Tuesday, January 20, 2009

Banker to the Poor - Muhammad Yunus

A journey of a thousand miles begins with a single step”

- Lao-tzu, Chinese Philosopher (604 BC – 531BC)

The adage mentioned above, has a lot of significance in every day life. Every single work that we do needs an initiative. It takes a lot of courage, to choose a path that has been less traveled and even more challenging if it defies the conventional wisdom. This is exactly what I felt after reading the autobiography of Dr. Muhammad Yunus – 'Banker To The Poor'.


While I was looking out for a good book to review, I was considering the following options viz – 'The Creation of Wealth' – The Tatas from the 19th to the 21st Century by R.M Lala, 'Maverick!' By Ricardo Semler, 'The Polyester Prince' – the rise of Dhirubhai Ambani by Hamish McDonald and 'The Banker to the Poor' by Dr Muhammad Yunus. While reading the first few pages in each book I was looking for a feel in the pages which was different – one which made me think and question the conventional thought process. I was struck very significantly by Dr Yunus's battle against poverty, and on reading a bit further, his ability to question the fundamentals of economics in the first few pages really intrigued me into reading the book further. I was searching for a book which had both the spirit of entrepreneurship and a social perspective to it; I found 'Banker to the Poor' the best fit in what I was looking for. The following is the review of the book.

The story of Dr. Muhammad Yunus, Noble Peace Price of 2006 – captured in his autobiography - “Banker To The Poor” is a story of a struggle to move against the conventional wisdom; facing every possible challenge both natural and human. The story doest just mention about the journey of a unique banking paradigm – The micro credit but also the shift in the perception of people towards poor in the society.

I have organized the review of the book/journey of Dr Yunus into the following sections

  • The time lines

  • Spheres of influence

  • The Grameen Experience

  • The Philosophy & Vision of the future

  • My Learnings

The Time Lines

Dr Yunus, was born in 1940 in Chittagong, the present Bangladesh Chittagong is a commercial city of around three million people and is the largest port in Bangladesh Yunus was the second son of Gold merchant Dula Mia and Sofia Khatun, who had nine children in total. Most of the early schooling for Yunus was done in his local school following which he moved on to do his Secondary School at Chittagong Collegiate School. Following his schooling he enrolled himself in Chittagong College in 1955, following this he proceeded to Dhaka to study at the Dhaka University where he spent four years. Following graduation in 1961 to 1965 he taught at the Chittagong University, when he got a chance to go to America to pursue PhD, he accepted the offer and went ahead with the Fulbright Scholarship.

While in America, he married Vera Forostenko in 1970. Around late March 1971, the liberation war broke out in Bangladesh; and he became actively involved in garnering support for the people who were fighting the war; this was a very eventful period in his life. The war ended and Yunus returned to his homeland with a lot of new ideas; in 1972 and was appointed to the governments planning commission, he found not much work happening in that post and then resigned the post to head the Department of Economics at the Chittagong University.

In 1974 there was a severe famine in Bangladesh, that is when Yunus decided to make a focus on farming improvements, he conceptualized the Three Share Farming experiment, which won the President's Award in 1978. It was around the same time that Yunus realized the complete inability of economics as taught in the colleges to help the grass root improvements to the life of poor. The close interaction with the poor around the University, unraveled a lot of hidden issues for Prof. Yunus; the talent and the skill of the poor was unquestionable but they still weren't able to make their ends meet. A bit of field interaction enabled Prof Yunus, to realize the critical role loans played in the life of these poorest of the poor. They couldn't borrow from the banks as these loans would need collaterals; and the other source of money was from the money lenders who would exploit the borrowers off all their efforts and make large profits for themselves.

The Three Share Farming experiment was not a real success as Prof. Yunus wanted it to be, and it wasn't able to really elevate the life of the poor farmers. Following the learning from the the experiment he decided to focus on the problems of the landless, assetless people.

Realizing the importance of collateral for the hardworking poor people who had already learnt the skill of survival and were enormously talented, he set out to see if there was any bank who was ready to plan his idea; of lending to the poor without a collateral. This interaction with the banking system, made him question the very basis of the current financial system, where only the well to do got more loans and the needy actually didn't. After much persuasion, an experimental project; in 1976, was initiated - The bank would give loan only if the collateral was signed by the Prof!!! Having received funds, came the organization and execution of the project, having seen the local society very closely, Yunus decided to loan out to the women in higher proportion than men. This however was a challenge in itself considering the deep silos of thinking in the country, Mechanisms were devised to be able to attract new borrowers, retain them, ensure they repay their loans. In 1977, an old acquaintance found what Prof was doing really worth the salt, and decided to support his initiatives – this is how the first 'Grameen Branch' was started as an experimental project under the aegis of Agricultural Bank.

It was around this time that his first marriage was a failure, and had ended in a divorce; but there was no time to look back. In 1978, at a seminar of 'Financing the Rural Poor' organized by United States Agency for International Development, Prof shared his experiment and its lessons with the bankers and experts presiding over. There wasn't much enthusiasm and more cynicism amongst the people from the conventional banking domain; except for Mr Gongopadhaya, who was the deputy governor of the Central Bank. With support from the deputy governor, he was now in a better position to pitch for Grameen from the banks, the acceptance of the banks came with their own challenges, not just of approval of the requested loans, but also, the test of the 'Grameen Model' in various geographies, and life styles of the poor. This phase of challenges enabled Grameen to improve its own model, make it suitable to the local needs and grow; the toughest challenge in this approach was the mind-set of people. Having overcome this problem and through a 'slow' and persistent approach in each of the localities; the Grameen model was accepted by the poorest of the poor with open arms and a medium to elevate them self from perpetual poverty.

In 1982, Prof Yunus met A.M.A. Muhith, an old acquaintance of the liberation days who had quite unexpectedly become the Finance Minister of Bangladesh. Muhith had brought into the idea of Grameen completely, and when Yunus approached him to be able to make it a separate corporate entity, it was accepted; however in spite of a lot of resistance the, haggling, change in clauses etc the Grameen Bank Project became the 'Grameen Bank' on October 2nd, 1983.

Following the success of Grameen in Bangladesh, the model of working with the poor began to be replicated world wide. The model replication was in a sense replication of the philosophy of Grameen to work with the poorest of the poor, and ensuring a very high repayment rate; unlike the traditional banking system.

Starting 1990 onwards, Grameen has taken a march towards new horizons – the micro-credit concept is a super hit; following this its has been able to grant housing loans to the poor; and started new venture to benefit the people in a larger way – The weaver community of Bangladesh which had remained a dormant entity got a new lease of life with 'Grameen Check'; The traditional ponds are being taken up though the Grameen Fisheries Foundation to promote Fisheries as a medium for upliftment of the poor; Grameen Phone, another sub-entity of the Grameen philosophy has enabled the poorest generate some income for them self though the well known PCO model, and also ushered a quicker growth in the economy by reducing the communication and travel time for the people. As the popularity of Grameen grew around the world, Grameen Trust was created in 1989 to bridge the ever increasing demand for information, training and technical assistance.


All of us are familiar with the context that we live in, the societal values we inculcate, the way we interact with people, our value systems, our behaviors and our attitude are all influenced to a high degree by the kind of people we interact with and the life experience we encounter. An autobiography definitely captures a lot of the influences one would have in ones life, it is this rationale with which I have made this a separate section for influences in Dr Yunus's life.

Parental Influence

Parents play a huge role in the value systems that a child inculcates, Dula Mia was a business man while his wife Sofia Khatun was a home maker. Dula Mia was was a soft hearted person and a devout Muslim all his life. Sofia was a strong and decisive woman, she was the disciplinarian of the family. She was very determined and once she decided to take up something she wouldn't budge unless done. She was full of compassion and kindness and probably had the highest influence, according to Yunus, on him. She always used to put aside money for any poor relations who visited them from distant villages. It was this concern for the poor and the disadvantaged, which later helped Yunus discover his 'destiny' – as he calls it. She narrated stories and sang songs, this was a source of knowledge for her kids, and also had a lasting impact on the life Yunus. His early years were dominated by his mother's influence, an interesting thing that he remembers till date was that she worked on some of the jewelery sold off in the shop, and it was the amount that she earned on selling these which she would use to assist the neediest relatives, friends or neighbors who came asking for help. She had 14 children in total and five of them died young. Growing in such a large family helped Yunus pick up the importance of babies, the importance of family loyalty, peer pressure and peer support, but also the value of compassion when living in a large group. When his mother got severely mentally ill later on, his fathers role became very dominant - His father didn't change one bit, and still behaved the same towards his wife. Once his mother was ill, his father took on the role of both parents for his children, 'in every sense of the term' as he now recalls. He never settled for anything other than the best for this children's upbringing. He now entails the present life standard and values to him.

The early childhood experience of Dr Yunus, definitely made him more responsible, compassionate, ethical, determined and hard working. These became the core value on which his future life would hinge on.

Education in Bangladesh

The next highest influence in the making of any one's mind set would be the initial formative period in school up to one completing his 10+2 education. The general education was limited, during those periods, only to those who could afford to go to school. The primary school to which he went to didn't just give the necessary scholastic ability but also inculcated 'good values' as he calls them – civic pride, importance of spiritual belief, respect for arts, admiration for music and poetry and respect for authority and discipline. He had a passion for reading and would read any book and magazine he would get his hands on.

At the mark of the Indian and Pakistani Independence, he makes a mention of the severe hatred prevalent during the days towards India, the question remains to be asked; for what does all the hatred exist? Is it because one gets a new identity to which his thoughts have been trained to accept? These are some of the thoughts that came to me when I was reading the small section on the number of hatred that was prevalent at the time of independence. The formative periods of child play a very prominent role, and if there is so much of hatred in the air at the time, wouldn't the child pick up some of these? I cannot generalize it but unless unlearnt and learnt again, this hatred would persist is what I believe.

His next education was at the Chittagong CS, which was thought to impart the best education in the country. It was here that he got his first exposure to boyscouting. The whole discipline imparted in the scouting exercises, helped Yunus develop the self discipline, compassion, courage, being religious to the inner self, to cherish and help fellow human beings. One one train trip to India as part of the First Pakistan National Boyscout Jamboree in 1953, the team stopped to visit important historical sites and relics. He recollects this trip as 'a time travel through our history, almost a pilgrimage to meet our own true selves.' While in front of the TAJ MAHAL, he found the assistant headmaster, Quasi Sirajul Haq, weeping silently. He states that the tears were not for the monument, nor for the famous lovers, nor for the poetry etched on the marble. As he recollects – 'He was weeping for our destiny, the burden of history that we were carrying and not knowing what to do?'. Quasi Sahib later on went on to become a friend philosopher and guide to him in many aspects. The encouragement he received from the Quasi Sahib, helped him realize the leadership abilities in him. Quasi sahib's influence enabled young Yunus to aim high, and channelize the passion and restlessness. It is through such teaches who communicate not just orally but also emotionally and guide their students that the student begins to realize his true potential, and march towards ones destiny.

After having completed his high school education he spent a very eventful time at the Chittagong College. His four years of graduation as he recollects were less event full than the two years that he spent in his college at the pre-university college.

Entrepreneurial Stint

While working in the Economics department at the Chittagong University, he tried his hand at Private business. It was in the packaging materials business, the loan for which he applied was immediately approved, and the industry was set up. It became a commercial success, he states this was not primarily to get into business but to prove that he could be a commercial success if he intended to. This experience gave him a lot of self-confidence, it confirmed his belief that as a young man he didn't have to worry about money – he could find one way or the other.

Campus Years in the US

The eastern culture and values are very different from those of the western, and generally one goes through a phase of unlearning - relearning when such a situation come through. This was no different for Yunus who had gone to US to complete his Doctorate. The shy and conserved nature of Bangladesh was not to be found anywhere. The colleges were co-eds and it was a highly informal environment a start difference from his country. It was in during his day in the US that he became addicted to the television. He joined the anti-Vietnam war protests, but there he kept an open minds than being carried away by any news and group think. Group think is probably the most easiest trap we fall into, the heard mentality is to be checked and understood properly to be able to overcome.

The traditional leftist Bengali's hated him for his positive opinions on US, it was the exposure and the learning phase which had made him realize the potential of the positives that the American Culture brought along with it – the personal freedom experienced was the most essential ingredient which enthralled him into accepting the culture as he saw in the US. He clearly states the high learning experience there as – 'little everyday incidents made big impressions on me.'

His interaction with the famous Romanian Prof. Nicholas Georgescu-Roegen, made him realize the respect for precise models which showed him how certain concrete plans can help understand an create the future.

The most important take away of this part of life for Dr Yunus, put in his own words is - '...things are never as complicated as we imagine them to be. It is only our arrogance which seeks to find complicated answers to simple problems.' I buy-in to this learning – its only as complicated as we make it; when u make yourself a clean slate having erased the earlier prejudices we start to look at thing simply and the solutions emerge easily – having a clear and calm mind becomes very essential in the success of any work we do, other wise we will invest far more resources into getting the work implemented.

The return to Bangladesh:

The liberation war had left the country in ruins, and there was much to be done. Dr Yunus was appointed to be on the Planning Commission. Having returned from the US, he was fresh with a lot of enthusiasm and energy to help shape the country's future, how ever he was taken aback by the slow pace of things; he was in the office the whole day and without much to do – having been frustrated he resigned from the post and became the Head of the Economics department of Chittagong University.

An important take away for me from this scenario and my personal experience is that is very essential to keep the resources in use, not to keep them waiting so long that they loose their interest and look for better opportunities to do things in future. Its important to keep a learning and challenging environment to keep the best talent in an organization.

The Grameen Experience

The famine of 1974, had a very decisive influence on the life of Dr Yunus, he began questioning the basic premised of what he had learnt all along the years. His usual travel to the campus from his residence was the first exposure to the life of the poor villagers surrounding the campus. He was dissatisfied and quite surprised at the observation that the land around the University was not really cultivable; while the University was a treasure house of knowledge, the areas surrounding the place had hardly anything to make use of the knowledge that these universities stored in them.

I think he was an activist or a pragmatist in his perspective; this life experiences had made him realize the sufferings of the people in his surroundings. The small villages surrounding the University campus – the Jobra village became his experimental ground. The theory he had learnt till focused primarily on finding why some countries are poor, rather than why certain segments of the population were poor. He finally decided to do something about the famine and initiated a campaign to get the attention of people to the issue of the hour.

This experience of the life of the poor and the famine forced another phase of unlearning and relearning, this time unlearning the theory and learning from the real world.

As a response to the famine, Dr Yunus decided to experiment and took upon himself to help the villages of Jobra grow more food. He designed the Three-Share Farm experiment. This involved the using the unused tube well to grow a winter crop. The experiment was primarily involving three parties – the land owners who would contribute the use of their land during the dry season, the share-croppers who would contribute the labor and Dr Yunus who would contribute all the costs; and each person yield would be distributed in proportion of a third by each party at the harvest. The process was a learning experience and the experiment was an enormous success, this experiment also won the President's Award in 1978. The experiment had brought to light the problems which he had not focused on earlier – The poorest people who slogged at night didn't get anything substantial from the initiative. This wasn't what Dr Yunus wanted to achieve – he was in fact expecting to benefit the poorest of the poor. This realization enabled him to think on different lines to seek a different solution to the problem. His attempts now focused on the problem of assetless, and landless people who lived in the neighborhood.

The story of the numerous poor people in the surroundings, helped him realize the importance of credit in the life of the poor. He wanted to come up with a better solution to the problem, rather than the usual methods of going to money lenders or looking for contribution from the well off. He instead went to the government bank and this lead to another insight into the plight of the poor and their inability to get loans to uplift themselves - the collateral.

The collateral actually denied the poor of any possibility of having an access to any loan, they had nothing at their disposal to provide as a collateral. This inability denied the most needy of the loans and only the people who possessed some asset already would gain the benefits of loan from a bank. This was something the Prof could not understand. After much coaxing with the bank; he was finally able to get the permission from the Bank for collaterals, where in he would act as the collateral guarantee for the large number of poor people. This model was how Grameen worked for quite a long time. His opinions on the topic of collateral are - “people who are well off don't care what the law will do to them,...the people at the bottom are afraid of everything, so they do a good job because they have to. They have no choice.”

The lending process was very unique in itself, unlike the traditional banks of Bangladesh, this loan were primarily given to women. These loans to women helped solve a lot of issues which were the core of the concern that Dr Yunus wanted to attack - “Women experience hunger and poverty in much more intense way than the men.” Poor women are the most insecure of the lot, and supporting her would help not just improve her social status within the family but also ensure greater stability to the whole family structure. The goals of economic development are easily attainable if its done through helping women. This approach however didn't come without its own set of social objections, but when the benefits started emerging out most of the doubts were automatically laid to rest. The major challenge in this approach of targeting the women as the primary customer was difficulty in reaching out to them, the conservative culture of Bangladesh didn't make it easy to be able to get to speak with the women being a man directly, lot of alternate strategies had to be adopted to get to the women in the locality. The efforts paid of; slowly but surely.

The next challenge in the journey was one of scale, the experiment was slowly growing and the impact was seen in society, but like any NGO, the challenge of scale persisted. There was a lot of formalization that had to come in the future, but currently the immediate challenge was to reach out to the poor women. This necessitated good talent to be able to work at the grass root level under not so favorable conditions, and having to work with women, women employees were an absolute must. Dr Yunus had to take up several hard decisions and finally the results paid off.

While combating poverty, there is an interesting observation made by Dr Yunus - “Poverty is a chronic disease, it cannot be cured by ad hoc measures. There may be short-run measures, but one must have a long term strategy in mind when taking a quick tactical step.

One short term programme is totally ineffective in this regard. Continuity of relationship creates an atmosphere of trust which helps to lay down the foundation for higher level of relationship. Projects can have an impact only when a long-term commitment underlies them.”

So, essentially for the success for he project it was very essential to have those people who were committed and were bought into the philosophy of the project completely. The kind of people who work with the project were both the really well educated people with masted degree – they were typically the branch mangers, and the others were people with some basic eduction.

Grameen follows a group structure and this plays a very critical role in the success of the operations. Individually a poor person who is already down in confidence feels exposed to all kinds of hazards, group membership gives him the feeling of protection, support. The group pressure smoothens the behavior patterns and makes the borrower more reliable. A sense of intra and inter group competition helps everyone to try to be an achiever. Keeping track of individual borrowers is difficult, and this challenge too is mitigated by using the group as the unit of interaction. The focus of the attempts of the Grameen employees was to focus on helping women to form groups and initiate the loan process; Awareness-building and Leadership training would follow the delivery of credit, rather than precede it. In the words of Dr Yunus - “The Grameen loan is not simply cash, it becomes a kind of ticket to self-discovery and self-exploration. The borrower begins to explore her potential, to discover the creativity she has inside her.”

An other interesting feature of the Grameen model is that is doesn't have any legal instrument between the lender and the borrower, its only based on trust. The relation is mutual – Grameen places trust in people and the people place trust in it in response.

Other than the organizational challenges that arose in the way the Grameen bank got built, the way it got financed was also very interesting. Networking and communicating with the right kind of people – the like minded people – was very critical in garnering the support so crucial for the success of Grameen.

The success story of Grameen spread beyond the boundaries and various modifications were attempted all over the world. The strong principles which Grameen has adopted if strictly followed had ensure success every where.

What started off only as an experimental project, went on to be a project under the Agricultural bank; became a separate financial bank later on. The success didn't stop there, it went ahead with helping improve the lives of the poorest of the poor – through the latest use of technology, power, communication etc. All this has put Grameen on the high books of every person who has come in contact some way or the other with the name – Grameen.

Finally, In the words of Dr Yunus, his journey with Grameen has taught him the following two lessons -

first, our knowledge base about people and their interactions is still very inadequate; second, each individual person is very important. Each person has tremendous potential. She or he alone can influence the lives of others within the communities, nations, within and beyond her or his own time.”

I concur with the above insights given by Dr Yunus, we need to believe it is in us that the potential to make the difference lies and if we consistently work towards achieving it, the world would be a better place to be. In the process of contributing to the world, we need to be cautious about arrogance and complacency – our knowledge about a lot of things is limited and it is essential we realize and work towards knowing each other better, so as to improve our understanding of the unknown-unknown in life.

The Philosophy and Vision of the future

Grameen is what Dr Yunus calls the Social Conscious Driven Enterprise, it is a private sector self help bank and its members gain personal wealth. Competition is central to a lot of innovation, technological changes and better management. He suggests a close association between profit and social returns.

Self employment hast been dealt very extensively in economics, and the role this has to play is very substantial in the alleviation of poverty. Self employment as a means of self help helps quicken the societal growth economically and in a very acceptable manner.

The vision of future for Grameen is to bridge the conventional society with the technological innovation to reach greater success for the poorest of the poor, and finally reach a stage were poverty is sent to the museum.

My Learnings

Many of my learnings and observations have already been added int the earlier part of the review, in this section I intend to touch upon the other topics/issues with which I could relate and learn from the book review.

The story is of a one man's dream; which arose out of his compassion and willingness to do something to society; spread like wild fire to many countries across the globe; challenging the assumptions of conventional economic wisdom and creating a whole new clan following of this world transforming idea of micro-credit. Each one of us in our own small way that we start can give rise to magnanimous organizations/institutions which grow on to not just outlive our time, but also make us believe in the strength of a slow, compassionate and steady approach to the challenges that we face.

'Slow and steady' as I see it today is almost a lost concept, we are in a fast paced world and expect every single thing around us to be done at the pace we expect it to be. We need to realize the value of value of patience; and work towards achieving what we set our mind on.

I intend to be an entrepreneur, and have started off with a venture of my own. As I read through the book there were many instances in his life that I could relate with. Probably this was a very critical aspect which helped me choose this book to make a review on.

I was born in Udupi and have my ancestral routes in the agrarian rustic lifestyle. I was brought up in Bangalore, but have been visiting my home town very vacation I got an opportunity. It has helped me become more socially conscious to the suffering of the people in these rural areas especially the role of money lenders in exploiting the poor. I have seen a transition happen in the past 15 years with the advent of the micro-credit schemes and various nationalized banks coming forward to help these economies grow and contribute substantially to the growth of the economy.

Education has played a very pivotal role in our family, and I can see the results of this right in front of my eyes. My father was the only person who got a formal schooling and went ahead to complete his engineering – the life we lead compared to that of my uncles who didn't get a formal schooling helps me value education and learning a lot. I could also related to the explanation of Dr Yunus that poorest of the poor are not short of talent and skill, as I know of my paternal grand father who was skilled in many things and was able to drive the family of 4 with his meager earnings. This story of the Grameen bank has helped me link much better to the life of poor people.

I was thinking of the new strata of firms called socially conscious firms; this would be a definitely a plus point to the firm I have started.

The biography has given me a lot to think about not just from the experience shared in the book but with the reflection on the various experiences I have had in my life. This book is definitely one of the few most influential books I have read in the recent times.

Tuesday, January 13, 2009

Some random thoughts on IIMB

The tag is one of the few things I will carry
unprotected unlike many as I walk out of campus...
to explore and realize my destiny...
this place has changed me a lot... given me a lot, taught me a lot...
I am nothing without the path I traveled hr...
I am still nothing coz a lot has been traveled b4 I came hr...
this place has humbled me.... and made me realize... its still u.. and nothing more...
It has made me a fighter.. made me realize my potential...
made me work harder...
over come the lazy inherent being that I generally am more often than otherwise...
I am in debt all thru my life for this place...
at the end its not the success or the failure that remains
its not the CG nor the RG that will be reminded...
its the way of life that shall remain...