they are not just subprime 81

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What began with a mortgage of $27 to 42 females in a small village 33 in the past has grown into a global microcredit action that has changed the everyday life of millions of poor people around the globe. Muhammad Yunus, founder and managing director of Bangladesh Grameen Bank, was the visitor speaker at Wharton MBA commencement on May 17 and also the recipient of an honorary doctor involving laws degree during the School of Pennsylvania commencement in May 18.
An revised version of the transcript uses. Thank you for joining us. But you have emphasized that your unit is a for profit one, not a non profit one. Can you temporarily describe that model and tell us why the distinction is so important to you?
Yunus: We are not seeking to create a non profit. Initially, I personally offered myself as a guarantor, after which it took the money from the traditional bank and gave it to the people. So 2050 Alameda Padre Serra 11 it was an extension in the bank activities. When we noticed that it was working well plus the banks were not as zealous as we were, we idea maybe we should have a separate bank created for this intent. Finally we did that will in 1983 called Grameen Lender or the bank. So we has been a bank because it is a bank hobby. We lend money towards the poor. People sometimes make reference to us as an NGO. We have to reveal that we are not an NGO. It not really that we are belittling NGOs I simply praoclaiming that people get confused, believing that because we work with the indegent, we must be an NGO. I believe that, no, we are a bank and it's also owned by the poor people. Owners of the bank are the people of the bank. That the change that we want to make, to clarify what we should are. I read that you now take over operations in more than 100 countries, and you have seven zillion borrowers in Bangladesh alone. However success with Grameen has triggered a lot of other people entering the actual microcredit area. Some of them are business oriented banks. Some are funded by venture capitalists. How has that changed the microcredit model, and may you explain some of the issues that have come up as a result of of which?
Yunus: Just a little clarification: We operate or at least the main idea has worked in almost all the countries around the world. So now it not right to express 100 countries. Whether they will be big or small successful or not you'll find presences in all those countries. At the moment, we are nearly eight million borrowers within Grameen Bank alone. In that way, Grameen Bank has extended within Bangladesh. Lots of organizations attended in [to do this] and we currently have encouraged them. NGOs have done of which. Others have done that. As soon as the word becomes popular plus the idea becomes popular, a but thenhoweverbutthen againeven so lot of people want to join [in]. So the phrase became very popular. became popular. And [institutions] not using these words and phrases before, suddenly started with these like agricultural banks throughout the world saying that they do microcredit. They in no way said that before.
Whether they are generally microcredit or not is a debatable issue because we define microcredit, microfinance, in the certain way. This is a credit score and financial service to your poorest people without collateral, with no guarantee and without any lawyers in the system. That has to be very clear in your work before we call it microcredit or even microfinance. And this has focused read more about women the poorest ladies.
If you look at agricultural finance institutions, for example, most of the agricultural financial institutions around the world require collateral Also, savings and loan connections say they do microcredit. Cooperatives say they generally do microcredit. Those who are giving agricultural lending options commercial banks are saying they certainly microcredit. So we need to clarify just what exactly microcredit is in its pure sort rather than everything else. Microcredit was generally given to people for lucrative activity. So whatever income you are taking, you are investing the idea to create an income source for yourself. There are many programs which give financial loans for buying consumer goods, and they say they are doing microcredit, they are allowing money to buy a refrigerator as well as buy a television. We say, i am sorry, that not microcredit. So we have to form this out.
Another facet that I want to draw attention to there are numerous microcredit programs going around advertising by themselves saying, this is a great opportunity to earn a living. And they encourage people who want to earn money to join in and do that. All over again, we say, our purpose is not to excite people about making money. Our purpose is always to help people get out of hardship. The focus is not on revenue making. The focus is for helping people to get out of poverty. Those who are seeing this as being an opportunity to make money have to elevate their interest rate to the degree that they make a lot of money. The interest amount issue becomes a sensitive just one. We are saying interest rates need to be kept as low as possible, preferably to protect costs. If you want to make a little profit on top of it, it should be a really modest profit, so that it doesn mimic this was your intention. Individuals who are doing that using microcredit, microfinance, to generate a lot of money we keep saying this is not microcredit in the sense that we apply it. We came here to address the loan sharks, not become financial loan sharks ourselves. This is their going in the direction of personal loan sharks. We want to disassociate ourselves from them. So they will be looking into the eye rate issue, the openness issue. A lot of people quote their own interest rate in many, many ways, covering up the actual fact of how much they can be charging. We say it has to be quite transparent. All interest rates needs to be expressed in a standardized variety so that you can compare A along with B. Who charges basically? This is something that they have to explain right away, and they also have to keep interest rate as low as possible.
I, professionally, have been promoting the idea that a real microcredit interest rate should be within a selected range as a cost of pay for at the market price plus 10%. Here is the green zone of microcredit rates. You are legitimate. You are doing fantastic work. If it is cost of account at the market price plus 10% so that you can 15%, we say your interest rate is in the yellowish zone. You on the loopt 5 oktober tot en met 15 met 231 films uit 43 landen  70 high aspect, but still we will consider a genuine microcredit program. We will stimulate you to push yourself into the green zone. If expense of fund is at the market price plus 15% and above, you will need to say you are in the purple zone, meaning that you are way too high and you are on the wrong part of microcredit. You are moving into the borrowed funds shark zone. Big countries, big economies, rich economies should have more merchandise to carry, and massive trucks to carry [it in]. They are very powerful and take over the paths. The small countries don include space for themselves because it almost all taken over by the big pickup trucks and the big companies. My spouse and i said if that image matches the picture, then we should have traffic rules so that the little firm in the little country within the little economy can creep and safely, and the huge trucks don take over every thing.
If we accept the targeted traffic rules idea, then we will require traffic police so that most of these rules are obeyed. They're able to, because they have the money power. That might be the wrong [kind of] globalization. In globalization, both sides must be the winner, and whatsoever gain in trade takes place, it needs to be shared equally. Just because I have got the power out of 100, My partner and i take 99.9% and give you 4.1% and say this is globalization I personally don think that would be tenable or even sustainable. So we have to agree with the fact how much you should get and how a great deal I should get, although I really could have taken over everything. However by agreed principles, we don do that. We provide you with some and we keep many. Otherwise, globalization will become an economic imperialism, having big economies taking over tiny economies. Why I find the item very interesting is because if you were to evaluate Grameen own borrowers, they are not just simply subprime, but sub subprime.
Yunus: It your paradoxical situation right now due to the fact 33 years ago when I had been trying to start this program in a very city village with a few men and women and arguing with the brokers that it would be a good idea to present loans to poor people the argument was that the indegent are not credit worthy. They may never pay back and so on. These days, 33 years later, you are able to ask the same question. Who's credit worthy? It is the bad who turned out to be more credit history worthy than the other family of people, because microcredit programs around the globe still function very well. Their particular repayment is very high, whereas the big banks and their huge lending operations are [near] retract. They are falling down.
Due to the [situation] we have now, we have no other way but to redesign the whole process recognizing the strength in not for collateralized loans for the poor people along with the weakness in collateralized loans with the rich people. We have to choose a ground where we can produce an inclusive financial system where not a soul will be thrown out of the procedure not the poorest man or Det irakiske militær stabschef woman, not the homeless individual or a beggar person. Nobody should be thrown out. They have already created a long time record of what they have executed.
So this is one lesson [to be utilized into account] when redesigning this financial system. Another point I will make is that this global turmoil, financial crisis is the worst within our lifetime the whole world is going by means of it. While we look at the problems part of it, we forget this is the greatest opportunity. When the technique is not working, that the time you actually unpack and redesign the idea so that it not only works, it truely does work better than ever before. Unless many of us do that, we will be committing an important mistake. So I emphasize a chance part of it. The crisis will require time to [run its course], but you should be focusing our attention with redesigning, piece by piece, [those parts] that need to be resolved so that we don have the identical old system we had previous to. So we would like to keep microcredit for the reason that [mode], not a profit maximization [mode], because you will be not looking at people ailment; you are looking at your own condition. You want to capture out as much as possible to improve a person's financial strength and so on.
This is the number one requirement for microcredit that you have the right kind of attitude when you get with it, that here I have come to work with my talent, my creative imagination, my management skills to help people get free from poverty without losing money. Depreciating pushes you into another direction. It pushes [you] within charitable kinds of programs. Microcredit isn't a charity program. Microcredit is a small business program but business with a social purpose. In a independent way, I have called it any social business and described in clear terms what social business is like.
So ideally, I would like microcredit to be a societal business where profit is actually zero for the person who will be investing, but the company might make profit. Profit stays while using the company with a social goal in this case, to help people get out of poverty.
Yunus: With Grameen Bank, we just sponsor people and let them learn by apprenticing with other, older persons in the branches. So it not a classroom training, which makes all the difference. Class room training is a very small portion of our training. We simply create what we do and then let them do it figure out how it is done. When they enroll in Grameen Bank, for them it just work. They are looking for a job. A small number jobs are available. They find the job. They are very happy. [They] will continue to work and get a salary. So the aim of helping the poor was not the main job.
But once you start working with poor people and get to know the unit and its objectives, gradually that you are taken by it. More and more you believe inspired by it. All these tips that, yes, my perform helps people, excites these people. It a wonderful experience every single child touch other peoples lives. The item almost an intoxicating knowledge. Once you have it, you cannot depart from it. You want to help a lot more, because you see things are developing in people lives. Their kids are going to school.
  
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