How do you bring compassion to financial services for the poor?

What problem did he solve?

+ Muhammed Yunus created the guidelines, systems and processes to enable loans at the “bottom of the pyramid” capital to flow

What was the paradigm through which he viewed the problem?

+ Worm’s Eye View: Yunus took a holistic and entrenched view into plight of an impoverished individual – he made no assumptions and considered all soft and hard aspects to serving the poor

When you hold the world in your palm and inspect it only from a bird’s eye view, you tend to become arrogant — you do not realize that things get blurred when seen from an enormous distance. I opted instead for “the worm’s eye view.” I hoped that if I studied poverty at close range, I would understand it more keenly. ~ M. Yunus

+ Solve Small Problems/Organic Growth: Yunus was results oriented, he focused on the problem right in front of him, and continued one solution at a time

What drove him?

+ Anger: As an economist he usually theorized about financial problems in the millions and billions, but when he met an impoverished woman whose life depended on pennies, he decided that an economic system that systemically leaves out people would no longer suffice

An Incomplete System: I was teaching in one of the universities while the country was suffering from a severe famine. People were dying of hunger, and I felt very helpless. As an economist, I had no tool in my tool box to fix that kind of situation. ~ M. Yunus

How did he do it?

+ Entrepreneurship: By empowering the poor, he did something no one else had done – he believed in the creativity and ingenuity of all individuals

Financial Platform: The crux behind the success of the Grameen Bank is that over time Muhammed Yunus established a platform for low-income banking – e.g., microloans, no signed documents, weekly repayment schedule, micro-savings (i.e. mushti chai – the bengali custom of saving a couple pieces of rice)

+ Support Groups: All Grameen Bank applicants joined groups of individuals in similar economic conditions – loans are distributed to each individual as long as the other members in the group are successful. This system creates inter- and intra-competition that propels success.

+ Human Trust: Lawyers, courts or outsiders are never involved at any point – the fundamental principal the Grameen Yunus relied on is trust.  If repayments are not made, then the Grameen Bank believes they need to do more to help their customer succeed.

What is entrepreneurship, after all?  Bigness is not the issue.  Poor people are the ones who take challenges every day. The guy who sells a hot dog on the street is as much an entrepreneur as anyone else. Getting his $50 loan to start could be as difficult as finding $50 million for someone else. All people are entrepreneurs. ~ M. Yunus

There are no legal instruments between the lenders and borrowers. We were convinced that the bank should be built on human trust, not on meaningless paper contracts ~ M. Yunus

Source image: World Economic Forum

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