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Microcredit founder says business can end poverty

Bangladeshi children enjoy Grameen Danone's fortified yogurt.
Bangladeshi children enjoy Grameen Danone's fortified yogurt.
Thomas Haley, Danone.Communities, Sipa Press

Many Americans may not recognize Muhammad Yunus' name but they have heard of his work. Yunus, who won the Congressional Gold Medal on Wednesday, is considered the father of microcredit, a groundbreaking approach to fighting poverty that has dramatically changed developing nations around the world.

Yunus, a 72-year-old former economics professor at Chittagong University in Bangladesh, has put a particular focus on helping impoverished women, who he said are often the biggest catalysts for change in their communities.

"Today’s award confirms what millions of women and working poor around the world already know: that Professor Yunus is a champion of women’s rights, economic development, and the belief that every human being should have the opportunity to become self-sufficient," said Kathy Calvin, President and CEO of the United Nations Foundation.

Yunus, who has already been awarded the Presidential Medal of Freedom and a Nobel Peace Prize, visited the Deseret News offices earlier this month to discuss the ways the power of business can be harnessed to solve the world's most pressing social problems: hunger, sanitation and health.

Building self sufficiency

Since 1974 when Yunus launched the concept, microcredit has spread around the world. As of 2009, an estimated 74 million men and women held microloans totalling $38 billion, according to Microfinance Information Exchange. Bangladesh’s Grameen Bank, which Yunus started in 1983 to administer microloans to his countrymen and women, has disbursed nearly $10 billion to the poor with a repayment rate of around 97 percent. These loans, according to various evaluations, not only alleviate poverty but help empower women and uplift, by extension, entire communities.

Microcredit typically involves lending small amounts of money to people in communities that have no access to credit. The recipients tend to be impoverished women who use the money to start small businesses, selling milk or sewing for example, to support their families, send their children to school and ultimately move out of poverty.

While pioneering the microcredit movement is a considerable accomplishment, Yunus continues to look for new and innovative ways to fight poverty, particularly the development of a new concept he calls "a social business."

Business can end poverty

A social business, according to Yunus’ definition, is a business that solves social problems using business tools. The goal of a social business is to overcome poverty, not maximize profit. To this end investors get back only their initial investment amount.

“If you invest $1000 in a social business, you only get back $1000” Yunus said.

Unlike a nonprofit organization, however, a social business should make a profit that, instead of being distributed to investors, is reinvested in expanding and improving the company, providing more jobs for people in the community and paying better wages to employees.

While social business may sound like pie in the sky to some, the concept has gained traction with several large corporations in Europe and Japan. For example, a joint venture between Yunus’ Grameen foundation and the French dairy company Danone (Dannon in the United States) creates fortified yogurt that meets the nutritional needs of undernourished Bangladeshi children. In addition to being nutritionally complete, the yogurt, which is considered a delicacy in Bangladesh, had to be affordable and not require refrigeration.

After several attempts Danone engineers came up with a plant-based yogurt that costs just 60 cents per cup, about half as much as other brands on the market.

“It is very delicious, something that children will like to eat,” Yunus said.

Nutritionists for Danone say eating two cups of this yogurt per week will ensure a child gets all the vitamins and nutrients needed for proper development. Yunus is pushing Danone engineers to continue to refine the product to better meet the needs of customers. In particular, Yunus would like to see the company come up with ways to make the container the yogurt comes in edible.

“Poor people do not want to waste their money on something they will just have to throw out,” he said.

Danone is not the only company participating in social business projects. Uniqlo, a Japanese clothing company, has partnered with Grameen to create affordable sanitary napkins for low income Bangladeshi women and girls. Adidas is working on a social business that would make shoes affordable for low income Bangladeshis, which would significantly reduce transmission of parasitic infection.

Is selflessness sustainable?

Yunus is confident people will step up to the plate if given the opportunity to invest in social businesses.

“The essential fact about humans is that they are multidimensional beings," Yunus wrote in his book "Social Business." "Their happiness comes from many sources, not just from making money.”

People will invest in social business "just to share in the joy of making a difference in other people's lives," Yunus said, noting that American charitable donations total nearly $1 trillion per year.

In his experience working with Danone, Yunus has seen how committed people are to doing good. When the partnership between Danone and Grameen was initially conceived, investors were told they would receive a nominal one percent return on their initial investment, something that troubled Yunus but he was unsure how to avoid it.

At a 2009 board meeting, Danone executives announced they would be happy to receive their initial investment but would decline the one percent dividend. Yunus remembers cheering at this.

"It's maybe the first time in business history that owners were celebrating because a dividend payment has been waived," he said jokingly.

Yunus described the benefit of participation.

"The investors of Grameen Danone ... know that their sole benefit is the psychological and spiritual one of helping poor people halfway around the world. It's a remarkable sign of support for this ... investment concept."