The current economic crisis has revealed the flaws of an unregulated free capitalistic financial system. The biggest flaw to the system is clearly the greed of men but closely associated to it is the expectation of continuous growth and ever increasing profits. Doing business to achieve maximum financial profit is just not a sustainable model for the world. It does not eventually, for the majority, promote a better standard of living, a healthy environment nor reduce the widening gap between the poor and the rich.
I am not an economist but I realise the current profit first approach and profit always increasing expectations are fundamentally wrong in that it does not recognise a real world with finite and depleting resources. It’s time to replace that approach with a new sustainable approach. There must be a better way.
I recently had the privilege of hearing Muhammad Yunus, the founder of the Grameen Bank, give a speech. Muhammad Yunus and his bank were awarded the Nobel Peace Prize in 2006 for this reason:
“Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty.”
Basically, Muhammad Yunus lent small loans, primarily to women to help them develop business ventures that would enable them and their families to break out of the poverty cycle. An example would be where a woman sews clothes for a living. Hand sewing, she can maybe complete 5 dresses a week and earn barely enough just to keep the family fed. However, with a loan of just USD1oo, she could buy a sewing machine. With the new machine, she can sew about 20 dresses a week, earning enough to repay the loan and slowly enable her to extract her family out of poverty. The large traditional banks would never lend money to poor people in this manner.
The Grameen Bank has now helped more than 7 million people in this manner and has remained profitable with a high repayment rate and a low but achievable interest rate. It is now a model that has been copied in other parts of the world.
During his speech, he told a story about one of the earliest woman that took part in the scheme. She was able to build up her business and provide for her family and break out of the poverty cycle. Years later, she invited Yunus to attend her daughter’s graduation from University with a doctor’s degree. Yunus showed a picture of him posing with the woman and her daughter on that graduation day. He then asked the audience to consider how the daughter was different from the mother. Was she more intelligent? No, he proposes that the only difference was that the daughter had the opportunity that her mother never had. Microcredit creates the opportunities. He stressed that the mother was not poor because she was not intelligent but because she had never got the opportunity to do better.
It was not an easy road for Yunus and the Grameen Bank either. There was opposition from violent radical leftists to the conservative clergy who told women that they would be denied a Muslim burial if they borrowed money from the Grameen Bank. Nor did the voices of conventional banking and business think highly of his efforts. In commenting on his Nobel Peace Prize award, The Economist stated explicitly that Yunus was a poor choice for the award. In their words “…the Nobel committee could have made a braver, more difficult, choice by declaring that there would be no recipient at all.”
This may not be a total answer to what ills the world but might it at least be pointing to a more realistically sustainable financial and business model; one that addresses the issue of sustainability and defeating poverty. Maybe this is one way towards a better way.