About Founder of Microfinance

Muhammad Yunus

Muhammad Yunus (born 28 June 1940) is a Bangladeshi social entrepreneur, banker, economist

and civil society leader who was awarded the Nobel Peace Prize for founding the Grameen Bank

and pioneering the concepts of microcredit and microfinance. These loans are given to

entrepreneurs too poor to qualify for traditional bank loans. In 2006, Yunus and the Grameen

Bank were jointly awarded the Nobel Peace Prize "for their efforts through microcredit to create

economic and social development from below". The Norwegian Nobel Committee noted that

"lasting peace cannot be achieved unless large population groups find ways in which to break out

of poverty" and that "across cultures and civilizations, Yunus and Grameen Bank have shown

that even the poorest of the poor can work to bring about their own development". Yunus has

received several other national and international honours. He received the United States

Presidential Medal of Freedom in 2009 and the Congressional Gold Medal in 2010.

In 2008, he was rated number 2 in Foreign Policy magazine's list of the 'Top 100 Global

Thinkers'.

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 manages Incubator

Funds for social businesses in developing countries and providing advisory services to

companies, governments, foundations and NGOs.

In 2012, he became Chancellor of Glasgow Caledonian University in Scotland. He is a member

of the advisory board at Shahjalal University of Science and Technology. Previously, he was a

professor of economics at Chittagong University in Bangladesh. He published several books

related to his finance work. He is a founding board member of Grameen America and Grameen

Foundation, which support microcredit.

Yunus also serves on the board of directors of the United Nations Foundation, a public charity

created in 1998 by American philanthropist Ted Turner's $1 billion gift to support UN causes.

In March 2011, the Bangladesh government fired Yunus from his position at Grameen Bank,

citing legal violations and an age limit on his position. Bangladesh's High Court affirmed the

removal on 8 March. Yunus and Grameen Bank are appealing the decision, claiming Yunus'

removal was politically motivated.

13.1 Grameen Bank

The Grameen Model which was pioneered by Prof Muhammed Yunus of Grameen Bank is

perhaps the most well known, admired and practised model in the world. The model involves the

following elements.

Homogeneous affinity group of five

Eight groups form a Centre

Centre meets every week

Regular savings by all members

Loan proposals approved at Centre meeting

Loan disbursed directly to individuals

All loans repaid in 50 instalments

The Grameen model follows a fairly regimented routine. It is very cost intensive as it involves

building capacity of the groups and the customers passing a test before the lending could start.

The group members tend to be selected or at least strongly vetted by the bank. One of the reasons

for the high cost is that staff members can conduct only two meetings a day and thus are

occupied for only a few hours, usually early morning or late in the evening. They were used

additionally for accounting work, but that can now be done more cost effectively using

computers. The model is also rather meeting intensive which is fine as long as the members have

no alternative use for their time but can be a problem as members go up the income ladder.

The greatness of the Grameen model is in the simplicity of design of products and delivery. The

process of delivery is scalable and the model could be replicated widely. The focus on the

poorest, which is a value attribute of Grameen, has also made the model a favourite among the

donor community.

However, the Grameen model works only under certain assumptions. As all the loans are only

for enterprise promotion, it assumes that all the poor want to be self-employed. The repayment of

loans starts the week after the loan is disbursed – the inherent assumption being that the

borrowers can service their loan from the ex-ante income.