Muhammad Yunus - Concept of Grameen Bank and Micro-credit

Muhammad Yunus is a Bangladeshi banker,economist and a Nobel peace prize recipient.To be honest i didn't know much about Muhammad Yunus before our Prof. Dr Mandi asked us to watch a speech that Muhammad Yunus had delivered in Emory University. I was curious why our Prof asked us to watch this particular speech.After watching this speech i got to learn a lot of new things which i will share here.

I got to learn about a concept called Microcredit and its importance.Muhammad Yunus was a professor of economics in USA when his country Bangladesh became an independent country after attaining freedom from Pakistan.The economic condition of his homeland was grim as there was a lot of poverty.One of the big factors to fact why poor people were still poor and why there economic condition was not improving was the fact that they were not given big loans by the banks.Hence they were not able to start their businesses or to afford good education for their children and were finding it hard to improve their financial condition.This motivated him to start a new institution called Grameen Bank which had a sole aim of upliftment of the poor people in Bangladesh.Grameen Bank was different from conventional banks in the following ways:-

1. Conventional Banks lended money to people who were already rich and hence could easily repay it with interest where as it thought that poor people were not credit worthy and would not be able to repay the loans.
2. Borrowers from conventional banks were mostly men where as most of the loan borrowers from Grameen bank were women(nearly 97%)
3. Unlike conventional banks, Grameen banks are free from lawyers as they do not need collateral to give loans to people neglecting the past issues of these people

       The main aim of Grameen Banks was to eradicate poverty from Bangladesh and give opportunities to poor people to start their own business and create subsequent employment and to make poor people provide their children with good education so that they can get good jobs when they grow up.All the above mentioned things would not have been possible if the poor people were not given loans.The lesson to learned here a a good system results in a flourishing society where as a bad system ruins the society.

        Grameen Bank concept has also been implemented in the USA with the name Grameen America 

        In 2006 Yunus and Grameen Bank received the Nobel Peace Prize for their efforts through microcredit to create economic and social development.

       In February 2011, Yunus together with Saskia Bruysten, Sophie Eisenmann and Hans Reitz co-founded Yunus Social Business - Global Initiatives (YSB).YSB creates and empowers social businesses to address and solve social problems around the world. As the international implementation arm for Yunus’ vision of a new, humane capitalism, YSB manges Incubator Funds for social businesses in developing countries and providing advisory services to companies, governments, foundations and NGOs.

        Now let us try and define what micro-credit is after what what i have written so far.Micro-credit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment and a verifiable credit history. It is designed not only to support entrepreneurship and alleviate poverty, but also in many cases to empower women and uplift entire communities by extension. In many communities, women lack the highly stable employment histories that traditional lenders tend to require. Many are illiterate, and therefore unable to complete paperwork required to get conventional loans.

      

        The concept of micro-credit was given birth by Muhammad Yunus and he has earned our respect for that.Helping the helpless is what we all should strive to do as well.We should not just learn economic concepts from him we should also learn that we should help those who need it.