Grameen Bank, Bangladesh

Does the Capitalist System Have to be the Handmaiden of the Rich ?

Muhammad Yunus

[Extracts from the keynote address delivered at 85th Rotary
International Convention held in Taipei, Taiwan, on June 12-15,

Credit As a Human Right
IF we are looking for one single action which will enable the
poor to overcome their poverty, I would go for credit.  Money is
power. I have been arguing that credit should be accepted as a
human right.  If we can come up with a system which allows
everybody access to credit while ensuring excellent repayment ---
I can give you a guarantee that poverty will not last long.  If
the helplessness and isolation of labour,  who have nothing to
sell but their labour, can be totally removed by connecting
labour with capital through a universal credit system, we'll then
have other kinds of actors on the economic scene different from
what the existing capitalist world would allow us to bring out.
Poverty is not created by the poor.

Poverty is created by the existing world system which denies fair
chances to the poor.  If we can ensure truly equal opportunities
to everybody in the society there is no reason why poverty should
linger around us.

Charities and handouts help maintain and deepen poverty.  These
are invented to avoid giving equal chances to the poor.  Handouts
take away initiative from people.  Human beings thrive on
challenges, not on palliatives.

Grameen has put trust back into the picture.  We do business on
trust.  (In the USA, one of the Grameen replications calls
itself "Good Faith Fund" to make this very point.) Grameen
trusts people.  It believes in the enormous potential of each
and every human being.  Given enabling environment,  even  the
poorest woman can peel off doubts in herself and start exploring
her abilities to find a life with full human dignity.

Besides being a lending institution, Grameen also requires the
borrowers to save.  Each borrower saves one taka (2.5 cents US)
each week, and five per cent of the loan money.  Today the total
savings of Grameen borrowers exceed US$ 70 million. If they wish,
Grameen borrowers can collectively buy up the largest enterprise
in the country.  It would be fun to do that -- the poorest in the
country getting into the league of the richest in Bangladesh!

Capitalism : Making the Rich Richer
The  essence  of  capitalism  is  expressed in two of its  basic
features: a)  profit  maximization  and b) market competition. In
their abstract formulations none of them was supposed to have
anything conspiratorial against the poor.  But in real life
they turn out to be the "killers" of the poor#by making rich the
richer  and  poor the poorer.

Profit maximization is recognised as the best principle to ensure
the optimal use of resources.  It tells you when you are going in
the right direction in mixing inputs, when you are going in the
wrong direction, and when you have just the right combination of
resources. Free market competition ensures that you are pushed
out of any comfortable position when your competitor finds a
better combination or better product or better way of doing
business. It is the driving force for all innovations, technology
changes, and better management.

In the conceptualisation of the capitalist world we have
installed a greedy (almost bloodthirsty) person to play the role
of profit-maximizer.  Not only have we deprived him of all human
qualities, we have empowered him by giving him all the
institutional  support he can use by depriving the same support
to everybody else (e.g. banks will give him the money  and  not
to anybody else).  On top of it, we conceptualise that the
entrepreneurs are a very rare and special breed of people.  We
are lucky to have them with us.  We must give them all the
privileges they ask for.

We Build What We Imagine

If we imagine a world where every human being is a potential
entrepreneur, we'll build a system to give everybody a chance
tomaterialise his/her potential.  The heavy wall between
theentrepreneur and the labourer in this world will be
meaningless.  In addition, if labour had access to capital, this
world will be very different from what we have built so far now.
We build what we imagine.  In the past we imagined the wrong way;
as a result we got a wrong world.  By formulating our axioms the
right way, we can create the right world.

In the "right" world, we'll have to forget that people should
wait around to get hired by somebody.  We have to instil in
everybody's mind that each person creates his or her own job.
We'll build  institutions in such a way that each person is
supported and empowered to create his/her own job
(self-employment).  Wage-employment will come into the picture
only as an alternative to self-employment.  The more
self-employment becomes attractive, wide-ranging, and
self-fulfilling, the more difficult it will be to attract people
for wage-jobs.  Women, minority groups, the physically
handicapped, and socially handicapped persons will benefit more,
the more self-employment becomes rewarding and convenient.

Mass production of a product leads to economics of scale under
any production system.  But there is nothing which makes
itobligatory to organise this mass production under one roof.
Home-based production based on self-employment can be as
mass-scale as in a single roof wage-based factory system.  The
more we can move towards home-based production by the self-
employed masses, the more we can come close to avoiding the
disasters of capitalism.

Through wrong conceptualisation the agricultural world quickly
moved into plantation economy and enslaved people.   In its
impatience and arrogance, the world refused to see
theopportunities through  people-based agriculture.

Let me give some examples from Grameen how people-based
production can be organised in a large scale and benefit the

Help Them Learn How to Catch Fish

In 1986 Government of Bangladesh invited us to take over a large
fisheries project.  The project was not getting off the ground
after investing several million dollars of donor money.  We were
not sure whether we should get involved in the project.  We did
not know anything about growing fish.  In the end we agreed to
take over the project at the urgings of the government, hoping
that the un-utilised water bodies could be  combined with the un-
utilised abilities of the poor to create a new chemistry for
production and better life.

There were nearly 800 ponds of various sizes and shapes under
this project with a combined water area of over 1000 hectares.
The government tried to grow fish in these ponds.  They failed
because government employees used the resources to benefit
themselves rather than the government and the people.  Stealing
fish from the ponds by the villagers was identified by the
government officials as a major cause for the failure of the
project.  Government records show that the actual annual fish
harvest remained below 50 tons.

Grameen brought in new management style, new determination and a
new drive.  Poor people around the ponds were organised into
groups to become partners in the  pond management and share the
harvest on a 50:50 basis.  Grameen provided the capital and
know-how; poor people provided their labour.  Stealing of fish
was brought down to near zero.  The poor, who under the previous
regime, either stole fish for themselves or stole fish as agents
of others, now became growers and protectors of the fish, and
owners of the fish.  In 1993 Grameen produced 805 tons of fish,
402.5 tons went the poor group members.  In 1994 we are hoping to
raise the production to above 1,000 tons.  Yield per unit of
water body is rising steadily.  The project not only covers all
its costs, it now generates a profit.

Two Million Idle Ponds

Encouraged by the results in our fisheries project we have
nowcreated a non-profit, non-stock new company called the Grameen
Fisheries Foundation.  The new company has taken over all the
fisheries projects of Grameen Bank, including a shrimp farm
located on the Bay of Bengal.  Bangladesh has nearly two million
ponds, innumerable other water-bodies with excellent
possibilities to grow fish.  All these water-bodies remain
underutilized.  If we can only extend the Grameen style of
growing fish in these water-bodies we can achieve the following
objectives : a) poor people can grow and catch their own fish and
enhance their income by growing more and more fish per unit of
waterbody; b) it will make substantial contribution to animal
protein availability in the country; c) a large pool of educated
youth will have ready opportunities for self-employment and wage
employment, d) processing, storing, marketing of fish can
generate another growth area.

Why doesn't it get done now ?  Because in a capitalist world we
are told that we'll have to wait around until we find a "greedy"
entrepreneur to discover this as a new opportunity to make money.
With a socialist orientation of the government, the state would
have come forward and exploited the opportunity presented in the
fisheries sector of Bangladesh.  (In our case the state did step
forward.  But the result was very unhappy.)  In a capitalist
framework we have always ignored the role of another type of
entrepreneurs----social-consciousness-driven entrepreneur.  I
think it is time we pay serious attention to them.

Let me add a few more examples from Grameen experience.

Grameen Check : People-Based Textile Industry

Grameen had neither any intention nor any qualification to get
involved in the garment industry of Bangladesh.  But somehow we
got drawn into it.  There are over a million weavers in
Bangladesh with approximately half a million handlooms in their
possession.  Over eighty per cent of textile requirement in
Bangladesh are met by these weavers through handloom production.
One will tend to imagine that the weavers are having good
business from this captive market.  They are not.  Since most
Bangladeshis are very poor they cannot afford to buy clothes as
often as you'll imagine.  Unless a piece of clothing becomes
absolutely unusable one does not buy another piece of dress.

Many of the weavers are Grameen borrowers.  We see how difficult
their lives are because of very low demand and stiff competition
from machine-made clothes.  Many of the weavers remain without
work during slack season.

About two years back we came to know that Bangladesh imports a
handloom product called "Madras Check"  valued at US $ 80 million
for Bangladeshi garment industry to make garments for North
American and EEC countries.  We could not figure out why
Bangladesh imports such huge quantities of handloom fabric while
our weavers remain half-starved part of the year. One explanation
we got was that our weavers cannot produce the quality that is
demanded by  the international market.  We wanted to find it out.
We produced samples and circulated than around.  Everybody agreed
that   the  samples were as good or even better than the imported

Then we got another explanation why this cannot be procured from
the local weavers#because "they are not organised; we cannot go
door to door to each weaver to buy hundreds of thousands of yards
we need; now we place orders to Indian suppliers and they supply
whatever quantity we need, right on time".  We said Grameen Bank
can play the role of the supplier.  We can accept orders and
remain responsible for quality and delivery date.

Make Room for Social-Consciousness-Driven Entrepreneurs

We started receiving orders.  We named our product "Grameen
Check".  We organised some weavers to do the job.  These weavers
never had worked for the international market.  Everybody in the
villages was thrilled to know that the fabric their village was
making will be worn by the Americans and the Europeans.  The
weavers took it as a great appreciation of their work.  They
worked hard to make sure users like it.

Now business is picking up.  The more we deliver, the more the
garment industry takes us seriously.  This can grow into a
billion dollar business --- developed around home-based weavers.
We can supply "Grameen Check" to garment industry any where in
the world --- India, Pakistan, Sri Lanka, Thailand, China,
Viet-Nam, or any where else.  We are inviting consumers and
producers every where to try us.  Please make room for
social-consciousness-driven entrepreneurs in the world economy.

Noticing the growth of the business, Grameen Bank has created
still another a non-profit, non-stock company called Grameen
Uddog (or Rural Initiatives) and handed over all the Grameen
Check related businesses to this new company.  Grameen Uddog is
expanding itself into new areas of textile too.  Besides Grameen
Check it is now producing Grameen Flannel.  They are getting a
good response from the market.


Main Report & Country Reports (Part2)

Grameen Agriculture Foundation

Two years back Grameen Bank created another company called
Grameen Agriculture Foundation.  We saw how agriculture in
Bangladesh lagged behind other countries in the region because it
was left to people who did not have the knowledge, financial
capability or interest to bring any change in agriculture.
People with money and ability left villages for urban areas where
they adopted other professions.  They have very little link left
with agriculture except collecting rent from the share-croppers.

We saw how the poor in Bangladesh suffer because there is not
much activity during the slack season in agriculture.

Grameen entered agriculture to break the traditional production
cycle. Grameen Agriculture Foundation (GAF) now produces
unfamiliar crops like maize, soyabean and sunflower, besides
rice, wheat, sugarcane and other traditional crops.  GAF does not
own any land.  It enters into agreement with any willing farmer
to become a partner in production. GAF supplies all or some
critical inputs and gets an agreed quantity of the harvest.
Farmers do not have to worry about funds, inputs, or marketing.
They are now willing to experiment with any crop and crop-cycle.

Come and Join Hands With Us

GAF is looking for partners and friends around the world to find
new technology, new markets, new crops, new management systems.
GAF will like to enter into export market for banana, okra,
gherkins, tomatoes, vegetables, or anything else that has a
market for.  Any individual or organisation who is willing to use
the tools and concepts of capitalism to benefit, not the greedy,
but the needy, may come and join hands with us.

GAF wants to enter into biotechnology in a big way --- to
eliminate chemical fertilizers and chemical pesticides and
replace them with bio-fertilizers and bio- pesticides.  We are
hoping to organise the bio-fertilizers and bio-pesticides in
people-based ways --- rather than in mass- scale factory

GAF wants to set up a seed industry to allow all farmers access
to first-rate seeds so that his hard work is not wasted because
of inferior seed.  We hope to use tissue-culture technology in a
people-based way to produce some of these seeds.  We are looking
for experienced partners to help us set this up.

One of the big plans for GAF is to produce orchids in a home-
based manner by inducting poor households to grow orchids in
partnership with GAF for world market.

Health-Care for the Poor

All research done on Grameen Bank show that Grameen borrowers
improve their income significantly.  They also show high erosion
of income as the borrowers increase their earnings.  Despite this
erosion of income, Grameen borrowers succeed in crossing the
poverty line in ten to fifteen cycles of Grameen loans.  We are
trying to find ways to speed up the process of poverty reduction
and help the borrowers to cross the poverty line earlier, say, in
less than ten years.

If we can plug the erosion of income, we can help speed up the
process.  So we looked at it.  This income erosion takes place
primarily in procuring health care services.  The poor have very
poor health.  As they improve their income, they spend more and
more on one of the priority items --- health.  But the health
services they buy with their hard-earned money is not only
unreliable; most-often they lead to more serious health hazards.
In other words they end up buying more health troubles with their
money rather than overcoming them.

Grameen has decided to enter into this market and provide modern
health services on cost recovery basis.  Government of Bangladesh
has a very elaborate health service infrastructure which is built
to provide free medical services to all citizens.  As a result
the service is extremely poor and it is available only to a
handful of privileged people.

Grameen has started its experimental healthcare programme through
Grameen Trust, another member of Grameen family of companies.
This service is available to all villagers, both to Grameen
borrowers and non-Grameen villagers.  Grameen borrowers pay a
fixed amount of US $1.25 per family per year as premium for a
health insurance programme.  They pay a nominal fee (US $ 0.02)
each time they have to see a doctor.  Medicines are sold at a
discount.  Pathological tests are available also at a nominal
fee.  Non-Grameen villagers pay a higher fee.

>From our initial experiment, we feel that it is possible to run a
modern health-care programme on cost-recovery basis.  If we can
organise it through a nationwide franchise (even international
franchise) we see a good possibility to turn it into a strong,
competitive, sustainable pro-people enterprise.

The engine of the capitalist system is supposed to be fuelled by
greed to keep the system moving.  I feel that this is one wrong
assumption which has led the world to a self-fulfilling prophesy.
We must vision a world which has not only greedy people, but also
people with strong feelings for their fellow human beings.  Also,
between them, there are many people who are neither all greedy,
nor all self-sacrificing.  They can swing either way or spend
their lives following a middle course with a careful mixture of
selfish deeds and personal sacrifices for the community.  If the
societies can build a good reward system for works of collective
good, they will easily take on more of good works than the
selfish kind.  When we accept this configuration of the world,
we'll build our values, institutions, educational and social
systems consistent with this configuration.

An Alternative Vision of the World

In this alternative vision of the capitalist world, instead of
one motivating factor ("greed") to keep it in motion, we can
introduce social consciousness or social dreams as another
motivating factor.  Both types of people can be in the same
market place, using the same tools and concepts of capitalism,
but pursuing completely different goals.

Of course, in addition, there will be middle of the roaders, who
will mix both greed and social objectives according to their
tastes and abilities.

This alternative vision of the world under capitalism  will not
be as black as it turned out  under greed alone scenario.  This
capitalist world can accommodate all shades : white, gray and
black.  I think this is the most realistic vision of the world
under any framework, capitalist or non-capitalist.

I am inclined to believe that the role of social-consciousness-
driven entrepreneurs in the new configuration of the capitalist
world is assigned to the state in a socialist framework.  The
state did not do a good job in this role.  Can capitalist
concepts, tools and framework  allow, support and promote
economic activities leading to achievements of social objectives
in parallel with narrow personal objectives ?  My answer is an
emphatic `yes'.  Yes, it can be done provided we can create,
strengthen and widen the role of social-consciousness- driven
entrepreneurs through building supportive institutional
arrangements, state policies, educational systems, social reward
mechanisms and creating international support systems and
solidarity networks.

Through this forum I make an appeal to the Rotarians all around
the world who are leaders of their professions to join and take
up leadership among social-consciousness-driven entrepreneurs.
By joining the ranks of social-consciousness-driven entrepreneurs
you'll gain more in social respectability than what you'll lose
in dollar and cents of personal income.  Above all, you'll be a
happier person than you'd otherwise ever be.  If you become
social-consciousness-driven entrepreneurs with your total
commitment, I can assure you that you'll  build an entirely
different world than what we have now.  The world that we can
build will be totally free from poverty and human indignity; it
will be a world of friendship, cooperation and happiness rather
than a world of aggression and destruction of human values and

Are we Alert and Active ?

I appeal to all entrepreneurs, professionals, management people,
business strategists and fund managers, to take upon themselves
the task of setting up social-consciousness-driven enterprises
and businesses throughout the world and create supportive
financial and solidarity network to help sustain, grow and expand
this type of enterprises.

There are already many small efforts in this direction scattered
throughout the world.  We need to bring them closer to find
inspiration from each other.  We offer to make Bangladesh an
action-research site to demonstrate what can be achieved in a
problem-ridden least developed country through the combined
efforts of the social-consciousness-driven entrepreneurs from all
over the world.

We must find ways to have social-consciousness-driven
entrepreneurs out-number the greed-alone-driven entrepreneurs in
the world as fast as we can.  We just can't leave the market
place to be monopolised by the greed alone-driven business
people.  Let us not create a wrong world just because we laid
down wrong postulates or we are too indifferent to notice
opportunities to build a better world.  Let the new millennium
show that we are alert, active and committed.  We can take the
initiative to correct the errors of the past in a decisive way.
We can set our course on the right track with full vigour.

Let us join our hands to create a world which we'll be proud to
be part of, not ashamed of.

Return to the Grameen Bank Page Return to the Grameen Bank Page

Hari Srinivas -
Return to the Virtual Library on Microcredit