Microcredit? To Him, It's Only a Start

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The New York Times

Microcredit? To Him, It's Only a Start

By Devin Leonard

May 2, 2010

 

IN 2006, the Nobel committee made the surprising decision to award its peace prize not to a philanthropist or a human rights activist, but to Muhammad Yunus, the founder of the Grameen Bank of Bangladesh. What did this financier from a small, impoverished country do to deserve the world's most prestigious award? He invented microcredit, the practice of lending tiny amounts of money to the poor.

It was a revolutionary idea. Until then, bankers figured that such borrowers were worthy of neither credit nor trust. Along came Dr. Yunus, who demonstrated that lending to the needy could be a profitable business and transform their lives. Indeed, many of Grameen's clients used these small sums to start small businesses and to escape the clutches of poverty.

 

But you probably know this already. Over the years, Dr. Yunus has been embraced by rock stars like Bono and Peter Gabriel, and last year was recipient of the Presidential Medal of Freedom from President Obama. He has also been honored by major corporations eager to have their brands associated with the anti-poverty work of Grameen, which shared the Nobel with its charismatic founder.

 

What is Dr. Yunus doing with all the good will he has accrued? He has another initiative, one that is even more ambitious than microcredit. In ''Building Social Business: The New Kind of Capitalism That Serves Humanity's Most Pressing Needs'' (PublicAffairs, $25.95), he calls for creation of an alternative economy of businesses devoted to helping the underprivileged.

 

The way he envisions it, these companies would be run as efficiently as the for-profit variety. Unlike charities, they would make enough money to be self-sustaining. However, they would invest leftover money in expanding their humanitarian efforts rather than paying dividends to shareholders.

 

People ''will be delighted to create businesses for selfless purposes,'' Dr. Yunus predicts. ''The only thing we'll have to do is to free them from the mind-set that puts profit-making at the heart of every business, an idea that we imposed on them through our flawed economic theory.''

 

He even foresees the day when social businesses will be public companies whose shares are traded on their own stock market. This, he believes, will help pave the way for the elimination of poverty in our lifetimes.

 

In many ways, ''Building Social Business'' is best appreciated as a sequel to Dr. Yunus's 2007 book, ''Creating a World Without Poverty: Social Business and the Future of Capitalism,'' in which he first presented his theory of a new economy. The difference is that the author now declares that social business is no longer a dream. Three years later, Grameen has created social business ventures with corporations including Intel, Adidas, BASF and Danone, maker of Dannon yogurt.

 

''In just a few short years, social business has developed from a mere idea to a living, rapidly growing, reality,'' Dr. Yunus says. ''It is already bringing improvements into the lives of many people and is now on the verge of exploding into one of the world's most important social and economic trends.''

 

Well, maybe. The trouble is that many of Grameen's partnerships are still in their infancy. And the two more mature projects that he showcases have yet to break even, including Grameen Danone, an effort to provide poor Bangladeshi with low-cost, nutritional yogurt. I mention it because he included it in his last book as one to watch.

 

To be fair, Dr. Yunus expects the yogurt business to break even this year. But he's not making any promises. No wonder the chapter on Grameen Danone is entitled ''Growing Pains.''

 

None of this has dampened this global celebrity's enthusiasm for his cause. He urges readers to join his crusade. ''You don't need to know 'how to do business,' '' he writes a bit too facilely. ''Much more important is your desire to solve a social problem. To be sure, practical knowledge about doing business will be useful. If you do not have experience, you can learn as you go along -- hopefully with a mentor, an investor, or a partner to challenge and support you.''

 

Yes, but won't this be expensive? ''Obtaining financing is probably one of the biggest hurdles you will have to face on the road to launching and running a successful social business,'' Dr. Yunus says. ''But with some creativity, resourcefulness, and a lot of patience, you should be able to achieve your goals.''

 

That's easy for a Nobel laureate to say. He has so many big corporations calling him about creating social businesses that he can name the terms. It's hard to imagine any neophyte social entrepreneur being so lucky.

 

It's hard to fault Dr. Yunus' intentions and his optimism. Those things have already taken him awfully far. But it's a bit premature for him to assert that his social business movement is on the verge of reshaping the world economy.

 

He has a lot more work to do first. Then again, he probably encountered a bit of skepticism when he first floated the idea for microcredit, too.

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This page contains a single entry by Ernest Roberts published on May 3, 2010 3:17 PM.

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