not right to say 100 countries.

Knowledge@Wharton: So you’re even more successful!

Yunus: At least the idea is that it’s spread. Whether they are big or small — successful or not — there are presences in all those countries. Right now, we are nearly eight million borrowers within Grameen Bank itself. In that way, Grameen Bank has expanded within Bangladesh. Lots of organizations have come in [to do this] and we have encouraged them. NGOs have done that. Others have done that. When the word becomes popular and the idea becomes popular, many people want to join [in]. So the word “microcredit” became very popular. “Microfinance” became very popular. And [institutions] not using these words before, suddenly started using them — like agricultural banks around the world saying that they do microcredit. They never said that before.

Whether they are microcredit or not is a debatable subject because we define microcredit, microfinance, in a certain way. This is a credit and financial service to the poorest people without collateral, without guarantee and without any lawyers in the system. That has to be very clear in our work before we call it microcredit or microfinance. And this has focused more on women — the poorest women.

If you look at agricultural banks, for example, most of the agricultural banks around the world require collateral…. Similarly, savings and loan associations say they do microcredit. Cooperatives say they do microcredit. Those who are giving agricultural loans — commercial banks — are saying they do microcredit. So we need to clarify what microcredit is in its pure form rather than everything else. Microcredit was always given to people for income generating activity. So whatever money you are taking, you are investing it to create an income source for yourself. There are many programs which give loans for buying consumer goods, and they say they are doing microcredit, they are giving money to buy a refrigerator or buy a television. We say, “No, sorry, that’s not microcredit.” So we have to sort this out.

Another aspect that I want to draw attention to — there are many microcredit programs going around advertising themselves saying, “Oh, this is a great opportunity to make money.” And they encourage people who want to make money to join in and do that. Again, we say, “Look, our purpose is not to excite people about making money. Our purpose is to help people get out of poverty. The focus is not on profit making. The focus is on helping people to get out of poverty. Those who are seeing this as an opportunity to make money have to raise their interest rate to the extent that they make a lot of money. The interest rate issue becomes a sensitive one. We are saying interest rates should be kept as low as possible, preferably to cover costs. If you want to make a little profit on top of it, it should be a very modest profit, so that it doesn’t look like this was your intention. Those who are doing that — using microcredit, microfinance, to make a lot of money — we keep saying that this is not microcredit in the sense that we do it. We came here to fight the loan sharks, not become loan sharks ourselves. This is their moving into the direction of loan sharks. We want to disassociate ourselves from them.

Knowledge@Wharton: So how do you tackle that? Is there some regulation required, and if so, what kind of regulation should there be?

Yunus: In Bangladesh, we have been talking about regulation. The Bangladesh government has created a microcredit authority, [based on] our suggestions. So they will be looking into the interest rate issue, the transparency issue. A lot of people quote their interest rate in many, many ways, hiding the actual fact of how much they are charging. We say it has to be very transparent. All interest rates should be expressed in a standardized form so that you can compare A and B. Who charges more or less? This is something that they have to clarify right away, and they also have to keep the interest rate as low as possible. This is an encouragement regulatory authorities should be putting in.

I, personally, have been promoting the idea that a true microcredit interest rate should be within a particular range — as a cost of fund at the market price plus 10%. This is the green zone of microcredit interest rates. You are legitimate. You are doing excellent work. If it is cost of fund at the market price plus 10% to 15%, we say your interest rate is in the yellow zone. You’re on the high side, but still we will consider you a genuine microcredit program. We will encourage you to push yourself back into the green zone. If cost of fund is at the market price plus 15% and above, then we say you are in the red zone, meaning that you are too high and you are on the wrong side of microcredit. You are moving into the loan shark zone.

Knowledge@Wharton: You have spoken about the downside of a globalized economy, referring to it during the Nobel Peace Prize ceremony in Oslo as “a dangerous free-for-all highway whose lanes will be taken over by the giant trucks from powerful economies, even as Bangladeshi rickshaws will be thrown off the highway.” I’m assuming you’re referring to the one-dimensional profit mode of these giant trucks that focus more on money than on social good, but how do you think a global scenario could realistically be averted? Isn’t globalization, in fact, desirable?

Yunus: I was giving an image of globalization as like a multi-lane highway. All the products are moving back and forth in many directions, and everybody on the road is getting their merchandise. Big countries, big economies, rich economies will have more merchandise to carry, and big trucks to carry [it in]. They are very powerful and take over the lanes. The small countries don’t have space for themselves because it’s all taken over by the big trucks and the big companies. I said if that image fits into the picture, then we should have traffic rules so that the little company in the little country in the little economy can … move slowly and safely, and the big trucks don’t take over everything.

If we accept the traffic rules idea, then we will need traffic police so that these rules are obeyed. The idea is to have a traffic authority that says, “This is the rule of globalization — that if you are a big company, you cannot come to a weak economy and say, ‘I am taking over the whole economy.’ They can, because they have the money power. That will be the wrong [kind of] globalization. In globalization, both sides must be the winner, and whatever gain in trade takes place, it should be shared equally. Just because I have the power — out of 100, I take 99.9% and give you 0.1% and say this is globalization — I don’t think that would be tenable or sustainable. So we have to agree how much you should get and how much I should get, although I could have taken over everything. But by agreed principles, we don’t do that. We give you some and we keep some. And what that participation would be — how the division would be — would be [up to] the traffic police or the traffic authority to decide. Otherwise, globalization will become an economic imperialism, with big economies taking over small economies.

Knowledge@Wharton: One affect of globalization we see right now is what’s happening in the world banking industry. Why I find it very interesting is because if you were to look at Grameen’s own borrowers, they are not just subprime, but sub-subprime. In spite of that, Grameen’s repayment rates are 99% or so, and you have never required a bailout. From that perspective, I wonder how you see this global banking crisis and what advice you would give to the CEOs of institutions like Citibank or Bank of America about what they could do to salvage their operations.

Yunus: It’s a paradoxical situation right now because 33 years ago — when I was trying to start this program in a city village with a few people and arguing with the bankers that it would be a good idea to give loans to poor people — their argument was that poor people are not credit worthy. They will never pay back and so on. Today, 33 years later, you can ask the same question. Who is credit worthy? It is the poor who turned out to be more credit worthy than the other category of people, because microcredit programs all over the world still function very well. Their repayment is very high, whereas the big banks and their big lending operations are [near] collapse. They are falling down.

Given the [situation] we have now, we have no other way but to redesign the whole system — recognizing the strength in non-collateralized loans for the poor people and the weakness in collateralized loans for the rich people. We have to find a ground where we can have an inclusive financial system where nobody will be thrown out of the system — not the poorest person, not the homeless person or a beggar person. Nobody should be thrown out. They have already created a long-time record of what they have done.

So this is one lesson [to be taken into account] when redesigning the financial system. Another point I would like to make is that this global crisis, financial crisis is the worst in our lifetime — the whole world is going through it. While we look at the crisis part of it, we forget this is also the greatest opportunity. When the system is not working, that’s the time you unpack and redesign it so that it not only works, it works better than ever before. Unless we do that, we will be committing a big mistake. So I emphasize the opportunity part of it. The crisis will take time to [run its course], but we should be focusing our attention on redesigning, piece by piece, [those parts] that need to be fixed so that we don’t have the same old system we had before.

Knowledge@Wharton: What qualities does one need to lead a microfinance institution and how are these different from the qualities needed for another type of organization?

Yunus: We came from the direction of wanting to bring financial services to the poor to help them generate income for themselves and gradually move out of poverty.Build confidence, build experience, and step-by-step, move on and get out of poverty. So we would like to keep microcredit in that [mode], not a profit maximization [mode], because then you are not looking at people’s condition; you are looking at your own condition. You want to take out as much as possible to improve your financial strength and so on.

That is the number one requirement for microcredit — that you have the right kind of attitude when you get involved with it, that here I have come to use my talent, my creativity, my management skills to help people get out of poverty without losing money. Losing money pushes you into another direction. It pushes [you] into charitable kinds of programs. Microcredit is not a charity program. Microcredit is a business program — but business with a social purpose. In a separate way, I have called it a social business and defined in clear terms what a social business is like.

So ideally, I would like microcredit to be a social business where profit is zero for the person who is investing, but the company can make profit. Profit stays with the company with a social objective — in this case, to help people get out of poverty.

Knowledge@Wharton: But in terms of individual leadership skills, or organizational skills, how do you nurture these in individuals at Grameen Bank?

Yunus: With Grameen Bank, we just recruit people and let them learn by apprenticing with other, older persons in the branches. So it’s not a classroom training, which makes all the difference. Classroom training is a very small part of our training. We simply introduce what we do and then let them figure out how it is done. When they join Grameen Bank, for them it’s just a job. They are looking for a job. Not many jobs are available. They get the job. They are very happy. [They] will work and get a salary. So the intention of helping the poor was not part of the job.

But once you start working with poor people and get to know the system and its objectives, gradually you are taken by it. More and more you feel inspired by it. All these ideas that, yes, my work helps people, excites them. It’s a wonderful experience to be able to touch other peoples’ lives. It’s almost an intoxicating experience. Once you have it, you cannot get away from it. You want to help more, because you see things are happening in people’s lives. Their children are going to school. The kid you saw running around in the village — now you see that he or she is in school and doing very well, and talking about what she wants to be, what he wants to be. And you remember your own childhood — how difficult it was for you.

These kids are lucky kids. They are in school. Some of the older students are now going on to higher education. Grameen Bank gives them education loans. They say, “Nobody gave me an education loan. My education ended. After high school I couldn’t proceed any further. The only job I could get is this one. But I’m happy. Through my job, I’m helping other kids to go on to higher education, become doctors and jurors and university professors and so on and so forth. That excites them, that yes, their service is useful.

Knowledge@Wharton: One of the really interesting aspects of Grameen’s operations is the way you have been able to extend the concept of microfinance beyond just credit into areas such as health insurance. I wonder if you could explain some of those activities and how they have evolved? What have some of your challenges been?

Yunus: We do not consider micro insurance or health insurance as outside the financial service area. So we take it as a part of our activities — the bank’s activity. We started with giving credit at the same time we were taking savings. So it’s always together: Savings and credit formed our basic tool. Then we encouraged people to go into other directions regarding health and other issues. Gradually we introduced insurance programs. Life insurance was our first insurance program. Then we introduced the health insurance program. We saw that we can give health insurance, but then how do you ensure that people get the health service? The existing health service [system] is not very reliable. So we started creating health services through a separate company we created called Grameen Kalyan, or Grameen Well-Being.

Through that, we started setting up clinics in the villages with a professional doctor at the top of the clinic, and then paramedics and health workers with a pathological lab attached to it so that people don’t have to go to the city for simple pathological testing and so on. Everything is self-contained. Today, we run about 51 such clinics. On an average day, they cover about 93% of the costs; another 7% we could easily cover if we could retain the doctors in these clinics. That became a big problem: Doctors don’t want to stay in the kind of clinics that we operate in the villages. Most of the time, almost half or one-third of the doctors are missing.

That’s where our popularity in the area is not as high as it should have been. Now we are trying to redesign it, do it in a different way [by] trying to set up a program at the village level — what we call Grameen Health Management Centers — where our focus will be on prevention. Our focus will be on the healthy people first and then on the sick people. For the sick people, we say this is where we will do early detection and early treatment without relying on the doctors in the village. So doctors can [stay] in the cities, wherever they are.

We are trying to link the doctor and the patients through information technology. The mobile phone in Bangladesh is everywhere, like many other countries. The mobile phone is a common phenomenon. Even in the poor families, you will see mobile phones. They are very cheap. And these phones are Internet phones. They also carry Internet service. Bangladesh can receive Internet services [everywhere] through the mobile phone. So we want to do the diagnostics and plug them into a mobile phone — transmit all the images and all the data to the specialist doctor in the city who can analyze it and decide what the problem is, talk to the patient on the mobile phone and [then] some intermediary who can go between the patient and the doctors to carry on all these services. This is the new idea that we are promoting. Health insurance is a very popular [concept] provided we can guarantee that [people] get the services.

Knowledge@Wharton: Is there a plan to extend this further with Google?

Yunus: We have been discussing it with many partners. Already we have created a social business with the Intel Corporation. It’s called Grameen-Intel Company in Bangladesh. Through that company, we are bringing mobile phone services to the village with the health care software included in it.

The initial one that we are doing is a series of questions that we place before pregnant mothers designed in such a way that, by evaluating the answers, , doctors can tell whether she has a risky pregnancy. So immediately, we have screened a risky pregnancy. Then you can concentrate on that one. Gradually we’ll be moving into ultrasound. We will bring ultrasound to the family house to image the baby inside the womb and transmit it to the doctor. The doctor can then confirm that, yes, there is a problem. We can zoom in to that particular patient, and so on.

On this trip I’ll be meeting with the Google people to talk about it. One other idea that I’ll be discussing with them is how to capture all the patient data. Simultaneously, as we meet the people, talk to people, all this comes in a way that you can put in a central server through Google. You have global patient data available. You can analyze it. You can find out the incidents of diseases. [You can know] how the treatment is working, which treatment is working, how people are improving and so on. Lots of information can come out of that. There are many ways you can do that. It’s very simple. Now that technology is available, it can be almost cost-free — but at the same time extremely valuable — information about health care. So we want to see Excite, Google and others get involved. Google already has a lot of health care related programs, but we are trying to see how to extend the service and collaborate with them.

Knowledge@Wharton: By basing your model on getting funds from the borrowers rather than getting, for example, money from international investors, does that give you enough money to make as many loans, offer as many services as you could? Or do you think that outside money actually could play a role as long it doesn’t dilute the primary focus, which is social good and not making money?

Yunus: Within Grameen Bank, we are allowed to take deposits from everybody. It’s not limited to the borrowers only. It’s just like a bank. We can take anybody’s deposits. So that’s open within Grameen Bank. Each of our branches is required to mobilize enough deposits to carry on all the lending they do so that branches don’t have to borrow from the head office and don’t have to borrow from another branch. So they are self sufficient with their money.

On top of that, we encourage them to build up [an adequate] cushion of reserves of the deposits because of the problem of disasters. We have very frequent disasters. At times of disasters, you can’t get your money back, but you need to lend more money than you did before to get people out of the problems they face. So we want to build up that cushion. Usually we recommend at least 30% or 33% reserves should be kept within that system.

Today, we have more than 30% reserves; 37% has been the level of our reserves in all of Grameen Bank. Some branches have more. Some branches have less. But the average is 37%. We have no problem with the deposits. We have enough deposits in the bank. So the question of borrowing outside never occurs to us because we have enough money. I keep telling people that literally no matter where we live, we live in an ocean of money. But the problem is that poor people cannot take a sip out of it. That’s the problem. A shortage of money is not the problem. People have plenty of money to put in the bank. People are very happy that a Grameen branch came near their home because villages don’t have bank branches. Banks are all concentrated in the cities. If people have to put the money in the bank, they have to go to the city in the town where the bank exists.

So Grameen Bank works in the villages. It’s a very convenient place. People withdraw their money from the cities and put it near home because it’s handy. They can go in any time they want to pick up the money. So we have enough of that money and we do not see any reason that it will ever dry up.

Having said that, what is the amount of deposits coming from the borrowers themselves? We lend out over $100 million a month through Grameen Bank today. Nearly half of that money comes from the borrowers’ own deposits. So it’s quite a substantial amount of money that the borrowers put in. That money keeps growing because everybody is putting additional deposits in every week. It keeps growing and growing. People have their own savings accounts. At the same time, other people can put in money there. Sometimes we see that, in a certain branch, we have too much money. We decide whether we should keep that level of deposits without expanding the business. We encourage [the branches] to expand the business rather than build up [excess] deposits.

Knowledge@Wharton: You had referred earlier to the idea of a social business and you explained how that differs from a conventional business. One example of that is Grameen Danone Foods. What I find remarkable is that you are able to produce a power yogurt called Shakti Doi for 5 cents for an 80 gram cup. Could you explain how the economics of that works and whether that model is scalable?

Yunus: Yes, very much, because it’s a business and it [operates] according to business principles, [including] that you have to cover your costs and generate some surplus so that the business can keep running. But the idea of social business is that investors have invested the money not for their own benefit, but to achieve a social objective. In the case of Grameen Danone, the objective is to bring nutrition to malnourished children.

What we have done is put all the micronutrients, which are missing in the children, in the yogurt and make it very tasty. Children love it. They pay that 5 cents to buy a cup. If a child eats two cups a week and continues to do so for eight to nine months, he or she gets all the micronutrients back and becomes a healthy, playful child. That is the objective of the company.

That is how it is done. And others, it’s a question of how much it costs. How much does milk cost? What are the processing costs, equipment and distribution costs and so on. Once you are in social business, lots of costs go down because you don’t need to incur them.

For example, you don’t do any elaborate or fancy marketing because people know what you are doing and they are interested in it. So you don’t have to go on television and be in the newspaper. We are here. “Life is meaningless without eating Shakti Doi?” We don’t say that. We explain what it is as the people come, and gradually this spreads. And that’s it. So the marketing cost goes down. In our design, we made sure that extra costs are cut off. For example, we made it a very small plant so that you don’t produce too much. Around our own plant, there are enough consumers to buy [the product so that we don’t have] to move it long distances. The idea is to cut down on the cost of a cold train. If you are producing in a big plant, you have to carry [your product] long distances and you need a cold train. That is a very expensive item. So we eliminated that.

Our idea is to have many, many, many small plants all around the country so that you reach out to everybody. Our [first] plant is already operating. We are getting ready for the number two plant. We want to have about 50 plants to cover all the children in Bangladesh. Each one is self-contained. Each one makes money. Each will cover its costs and so on.

Sometimes we get through difficulties — like suddenly during the food crisis last year, milk prices jumped. We couldn’t maintain the price tag that we had on the product. We were wondering what we should do. We came up with many kinds of alternatives to keep the prices down — without losing the micronutrients and so on. We quickly came out with the Shakti Drink [which uses] less milk but [increases] other [ingredients] — all without losing the good taste. We kept the price as low as before. We were lucky; milk prices went down again. So we have to cope with those kinds of fluctuations without losing the whole focus of the company.

Knowledge@Wharton: In addition to Grameen Danone and Intel, I think you have a relationship with BASF for anti-malarial nets. Do you have any other joint ventures or partnerships with companies in the works?

Yunus: Yes. Many companies are coming up with ideas to work with us for social businesses, and we are giving them ideas. One, already in operation, is a very important social business — Grameen-Veolia. Veolia is a French water company, one of the largest water companies in the world. Many U.S. cities are served by Veolia. We persuaded this giant company to create a tiny little water treatment plant in the villages of Bangladesh to serve 50,000 people, because our big problem in Bangladesh is arsenic in our water. There is a very high level of poison in the water.

About 75 million people — half the population of Bangladesh — drink water with a high level of arsenic. So we are putting up this company to supply clean Veolia-quality water to every household in the village. The people will be paying for it — a very small amount. Nobody will mind paying that, and it will cover all the company’s costs. It will become a social business. Veolia is not there to make money out of it. But the fact [is] that people are drinking poison every day. We can work on that. Nothing is happening through any other program. So we said let’s move on and do that. This becomes another example of social business.

Once you can do that successfully for 50,000 people in the village, you have developed a seed. Then all you need to do is plant the seed in other places. Because each one is self-contained. You can do as many as you want and cover all the people. So development of the seed is the most important thing in social business. Like Grameen Danone is a seed. You can now take it anywhere in any country. We have already been approached by India. We have been approached by China. They would like to have Grameen Danone in [these countries] because they have the same problem. Malnutrition is very common. So health authorities are saying that yes, this is a big problem, and this works. We have invited GAIN (Global Alliance for Improved Nutrition) — a big NGO based in Geneva that concentrates on monitoring the nutrition situation globally — to monitor whether this is really true, whether this is just a gimmick [or whether what] we do is real. Are the children benefitting, is their nutrition level increasing and so on?

So you have Grameen Danone, Grameen Veolia, Grameen Intel, and there are some others in the pipeline, very interesting programs like one shoe company. It’s a very big shoe company. They approached us and said what can we do? I said, well, you have a theme. The theme or motto would be that nobody in the world should go without shoes. As a shoe company, it is your responsibility to make sure [of] that. So you come up with shoes that the poorest people can afford — a good quality shoe with your brand name so that it’s not a second-class, third-class thing. You take ownership of that shoe and make it very cheap. The company likes that idea. I suggested that they start making shoes for under $1, so that they cover people who will never be able to use that brand name shoe in their lifetime, ever. But now, every kid, everybody will be doing that.

So there are many in the pipeline. BASF is one already who signed an agreement to do the mosquito nets, treated mosquito nets, and also nutrition sachets for pregnant women and malnourished women. Because women’s nutrition is, again, another area where it is not as satisfactory as one would like it to be. This company will be making it possible for everybody to afford that nutrition. At the same time, while we are [offering] this nutrition supplement, we will be focusing on the diet itself. [We] can’t forget about the diet. We will be also encouraging women to [eat the] right kind of food as they go on.

Knowledge@Wharton: You have been dedicated to the microcredit concept long enough to be able to observe the children of that first generation of women that you helped, going back to 1976 and the $27 that you loaned to 42 women in a small village. How are these children, who are now adults, doing? Are they creating jobs for other people? Are they starting their own companies? Are they adding societal wealth to the community? And just by the very fact that this new generation of people still needs help, does that suggest that you have a long way to go with microcredit? What does that say about the success of the movement?

Yunus: Microcredit is the first step. You build up step-by-step many other things like insurance programs, savings programs, and other programs around it. We have encouraged the borrowers of Grameen Bank to send the children to school because they themselves are illiterate. Their husbands are illiterate. Their parents are illiterate. So we said, let’s break that circle here. Send the children to school so that they will be educated. They will be literate at least. And we succeeded at having all the children in school.

That was a very happy kind of experience for us — not only are we giving loans to the borrowers, but at the same time we have helped them to send the children to school. Then we saw that lots of these children are getting excellent results in the schools, some of them coming up at the top of the class. So we kind of got thrilled by the performance of some of these kids coming from poor, totally illiterate families. Now he or she is at the top of the class. We thought they should be celebrated. So we started introducing scholarships for all the top performing students. Grameen Bank gives over 30,000 scholarships every year. Now it’s growing. It’s 40,000 and so on every year because the number of children is growing.

Then we saw many of these children coming close to higher education. They have difficulty getting into higher education because they don’t have the money to pursue it. But the quality is there. They are as good as anybody else. So immediately we introduced education loans so that they don’t have to worry about money. The money is our problem. You can simply get an education. We started giving education loans and helping them through higher education. Right now, there are more than 35,000 students under education loans. We include medical schools, engineering schools and universities.

So in almost every single public university, public medical school and engineering school, there are Grameen children who are studying there as well. A whole wave of new children is going into that. When I meet them, they will always discuss [one] issue, which is that they worry about getting a job. They say: “After we finish our [education], can you help us find jobs?”

How am I going to find jobs for them? So I started thinking about it. I had the idea that maybe they shouldn’t be thinking about jobs. We tell them: Look, you are children from Grameen families. You are Grameen children. Your thinking should be different than other children’s. Other people, other children — they worry about jobs. You shouldn’t be worrying about this. You should take a pledge and repeat this pledge every morning you wake up. And your pledge is: I shall never seek a job from anybody. I’ll create jobs. This is my mission. So you are not job seekers. You are job givers. Think in those terms because your mother — you’re the first generation child — your mother owns a bank. Not many children have that fortune. You have that fortune. Your mother’s bank has an enormous amount of money. Money is not your problem. Your problem is what to do with your money.

Then, if you feel frustrated [because] you cannot come up with an idea, think about your mother and what she did. She didn’t wait for anybody. She took the money and went into business herself. She’s an illiterate woman. Along the way she was successful step-by-step. She went on and sent you to school. Now you’re in higher education with her bank. And what good is your education if you cannot do better than your mother? If she can do it, you can do much better. That’s the thing that you have to prove to yourself — that your mother gave you a chance and you will make use of it.

And the use is that you create a job for others. So start small and expand it as you grow and bring in more people to help you to grow. You don’t have to wait to finish this school and get a certificate. In education, when you use it for getting a job, you need a certificate. You don’t need a certificate when you go into business yourself. So when you’re in school, you start a business at the same time. Continue with it. Some of them are taking this idea and have started borrowing from Grameen Bank and getting into business themselves.

Knowledge@Wharton: To link what you just said to what we were discussing earlier about social business, what kind of social businesses could you start around education, and is Grameen involved in any such activity?

Yunus: On the health side, what we have done this year — we are in the process of finishing it — is start a nursing college as a social business, because nursing is a good profession. We’ll be giving nursing degrees to the young girls from Grameen families. They are coming from poor families and going to nursing college. Grameen bank will give them education loans so that they don’t have to worry about money or where the money is coming from. The college will cover their cost and they will get the jobs. We will [train] the nurses in a way that there will be an internationally acceptable level of education. There is a big shortage internationally of nurses. There is a big shortage within the country. So each girl will have a choice whether she will work in the country or she will go outside.

This is a social business. As I said, I don’t have to limit myself to one nursing college. I can have a series of nursing colleges. They are paying for themselves. Why can’t you create as many as you want because there are millions of young girls waiting around, sitting around doing nothing because they have no opportunities? I can create some opportunities for them that will change their lives. They will change the society, because now, they go out of the village and they work in the hospitals , and go outside the country and learn languages, and so on. This is another example of social business. I also want to do a medical college on the same principle because medical colleges also can cover their own costs and produce doctors — doctors with a different kind of orientation than you normally have.

Normally doctors — student doctors — are planning, when they finish their education, to start their career and make a lot of money. That focus usually happens. So this orientation will be that when I come out, I want to make sure I can help the health situation in the country and focus on the poor families. So how do we do that kind of thing? By having a very high quality of education … and not feeling that you’re left out because you concentrated on a certain kind of thing. And you can get involved in researching health issues and so on. So another social business could come up. Even in education, you can use the idea of social business.

Knowledge@Wharton: Is there anything that’s happened in the microcredit movement or in your own life as it relates to this work that has changed the way you view microcredit? Have you ever said to yourself I should have done this instead of that? Have any of your initial assumptions changed?

Yunus: The basic assumptions remain the same. We have expanded them. Lots of other things came. We thought, “Let’s try this one.” And we tried it and it worked. We felt happy about it. If I reflect on [this question], there is probably one area I would have done differently. When we began in 1982, there was a tremendous amount of enthusiasm among the donors to give us money because we had a small project. They wanted to help us. We were very reluctant to take money because we had plenty of money at that time…. But they kept on pressuring us — the central bank with which we were working. Finally the central bank yielded because they thought, why not? If donors want to give money, let’s take some money. It’s a loan — not even a grant — from IFAD, the International Fund for Agricultural Development. So in 1982, we took the external money. Before that, we never had any external money.

Other donors came in. They wanted to give us more money. So we thought, why not? Once we have taken one, we can take two. We can take three. We started taking it and lots of money kept coming. We kept on expanding. Then one complaint kept coming, which was: Well, Grameen Bank works because it gets a lot of money and its donors are keeping it afloat. I said, no, that’s not true. We didn’t need the money. They gave the money so we took it. So in ’95, we decided not to take any money at all, because we thought we can do it ourselves. From 1995 on, we never took any external money. It’s entirely local money. If we could go back, I would have changed that 1982 decision.

Knowledge@Wharton: Never take any money?

Yunus: Never take any money…. People said, “Well, a donor had to be there; otherwise they cannot survive. These are donor-supported programs.” Which is a lie. I said that’s a very wrong idea because that’s not how we wanted to work, and we never worked that way. So that’s one change.

Knowledge@Wharton: I have one last question. How do you define success?

Yunus: Just like any other case. Whatever your objective was, if you came to that, you are a success. It depends on what your objective was. In our case, we wanted to bring credit to poor people and savings services to poor people. People said it could never work. We hoped that it would work, and it did. And then [people would] said, “Well, it may work in one village, but it won’t work for two villages.” We did it. They said, “Maybe in 10 villages it won’t work. If you grow big, it will collapse. You are stretching your luck too much.” We did it. So that is a success, even beyond what we imagined. We never thought that we could continue with such a repayment record for years and years because organizations get weakened or, as you grow big, your management becomes a problem. This was a big worry for us.

As we grow, can the quality of administration, quality of management continue to grow with it, or deteriorate? Because you are not running it yourself any more, you are depending on hundreds and hundreds and thousands of young people who just came to know about it. We leave everything in their hands, [including] the decisions. But it worked. And then [people said], “It may work in Bangladesh, but it won’t work outside.” So now, as I said, it has worked all over the country, all over the world. In many countries, they said, “Well, our country is not like Bangladesh. We don’t have such a huge density of population and not as much poverty concentrated in our population. So in our country it won’t work.” We said, “Well, you debate about your country and Bangladesh. Give the task to us. We will go and do it for you.” Many countries accepted that, so we started doing it. We did it in Turkey. We did it in Kosovo. We did it in Costa Rica, Guatemala, China, India and many other places to demonstrate those kinds of things.

We started one in New York City last year. It’s called Grameen America. We do the same kind of work that we do in the villages of Bangladesh and with beautiful results. We have more than 600 borrowers in New York City. All women. Five-member groups. Weekly repayment. Savings, $2 each week. We have given loans. The average loan is $2200. The repayment rate is 99.3%. No collateral, nothing. So it works. I would say the strength of the idea is that it’s not country-specific or people-specific. It’s global. It’s a human thing. It’s not something that works with one particular character trait or community.

Knowledge@Wharton: Thank you so much for joining us today.

Yunus: Thank you for giving me this opportunity.

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