Social Business and Social Fiction: An Interview with Muhammad Yunus
David Bornstein interviewed Grameen Bank founder Muhammad Yunus last week. Here’s part of his conversation. For the full conversation, please go to the Fixes column here. (Photo by Nasir Ali Mamun)
Yesterday, in a ceremony at the United States Capitol, Congressional leaders presented the founder of the Grameen Bank, Muhammad Yunus, with the Congressional Gold Medal in recognition of his “efforts to combat global poverty.” The award places Yunus in the company of a small group of people – including Norman Borlaug, Martin Luther King, Jr., Nelson Mandela, Elie Wiesel, Daw Aung San Suu Kyi, and Mother Teresa — who have received this award, as well as the Presidential Medal of Freedom and the Nobel Peace Prize.
Yunus is best known for his work pioneering and spreading microfinance. Today, microfinance providers reach about 200 million clients globally. In Bangladesh, the Grameen Bank has 8.4 million borrowers, 96 percent women. Yunus has also developed many other enterprises that offer an array of products and services to the poor, including Grameen Phone, the largest cellphone operator in the country. Over the past two years, his work has come under attack by the government of Bangladesh, which we have reported on here, here and here in Fixes. Below, in an interview conducted a few days ago, Yunus reflects on his life, the role of social business, and the importance of imagination in creating a poverty-free world.
Q: There is much debate about microfinance today — when and how and whether it works. How would you describe the state of the field?
A: Long before the crisis of 2008, when financial institutions were crumbling all over the world, many of us had been saying that we need to redesign the financial system [which] only serves the top one-third of the world; two-thirds are left out. Microcredit has shown how you can reach out to people that conventional banking cannot. It has demonstrated that it’s a doable proposition.
When we designed microcredit, the purpose was to help people get out of poverty, but some people moved away from that motivation. Grameen is still the same. It reaches out to the poorest — the women — and has demonstrated that despite disasters it can work. The next generation of children in the Grameen Bank have education and health. The Grameen Bank now has nearly a $1 billion in savings accounts of the borrowers, and the institution is 97 percent owned by borrowers.
If others have tried to imitate it in a flawed way, it doesn’t mean the whole idea of noncollateralized lending to the poorest people is flawed. The challenge is to get it right. You can debate which parts of it have impacted on this, and which parts have impacted on that.
You often speak about the emergence of a new kind of business, you call it social business, which is different from what we usually think of as socially responsible business. Can you explain what you mean?
Capitalism has been interpreted as an exclusively profit-centric human engagement. Some have been saying to bring people and planet into the picture. This can be a good change, but it is still not fully operationalized. Are you putting people, planet and profit at the same level?
What I have been trying to promote is different. I dismiss personal profit, and focus exclusively on people and planet. That’s what I call social business: a nondividend company dedicated to solving human problems. You can go all the way, forgetting about personal profit, being single-minded about solving problems. The company makes profit, but profit stays with the company. The owner will only get back the original investment. Nothing more.
I’m not saying to get away from profit-making businesses. I’m saying keep these separate, run them in parallel. There is a toolbox to solve the problems of poverty, unemployment, the environment. All I’m doing is adding one more tool to the box. It’s simply enhancing the capability of people to express themselves in another way to address the problems we have.
Is it realistic to expect people to pursue this kind of business?
When we started microcredit, people asked if it was realistic to lend money without collateral. We demonstrated that it is.
The profit orientation is only one orientation of a person. The same people who are interested in profit making are also selfless. I am not saying that capitalist theory is wrong. I am saying that it has not been interpreted and practiced fully. The selfless part of human beings has not been allowed to play out. As a result, we created a concept of business based on money-centric, one-dimensional human beings. But real human beings are multidimensional.
What do you say to people who say that business needs the profit incentive?
People climb to the top of Mount Everest. What’s their incentive? Making money is an incentive. But making other people happy is a super incentive. We haven’t explored that part of it. I’m inviting you to have a taste of it. If you like it you’ll make your own decision. I tasted it and I found it an exciting thing to do — more exciting than making money.
Do you think people will evolve from being profit-focused entrepreneurs to social business entrepreneurs as they go through their lives?
You’re looking at what exists. Suppose as you went to preschool and school, teachers were telling you that there were two kinds of businesses, one to make money for yourself, another to solve the problems we see around ourselves. And you can use your creative power either way. So you would have grown up with the idea that there are two kinds of businesses. You would make your decision what kind of business you would like to get involved with, and how much of each, if you want both.
We’ve used our creative power to focus on making money — and we’ve done it like it’s the only game in town. It’s not. There’s a more exciting game in town.
What makes you confident the idea will grow?
There’s a whole generation of young people coming up with social business ideas. Profit making doesn’t interest them as much as it interested people before, particularly the postwar generation. Their main question is: What am I going to do with my life. What is the purpose of my life?
Where will the investment come from?
Individuals, companies have foundations, charity organizations. There are billions of dollars locked up in them. We can reserve a portion of charity money for social businesses. It’s a reorientation of the whole idea of charity, and in the process you can build self-sustaining companies and initiatives. Once people like the idea of social money they’ll start diverting their business money into social business.