“Poverty is the absence of all human rights. The frustrations, hostility and anger generated by abject poverty cannot sustain peace in any society. For building stable peace we must find ways to provide opportunities for people to live decent lives.”1
Who would ever have imagined the founder of a bank receiving a Nobel Peace Prize? Yet the awarding of the 2006 prize, shared equally between Muhammad Yunus (born in 1940) and the Grameen Bank did not come as a complete surprise, for the Grameen Bank Yunus founded had set a shining example for the entire global microfinance sector. Yunus was a pioneer in awarding loans to poor people, and it was he who first brought the issue to the public’s attention. In the presentation speech justifying the award, the Norwegian Nobel Committee said, “Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights.”2
In the meantime, microcredit has become a widespread instrument for combating poverty in developing countries. Poor people usually have no access to loans because they have no collateral to offer. Yet in many cases tiny loans are all it takes to turn a business idea into an activity. For instance, sums as modest as $5 or $50 can be used to purchase a pottery wheel, a millstone, a plow, or a rickshaw to form the basis for somebody’s subsistence. As Yunus has tirelessly reiterated, in the absence of such loans poor people are effectively denied their potential. “People don’t want charity, they need opportunities.”3 Awarding them microloans gives them just such an opportunity, enabling them to gradually free themselves from misery and ultimately repay their loan to the Grameen Bank.
The size of these loans is tailored to the poor recipients’ ability to make payments so that they do not fall into the trap of overindebtedness. A typical sum paid out by the Grameen Bank is around $30. Naturally, interest is charged on the borrowed amounts, because the loan is not meant to constitute alms for the poor, but should rather pay for itself. Microcredits differ from conventional commercial loans in that no collateral at all is offered by the borrower.
The loans in question are associated with a series of fairly unusual principles. For example, the Grameen Bank awards credit almost exclusively to women because “they simply deal more diligently with money,”4 as Yunus put it. And since women are put in charge of finances, they become irreplaceable for the family business, which in practice invariably helps them compensate for their gender’s disadvantaged status within their family. In the Islamic society of Bangladesh, this is tantamount to a revolution. A second principle is that individual would-be creditors must form a group of five female borrowers. Within that group they hold regular discussions and monitor each other’s repayment of the individual loans. Instead of paying out money to all five women at the same time, the bank starts off by awarding just one member of the group the sum that one particular individual requires. The remaining women in the group are awarded their loans only when the first recipient’s repayment record has been monitored over a certain period and deemed dependable. If one member defaults on her loan repayments, the entire group will automatically be affected. From a management point of view, this is a striking example of effective self-management.
Many further rules apply, which Yunus stresses arose from daily experience with the fight against poverty. For example, the women pledge to limit the number of children they have, to drink only boiled water, and to grow as many vegetables as possible.
These and numerous other examples show pragmatic ways in which an organization can be rendered more effective by applying lessons it has learned from experience. When Yunus awarded his first loans, he was astonished at how swiftly they were repaid, and today he is proud that his bank’s loan default rate is so very low—at just over 2 percent.
“When I started I had no idea,” Yunus said. “We professors were all so intelligent, but we knew absolutely nothing about the poverty surrounding us.”5 Yunus was not always committed to combating poverty, having originated from a respected family in Bangladesh and having been sent to the best schools by his father, who was a jeweler. Thus his career trajectory began, rather typically for a son from a good home, by studying economics. Having secured a Fulbright scholarship, he then went on to complete a Ph.D. at Vanderbilt University in Tennessee. In 1972 he was appointed professor at the university in his home town of Chittagong and, by his own estimation, he had perfectly isolated himself from poverty. In 1974, when Bangladesh gained its independence from Pakistan, a famine tore through the country, claiming hundreds of thousands of lives. That proved a turning point in his life: “I started hating myself, the arrogance with which I acted, as though my elegant economic theories gave me the answer.”6
Yunus started taking his students into villages, and in 1976 he launched the Grameen Bank Project, which in 1983 led to his founding Grameen Bank, of which he served as the managing director until March 2011. Today, Grameen Bank has some 8 million borrowers, 97 percent of whom are women. Meanwhile, Yunus has received the Nobel Peace Prize, the Presidential Medal of Freedom (the highest U.S. honor for civilians), and countless other awards worldwide.
At the same time, Yunus also has his critics. Some reproach him for charging excessive interest and maintain that he is not doing enough for the poorest of the poor, like those individuals who are too sick to continue working. Fortunately, Yunus does not allow himself to be upset by this, because he is probably aware that every successful human being in history always had critics. It would be interesting to know how many of his detractors make their claims from the comfort of their cozy studies and on which real results they can base their comments in comparison to those achieved by Yunus.
The work done by Muhammad Yunus shows in impressive fashion the extensive power of effective management applied to the individual, the organization, and society as a whole.
Yunus’s system benefits society by benefiting its customers. The really noteworthy fact is that by offering his customers outstanding benefits, Yunus is developing a strong, healthy organization, which is in turn in a position to contribute toward a stable, healthy society. The sequence is important here and cannot be randomly shuffled: customer benefit must come first. And the organization’s obligations to society are not fulfilled through special social responsibilities, but by creating satisfied customers.
Naturally, any organization has to take responsibility for the influence it exerts either directly or indirectly over individuals, its impact on the environment, and the consequences of its actions. However, it can assume more extensive responsibility for social tasks only if the organization, in so doing, does not jeopardize the attainment of its actual purpose, its business mission. The organization must also be competent in the first place in the domain in which it is supposed to assume responsibility; otherwise, the organization itself could encounter difficulties or cause damage. Consequently, it is essential to resist the temptation to palm off onto large, strong businesses and nonprofit organizations tasks for which they are unable to assume responsibility because doing so is simply not within their capability. After all, good intentions are not always socially responsible.
Even where Grameen Bank’s overall objective—the fight against poverty—is concerned, only if the company has customers can it take on other social tasks. The clear consonance between satisfied customers and the creation of benefits for society, which in this instance are even going so far as to make a contribution toward world peace, is extremely clear, thanks to Grameen Bank’s specific business mission and its special business model. The really great thing about the project is that it shows how good management can be used to realize business models that used to be regarded as impossible. Nobody before Yunus had believed that poor people could be integrated into the economic cycle so effectively and with such lasting effect.
Yunus provides us with countless examples of effective management, including his innovative approach, which on numerous occasions took him into uncharted territory: the calculating—never rash or hasty—way he takes risks, the way he harnesses the power of self-organization, and his clever involvement of powerful partners to attain shared objectives. But one aspect of his approach merits particular attention: he displays true leadership, above and beyond what is normally understood as professional management.
Grameen Bank’s website presents a statement by Yunus which is one of the most remarkable statements ever made about management. Yunus and Grameen Bank had won the Nobel Peace Prize, yet what and how he writes about this goes way beyond what can even be expected from professional management, because it displays leadership in its purest form. In fact, his statement encapsulates what leadership is all about, standing in very stark contrast to the otherwise totally inflationary use of the term. What Yunus wrote about the Nobel Prize awarded to him and Grameen Bank was this:
“October 13, 2006 was the happiest day for Bangladesh. It was a great moment for the whole nation. Announcement came on that day that Grameen Bank and I received the Nobel Peace Prize, 2006. It was a sudden explosion of pride and joy for every Bangladeshi. All Bangladesh felt as if each of them received the Nobel Peace Prize. We were happy that the world has given recognition through this prize, that poverty is a threat to peace. Grameen Bank, and the concept and methodology of micro-credit that it has elaborated through its 30 years of work, have contributed to enhancing the chances of peace by reducing poverty. Bangladesh is happy that it could contribute to the world a concept and an institution which can help bring peace to the world.”7
Finally, let us read what Peter F. Drucker wrote about leadership: “The last basic competence [of four that a genuine leader needs] is the willingness to realize how unimportant you are compared to the task. . ..”8 “The most important [thing to] do, I have said again and again already: Keep your eye on the task, not on yourself. The task matters, and you are its servant.”9
Could Yunus have expressed the mental attitude of a true leader any better than by saying what he did about the Nobel Prize awarded to him?
Commit yourself to more than just your own well-being.
Focus on the task, not on yourself. The task matters, and you are its servant.