Continuing on the theme of the "Wesley Autrey and Swami Ranganathananda, and NOT the Energizer bunny" post..........
The interview is WELL WORTH WATCHING.
The entire transcript of the interview can also be found using the above link.
I am posting a piece of the transcript here.
The social side of microfinance
PAUL SOLMAN: How did you create the level of trust that you did? When you write about your first experiences, farmers cheated you. When you had a guy collecting the repayment, beetle leaf seller, I think it was, people were saying, "Oh, we paid him back already," and lying about that. So it's not as if these were naturally trusting or trustworthy people. How did you turn it around?
MUHAMMAD YUNUS: Well, people are people everywhere, same way. Natural tendency is for people to stay honest. If the system encourages them to go wrong, they take the other route. Then they say, "OK, if everybody is doing it, I'll do it, too."
So we created an environment where everybody remains at their natural state of affairs, which is to remain honest. Because as long as you pay back the loan, the door of the bank remains open to you. You can take more loans and move up.
If you don't pay back, all you have done, you closed down the door. You don't go mad at them. Then she says, "Can I come back? I made a mistake. I had a lot of difficulty. I couldn't pay you back. Can I now pay and come back?" Of course you can come back. You're welcome.
PAUL SOLMAN: Because they've learned their lesson.
MUHAMMAD YUNUS: Because they have learned the lessons, and we know that. And that's what we wait for.
PAUL SOLMAN: So if this is the natural state of people, then why weren't banks doing this before? Why weren't commercial banks doing it? Are they stupid? Are they prejudiced, both?
MUHAMMAD YUNUS: Because they don't trust people. If you look at it in a kind of funny way, you'll say the entire banking system is based on distrust, because you are bringing the lawyer, you are bringing the collateral. You are assuming this guy is going to run away with my money, so you want to tie him up so that he cannot run away with money.
Our system started with trust. We assumed that she was good enough to pay us back and so on. We didn't make any arrangement whatsoever. And in 99 percent of the cases, we are right.
PAUL SOLMAN: Do you mean to say that you think that, if Citigroup and I simply had a trust relationship with each other, it'd all work fine?
MUHAMMAD YUNUS: No harm trying. I tried. It worked.
...
PAUL SOLMAN: A critic of the micro-credit movement, Thomas Dichter, in Forbes magazine recently: Quote, "The large majority of people in the advanced economies are not entrepreneurs, so why do we assume that in the developed economies the poor are?" MUHAMMAD YUNUS: All human beings are entrepreneurs. When we were in the caves, we were all self-employed. We were finding our food, we're feeding ourselves. That's where the human history began with. As civilization came, we suppressed it and made it into labor. We are all labor. PAUL SOLMAN: And a labor market. MUHAMMAD YUNUS: And a labor market. We became labor, because you stamped us, "You are labor." We forgot that we are entrepreneurs. ...
MUHAMMAD YUNUS: Yes, I invite everybody to come into micro-credit area. But one thing I want to distinguish and also urge them: Don't make it an area to maximize profit. Because when you maximize profit, you minimize the benefit to the people. PAUL SOLMAN: Why would you expect me, if I were a hedge fund, to take a lower profit than I could otherwise get by attending to other people's social-economic problems? MUHAMMAD YUNUS: Because people are people, human beings. Human beings are a much bigger entity than money-making machine. People have all kinds of feelings and all kinds of inclinations, all kinds of exciting ideas. That's why we create foundations. We give away our money. You don't say this is a crazy thing to do, but we all do. Big companies have their foundations. What is a foundation? You give away your money. So I'm saying, if you can give away your money, why don't you invest to do good to people and get back your investment, do the same thing over again so that your money recycles and again and again, and change the quality of life of people? PAUL SOLMAN: And so there will be enough investors in the world to invest in these funds to make them continue to operate, even though they're not as profitable as they could be? MUHAMMAD YUNUS: It was not profitable at all, non-loss, non-dividend companies. That's what the social business is all about. So you came here to do good. It's a clean idea. *************** Kiva is a not-for-profit organization doing microfinance, and makes it very easy for people in the U.S. to contribute to entrepreneurship.
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