Transforming the Perception of Poverty

Yesterday, economist Muhammad Yunus was awarded the Nobel Peace Prize for his work helping to curb poverty in Bangladesh.   Yunus founded the Grameen Bank which takes an innovative approach to lending and finance.  Grameen Bank bank specializes in microcredit; lending out small amounts of money to entrepreneurs.  In poorer countries many people do not have the collateral, credit history, or employment necessary to qualify for a basic loan.  In addition, the bank helps with loans for women in Bangladesh, assisting them to found small businesses from basket making to clothing stores.

Here is a great interview where Yunus discusses the incredible history behind building this bank- and his vision for it’s success. As a professor of economics, he realized that many of the traditional theories cannot be applied to countries with such impoverished conditions. He had to completely throw out classic thinking order to build an infrastructure that could help a people considered high-risk and not “bankable”. The result is a successful multi-billion dollar lending institution with a 98% loan repayment rate; an unheard of figure in traditional financial institutions. Yunus equates much of his success to a natural trust of people to do the right thing.

“Well, people are people everywhere, same way. Natural tendency is for people to stay honest. If the system encourages them to go wrong, they take the other route… So we created an environment where everybody remains at their natural state of affairs, which is to remain honest.”