Yunus said at Grameen: “We know the limits of our operations and we know how much risk the bank and our clients can take.”
A focus on consumption, rather than income-generating activities, contributed to the US credit fiasco, he adds.
Grameen also has been successful because it’s grounded in what he calls “the real economy,” rather than “fantasy economy” of ever-climbing asset prices. A loan for a goat, for example, produces tangible benefits that can support a family.
“The closer you are to the real economy, the safer you are,” he said.
Grameen’s model has been replicated successfully in more than 100 countries, including the US. Established in the US since early last year, Grameen America lends investment capital to people who otherwise would not have access or would have to rely on money from pawnshops and loan sharks.
The failure of traditional banks to provide this kind of credit is a “big hole” in the US financial system where millions cannot open bank accounts, according to Yunus.
The global financial meltdown “has given us an opportunity to create a financial system that is more inclusive,” said Yunus, who was in Bangkok to launch the Yunus Center in partnership with the Asian Institute of Technology, a university, aimed at poverty reduction in the region.
Yunus’ latest project is advocating what he calls “social business,” which combine altruism with business models to bring corporate efficiency and innovation to help the poor. The goal is to solve social issues and not to maximize profits.
But unlike charity which has no mechanism to regenerate its funding, the business must recover its full costs and recoup its investment.
Joining with multinational companies, Grameen has successfully launched a yogurt business, Grameen Danone, which provides malnourished children with a low-cost source of nutrition. Grameen Veolia has built several water treatment plants that provide clean drinking water to the poorest in Bangladesh, where some groundwater is contaminated by arsenic. BASF Grameen provides cheap treated mosquito nets to help prevent malaria.
Despite cynicism about whether such cause-driven projects could be done on a large scale with no profit incentive, Yunus remained optimistic. He has faced plenty of naysayers before.
“When things fail, then it’s time to ask questions, fix the problems and redesign the system so it works for everyone,” he said. “That’s the challenge of the day.”
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