Banker to the poor who changed lives of millions

Mohammed Yunus is not a statesman or world leader. He is not feted everywhere he goes. He is an economics professor who lives in a small apartment in Bangladesh. But he has probably improved the lives of more millions of people than most statesmen could aspire to.

And he has not done it from the comfort of some ivory tower. As the Independent put it when Dr Yunus visited London two years ago: "He lends to beggars."

"Give a man a fish, and you feed him for a day," the old adage runs. "Teach him to fish, and you feed him for a lifetime." Dr Yunus is the man who realised you can teach someone as much about fishing as you like but, if they can't afford a boat or a net, they'll still go hungry.

He pretty much invented microcredit; the idea that you can lend money to the poor and the destitute, to people who have no collateral to guarantee the loan, and that they will pay it back by earning a profit with their own skill and hard work. People laughed when Dr Yunus first told them his idea. The bankers he went to see to try to sell them the scheme showed him the door, barely repressing a smirk of amusement at the mad professor with his well meaning and utterly unworkable scheme.

They're not laughing any more. In 1976, he started by lending the cash he had in his pocket, the equivalent of US$26, to a group of 42 women in a small Bangladeshi village. That worked out at US62c each. With the money, they bought the materials to start a business, some making chairs, others pots. They paid him back in full.

Today, Dr Yunus' Grameen Bank has lent more than US$5.3 billion. His methods have been copied in more than 50 countries and similar loans are believed to have reached more than 100 million of the poorest people worldwide. The rate of loans which are paid back to the Grameen Bank is 98.45 per cent, a recovery rate most commercial banks would love to be able to emulate. And this is in a bank that is 94 per cent owned by its borrowers, is still run on an entirely philanthropic basis but is completely self-funding.

If you visit Bangladesh, you're likely to find the name Grameen pop up on your mobile phone screen. The Grameen Bank now runs the largest mobile network in the country. Last year, Grameen opened a mutual fund. Together, the bank and its constituents are worth more than US$7 billion.

Not bad for a starry-eyed professor who wanted to save the world. His ideas have been imitated not only in developing countries from Africa to Latin America, but even in the United States, where microcredit organisations have lent money to the poorest of Americans.

"One day, our grandchildren will go to museums to see what poverty was like," Dr Yunus said in 1996.

Dr Yunus was born in 1940 in the last years of what was British-ruled India. In his autobiography, Banker to the Poor, he admits to being no saint as a child. When a children's magazine ran a competition with free subscriptions as a prize, he was dismayed not to win. But he found a way to get round the rules, writing in under the name of one of the published winners to inform them of a "change of address" so the free magazines were delivered to him.

He also admits to stealing loose change from his father's shop where he worked as a child. He won a Fulbright scholarship to the US, where he did a PhD at Vanderbilt University in Nashville, Tennessee, returning to Bangladesh to teach economics at Chittagong University.

But it was in 1974 that Dr Yunus' story really began, amid the catastrophic famine of that year, when as many as 1.5 million Bangladeshis are believed to have died.

"While people were dying of hunger on the streets, I was teaching elegant theories of economics," he said. in 1996. "I started hating myself for the arrogance of pretending I had answers. We university professors were all so intelligent but we knew absolutely nothing about the poverty surrounding us."

He started making increasing field trips to the village of Jobra, near the university campus. It was in Jobra he had his moment of insight. He was interviewing a woman who made bamboo stools. She had no savings or capital and she had to borrow the equivalent of 15p to buy bamboo for each stool. But after she had repaid the exorbitant interest rates demanded by the money men, she only made 1p profit on each stool: She was trapped in poverty.

But Dr Yunus believed sufficient funds to invest were all they needed to break out of the vicious circle. So he found 41 other workers in a similar predicament and lent them the cash in his pocket as an experiment. They proved him right, paying him back and flourishing.

"The fact that the poor are alive is proof of their ability," he said. "We do not need to teach them how to survive: they know this already. Giving the poor credit allows them to put into practice the skills they already know. And the cash they earn is then a tool, a key that unlocks a host of other problems." So he took his ideas to the commercial banks, who laughed him out of the room, saying the poor were not "creditworthy". He replied: "How do you know they are not creditworthy, if you've never tried? Perhaps it is the banks that are not peopleworthy."

And he decided to do it himself. He started Grameen Bank as a research project at Chittagong University. In three years, he lent to 500 poor borrowers and, in 1979, the Central Bank allowed the Grameen Project to be run from the branches of seven state-run banks.

Dr Yunus still dreamed of making it an independent institution but the Government was against it. Then, in 1982, there was a coup and Dr Yunus's friend A.M.A. Muhith was unexpectedly appointed Finance Minister.

Together, they persuaded the Government and the Grameen Bank was born. At first, the Government held a 60 per cent stake but Dr Yunus has whittled that away to 6 per cent.

- INDEPENDENT