JEDDAH: While free market capitalism is thriving globally and bringing unprecedented prosperity to many, the reality is that half the world lives on two dollars a day or much less. Eradication of poverty remains the biggest challenge for humanity. Colossal social problems and deprivation shame us every day. It is clear that the free market has failed much of the world. Many people assume that if free markets cannot solve social problems, then governments can; this is the view of Nobel Peace Prize laureate Muhammad Yunus.
While delivering a lecture on his new book “Creating a World Without Poverty” as part of the 10th meeting of the Arab Gulf Program for United Nations Development Organizations (AGFUND) Prize Committee at the Islamic Development Bank Group headquarters on Tuesday, Yunus said the poor were not responsible for poverty. Poverty is created by the system. “If anyone has to be blamed for the menace of poverty, it’s society and its unfair economic systems, not the poor people. There is nothing wrong with the poor,” Yunus, founder and managing director of Bangladesh’s Grameen Bank, said.
“I always believed that poverty could be totally eradicated in our own lifetime if only we adopted the right approach. I based my belief on the inherent ability of the poor to help themselves if they are given the opportunity to develop their potential,” Yunus said.
The meeting was also attended by Prince Talal, president of AGFUND and Ahmed Muhammed Ali, president of the IDB as well as officials of various organizations.
In talking about Grameen Bank, Yunus said the bank had reversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, accountability, participation and creativity. The bank provides credit, without collateral, to the poorest of the poor in rural Bangladesh. “The concept of microcredit did not exist before I started Grameen Bank in Bangladesh. It basically accepted that credit without collateral is a fundamental right of the poor,” he said.
He added that while conventional banks focus on men, Grameen Bank gives high priority to women. As of October 2008, it had 7.5 million borrowers, 97 percent of whom were women. With 2,535 branches, Grameen Bank provides services in 83,343 villages, covering more than 99 percent of the country.
Yunus explained that the first principle of Grameen banking is that the clients do not come to the bank but the bank goes to them instead. He said Grameen allowed the poor to be participants in the free market and to enjoy some of its fruits as they raised themselves out of poverty. Grameen is a business but it is a social business. Social business introduces a totally revolutionary dimension to the free market economy. Social business is a new concept and its practice is just becoming reality. Yunus pointed out that there could be two types of social businesses. Type one focuses on business dealings with social objectives only.
Type two takes up any profitable business so long as it is owned by the poor and the disadvantaged, who can gain through receiving direct dividends or by indirect benefits.
He said one thing was very clear that with social business taking off, the world of free market capitalism would never be the same again, and would that deliver a significant blow to global poverty. “I am sure, many business wizards and successful business personalities will apply their abilities to this new challenge — the challenge of creating a poverty-free world within a short time. At the moment we are seeing merely a line on the horizon,” Yunus said.
Soon a good part of business genius, creativity and innovation in the world will devote itself to this new goal of social good. A whole new stock market with new indices will thrive in the financial capitals of the world, motivated by these new incentives. It will accelerate the process of poverty’s eradication, using the same market mechanisms which have contributed to global prosperity for the rich, Yunus said.
