Sufia was a beggar-woman, one of the
landless poor who constitute 50 percent of the population of Bangladesh. She
was a widow with two daughters to feed, and when bad weather prevented her
from begging, the children starved. Sufia watched other women in her village
of Jobra forming groups to get loans from a unique bank. This bank loaned
money only to the landless poor. Its workers came right into the village
every week to talk to people, and many of the bank workers were actually
women who encouraged other women to become self-supporting. Sufia gathered
her courage, joined a group, and with her first loan of 25 taka (less than
US$2) bought a small stock of bangles, soap and hairpins which she sold
around Jobra. When she repaid one loan, she borrowed again to expand her
business and her profit. She dreams now of sending her grandson to school.
Sufia's self-reliance and improved economic situation were made possible by
the Grameen Bank, created by MUHAMMAD YUNUS.
YUNUS looks far younger than his 44 years. He describes with wry amusement
how much he has learned from his many experiences; his ideas flow in
paragraphs, and the explanations in vivid metaphors. A human dynamo with ten
ideas a minute, he clearly enjoys the careers he has followed—as
businessman, professor and now full-time banker.
YUNUS was born on June 28, 1940 in Chittagong, Bengal, India—which became
part of East Pakistan in 1947 and Bangladesh in 1971. His father, Muhammad
Dula Meah, was a prosperous gold-jewelry merchant whose limited (seventh
grade) education and deep religious beliefs never prevented him from
encouraging YUNUS and his brothers to study, travel and experience new
things. YUNUS' mother, Sufia Khatun, attended school only up to fourth
grade, but she was a very intelligent woman. She could read, and YUNUS
remembers her repeating stories and reciting poems to her children. The
first child in the family was a girl who married at 13 or 14. The next child
and first son was educated in an Islamic religious school at his mother's
request, but then went on to study commerce and law. YUNUS, the third in the
family of nine, was the family's first academic star and world traveler.
The boy's education began at the nearby Baluardighi Primary School. When he
placed first in the city in the fourth grade exams, one of his teachers
advised him to apply to Middle English (M.E.) School—the top school in
Chittagong—for grades five and six. YUNUS set off on his own to see the
headmaster of the school, which was located some distance from his home, and
was accepted on the basis of his exam results. His father gave his
permission and the tuition money, which was nominal, but otherwise left the
decision up to his son.
YUNUS has a vivid memory of how shy and uncomfortable he felt at first,
attending a school where the students were nearly all sons of senior
officials and already spoke good English. But he was acquiring habits of
self-reliance and independent action which were to become cornerstones of
his subsequent career.
When he placed first in his class in the mid-year exams, he lost his initial
nervousness and began to enjoy the special status and private tutoring he
and three other students were being given in preparation for the divisional
(seven school districts) examinations taken at the end of sixth grade. To
the delight and professional credit of his school, YUNUS took first place.
The next step on his educational ladder happened by chance. He had already
been accepted by the Muslim school close to his home where most of his
friends from the neighborhood were going, but he accompanied former
classmates from M.E. School when they went to see if they had been accepted
by Chittagong Collegiate School. There a teacher recognized young YUNUS and
took him to see the headmaster. The two men convinced the boy that
Chittagong Collegiate, the top government high school in the city, was the
best choice for a student of his ability, and allowed him to enter without
taking its entrance exam. His father agreed to the changed plans and YUNUS
completed tenth grade there in 1955, and placed 15th among the 39,000
students taking the provincewide final examinations.
While he was still in M.E. School, YUNUS had joined the Boy Scouts. There
were only 25 scouts in the whole institution and he relished the opportunity
to wear a special uniform and be different. As with everything else, he
excelled in scouting, and in 1952 was chosen to attend the first
All-Pakistan Jamboree; he traveled to West Pakistan and saw some of India as
well. Three years later he was selected to participate in the World Jamboree
in Canada. He and two others from East Pakistan joined 25 scouts from West
Pakistan. They flew to New York, and from there to Niagara-on-the-Lake,
Ontario. For the first time YUNUS learned how little many people knew about
countries other than their own: he had a hard time explaining just where
East Pakistan was. He also found out that human nature was similar in every
country, because the boys at the jamboree were playing the same games and
acting like his friends back home. At the conclusion of the jamboree the
scouts from Pakistan embarked on a six-month trip back to Karachi. With one
rather ineffective scoutmaster whom the boys "directed," (the leader had
flown home from Canada), and generous allowances from their parents, the
scouts traveled to Washington and New York, and then boarded an ocean liner
for England and the Continent. In Germany they bought three microbuses from
the Volkswagen factory which they used to tour Europe and the Middle East.
The buses, they reasoned, were cheaper than plane fare for 28 boys, and the
Boy Scout Association would fall heir to them when they returned home.
The boys drove around Europe. Since they had their own tents, they stopped
and camped whenever they were tired. They visited scout offices in various
towns, and the scouts, and sometimes the government officials, treated them
like honored guests. When they wrecked one bus in Yugoslavia, the uninjured
boys crowded into the two remaining vehicles to drive to Basra, Iraq. There
they embarked by boat for Karachi. Stretching the experience to the limit,
YUNUS and a friend dawdled through India, seeing Bombay, Delhi and Calcutta
(where in each city they had relatives or friends) before they came home to
Chittagong. Later, questions were asked about the wisdom of the Boy Scout
Association of Pakistan sanctioning such a trip, but the association
acquired two microbuses and the boys thought the whole adventure was
wonderful; in college YUNUS would give talks about his travels. In 1958
YUNUS attended both the World Jamboree in the Philippines, and the All
Nippon Jamboree in Japan. In so doing he visited Rangoon, Bangkok, Saigon
and Hong Kong: Thus, before he graduated from the university, he had already
seen much of the world.
YUNUS had returned from his Canadian trip to enter Chittagong College in the
third month of the term. He chose to follow an arts instead of science
program, much to the bewilderment of his advisors; all the other bright
students, they pointed out, were taking science to prepare themselves to
become doctors or engineers. He also expanded his extracurricular
activities. Encouraged to try out for a drama production, he got one of the
major roles, and won several prizes for his portrayal of an elderly, mad
In the lower school YUNUS had done a bit of writing and cartoon work, and
now at Chittagong College he single handedly produced a small paper called
Do Pata, meaning literally "two pages." He also took courses outside his
field in mathematics and economics, and continued in this vein when he
entered Dhaka (Dacca) University in 1957. There he was the founder and
co-editor of a nationally circulated literary magazine called Uttaran
(Advancement). He received his B.A. (Honors in Economics) from Dhaka in 1960
and his M.A. in Economics in 1961.
With his new master's degree, YUNUS went back to Chittagong College to teach
economics. He had no doubts about his decision—he had always wanted to
teach. At the same time, however, he tried to persuade his father to set up
an industry of some kind, and because of his experience at school in
publishing, he decided printing and packaging was an area with potential.
Nearly all printing at this time was done in West Pakistan, even small items
like cigarette packets. Overcoming his father's doubts, YUNUS went to Lahore
where the biggest printing plant in the country was located. There he met a
fellow-Bengali who was involved in a Swedish-Pakistani joint printing
venture. This man took an interest in his fellow countryman, showing him
around the plant and giving him all the advice he could. YUNUS in turn
commissioned his new friend to design a small printing plant for him and
draw up a list of the machines needed. Within a year or so YUNUS obtained
all the necessary government approvals and the factory was soon built and in
The young professor realized, however, that he was spending more time than
he wanted to on this industrial venture, and turned over the full operation
to his father, who eventually brought in YUNUS' elder brother to manage it.
He also realized that since his ambition was to teach in a university, he
should get a Ph.D.
Earlier he had had an opportunity to study in England and thought of
attending the London School of Economics, but the timing was not right. In
1964 he saw a notice, and applied for a Fulbright Scholarship in the United
States. On the application form YUNUS put his subject preference as
"development economics." On the basis of this preference he was granted a
scholarship to Vanderbilt University—which he had never heard of—in
Vanderbilt's one-year program in development economics proved far too basic,
and YUNUS decided to apply for the Ph.D. program at the university instead.
In the summer of 1965 he attended a preparatory course for foreign students
of economics at the American Economics Association's Economics Institute in
Boulder, Colorado. While there, without explanation or preparation, he was
given the U.S. Graduate Record Exam (ORE) and scored in the 98th percentile.
On the basis of this score, he was readily accepted in the doctoral program
at Vanderbilt and was placed in advanced courses. He enjoyed most, and found
most stimulating intellectually, Georgescu-Roegen's class in statistics.
YUNUS had studied the subject before but this particular course and
professor made it come alive. As a result YUNUS developed an interest in
mathematical and computer models, and finally econometrics. He became a
"permanent resident" of Vanderbilt's computer center, making his own
programs and using them as the basis for his doctoral dissertation which was
entitled, "Intertemporal Allocation of Resources." He used as his example a
multipurpose hydroelectric dam, analyzing the time relationships in the use
of water when it was intended for two purposes, electricity and irrigation.
While working on his Ph.D., YUNUS had teaching and research fellowships and
assistantships at Vanderbilt. In the summer of 1969 he taught at the
Economics Institute in Boulder, and even before he completed his
dissertation in 1970 he was appointed an instructor at Tennessee State
University, Murfreesboro, where he taught until 1972.
Although he enjoyed his seven years in the United States, YUNUS never
considered the possibility of a permanent stay. Thus in March of 1971, when
he heard on the radio that the—largely West Pakistani—army had taken control
of Dhaka, the capital of East Pakistan, he immediately became an activist
for the Bangladesh (Bengal) separatist cause. He and five other Bengalis
living in Nashville formed the Bangladesh Citizens' Committee, declared
their allegiance to Bangladesh, and immediately began visiting local
newspapers and radio stations to explain their stand. Next they contacted a
fellow Bengali who was the second in rank at the Pakistan Embassy in
Washington, Enayet Karim (later Foreign Secretary of Bangladesh), who
invited them to join a demonstration being held there the next day by
Bangladesh supporters from all over the eastern United States. They
participated and YUNUS stayed on in the capital, living at Karim's. He
helped man the Bangladesh Information Center and began to lobby congress and
foreign embassies for diplomatic recognition of the new nation. It was
quickly pointed out to the neophyte lobbyists that they were asking for
recognition of a state that had no government. YUNUS and his friends
considered forming a government-in-exile themselves, but realized that would
be presumptuous. Instead they sent a colleague to Calcutta to study the
situation. There he found duly elected officials, who had escaped the
country, in the process of forming a government-in-exile. YUNUS and his
friends focused on helping this new government.
Promising half their monthly incomes for the cause, the six members of the
Bangladesh Citizens' Committee first purchased transmitters to send to the
Bangladesh forces so that they could learn of outside support. YUNUS himself
published a newsletter under the aegis of the Bangladesh Defense League, and
out of that organization he and others created the Bangladesh Emergency Fund
to raise money for relief work.
After this hectic summer YUNUS went back to Murfreesboro to teach, but he
traveled whenever he could to other university campuses to explain the
Bangladeshi cause. In December 1971 "liberation," as Bangladeshis call their
independence, finally came. As soon as the semester was over, the young
patriot returned to Dhaka to see how he could best fit into his new country.
Living in the house of a friend who was still in the United States, YUNUS
began looking for a job. Dhaka University showed little interest in his
application, but one of his professors, Nurul Islam, who was now Deputy
Chairman of the newly formed state Planning Commission, overcame the doubts
of his former student and persuaded him to accept the rank of Deputy Chief
of the General Economics Division. YUNUS reluctantly agreed to stay for one
year, but stayed only two months, during which time he received no work to
do. In consequence, he left a letter of resignation on his desk one morning
and went home to Chittagong. There the university immediately offered him
the position of Chairman of the Economics Department and an associate
professorship. Returning to Dhaka to pack, he found that Nurul Islam had no
intention of accepting his resignation. However, after a lengthy argument,
he acquiesced. YUNUS returned to Chittagong, moved into his parents' home
and began to teach.
In addition to academic ability and experience, the young professor brought
with him ideas about practical research, an unfulfilled desire to do
something for his country, and a realization that gradualism was the only
feasible way to achieve lasting change.
The opportunity to bring these qualities into play lay at hand. Just outside
the campus was the tiny village of Jobra. It was December and the land was
barren, but neighboring areas were green and fertile. YUNUS asked the
villagers why their land was lying idle. They looked at him in astonishment.
It was the dry season they explained; the other areas were able to plant at
this time only because they had a deep tubewell for irrigation. YUNUS
determined to get a tubewell for Jobra.
"This village, Jobra, became my Bangladesh," YUNUS explains. He felt
particularly keenly about his village because, as he has said, "a university
is a reservoir of knowledge for the whole world, and if that knowledge
doesn't spill over to the nearest land, then it is useless."
It took a year of running from one government agency to the next, but he
finally convinced the Bangladesh Agricultural Development Corporation to
provide the village with a tubewell. The results, however, were far from
satisfactory. In the first year of operation, only nine and a half acres
were planted in the dry season; in the second year, ten; and in the third
In 1973 YUNUS had started a Rural Economics Program at the university which
focused equally on teaching and applied research, with students going out
into the villages to do their research. This was the first time in a
Bangladesh university that such a program had been tried. To YUNUS Jobra
offered an ideal case-study because all government information on tubewells
had indicated that once a tubewell was sunk, productivity would increase
enormously. Why had this not happened?
YUNUS suggested a public meeting in the village to discuss the situation. He
and his students quickly learned that the reason the tubewell was not being
utilized was bickering within the village. Each person using the tubewell
was supposed to pay his share for the diesel fuel to operate the pump, but
some used it without paying, and some claimed they had paid but received no
water. Those few who planted and harvested rice had suffered so much from
the bitterness and infighting that after two years they refused to use the
well again. They suggested the government remove it.
Since he had gone to a great deal of trouble to obtain the tubewell, and the
government had spent some Tk.200,000 installing it (the villagers paid
nothing), YUNUS proposed an alternative—the Tebhaga Khamar (three-share
farm) plan. Each farmer would be given as much water, seed and fertilizer as
he needed. At harvest time the farmer would divide his harvest into three:
one-third to go to the landlord, one-third to the farmer himself, and
one-third to the committee which would have borrowed money to provide the
necessary inputs. The committee, chosen by the villagers, would sell its
share of the rice, pay back the money borrowed, and finance the next crop.
If there was a surplus the committee could share it among the villagers who
had participated in the plan.
Many questions were asked and more doubt expressed than enthusiasm. The
villagers were interested in the possibility of profit, but wanted no part
of a loss. YUNUS therefore offered to take personal responsibility for a
loss, but emphasized he was doing so only because he was sure the plan would
work. He asked the people to consider the idea and meet again in a week's
He was living on the campus by then, and during the following week there was
a steady stream to his house of the poorest people in Jobra. They had not
been at the original meeting, but had heard about the plan and were willing
to try it; they had nothing to lose.
The second village meeting was very well attended and the landlords agreed
to accept one-third of the crop, instead of the usual one-half; YUNUS
insisted on having a written agreement so there could be no reneging at
harvest time. After more questions and explanations, the villagers agreed to
try the plan.
YUNUS went to the university branch of Janata, a commercial bank, and
arranged for a personal loan to cover the operation costs; he borrowed
Tk.40,000, which he later increased to Tk.65,000, as more and more people
joined the program when they saw others getting free agricultural inputs.
YUNUS had planned to irrigate only 40 acres the first year, even though the
tubewell was supposed to be able to supply 80 acres, because the soil was
very porous and he wanted to be certain his plan would succeed. Thus when
the number of acres under cultivation snowballed to 85, he warned the
committee there might not be enough water. The committee members were not
worried; for only Tk.1,000 more, they said, they could put a crossdam in a
local stream which would flood the fields and provide the extra water
needed, an option that had always been available to them but never tried.
The dam was built, the crop was harvested and the yield tripled from 11
maunds (1 maund equals 40 kilograms) per acre to 33; the national average
was 17. Everybody was very pleased with the results except YUNUS. When he
went to the committee to get the money to repay the bank loan, he discovered
that the committee had not collected enough rice to cover the debt; it was
Tk.13,000 short. The landlords got their share, presumably because they were
present every day at harvest time; the farmers took their own share—and
could not resist taking extra from the committee's third since YUNUS was not
on hand to protect his interests. The committee suggested that YUNUS had not
organized the collection properly and had trusted the people too much.
YUNUS used his own money to repay the bank and chalked it up to experience,
but when the villagers asked him to head the committee the next season, he
refused. He advised them on how to obtain a loan, introduced them to the
bankers and insisted they handle further financing themselves. The committee
thereupon devised a fool-proof system for collecting its third of the next
harvest. The farmers would bring all the grain to the committee yard and
give the committee its share before personal shares could be taken home.
The Tebhaga Khamar project was so successful that a year later the committee
was able to buy an electric motor to replace the diesel engine for the
tubewell, greatly reducing its operating cost because the village was
already electrified. The crossdam was maintained, saving enough water to
irrigate twice the expected area. The committee went on to purchase its own
land, build godowns for storage and husking, and each year the profits have
What YUNUS learned from the Jobra experiment became the basis of his
approach to rural development:
1. Government solutions do not work on their own.
2. When the government gives outright, the recipient is not involved deeply
enough to give full support or work to capacity.
3. Local problems should be solved by the community; many times the
solutions are already known but not acted upon, e.g., damming the stream.
4. Local organizations (like the committee to carry out Tebhaga Khamar) can
be very successful, but are most effective when they develop their own
structure and rules. Attention must always be given to class structure,
however, so that the wealthier and more powerful do not control the
enterprise to the detriment of the poor.
5. The people who are most receptive to new ideas are those who have least
to lose—the landless poor, i.e., those who sell manual labor to survive. And
since they are not tied to the land, they are mobile, enterprising and open
to new ideas. He also learned that landlessness had risen in the "recent
past" from 18 to 40 or 50 percent. When the local villagers who were
landless were questioned, 252 families had become landless in their own
lifetimes, compared to 89 in their fathers' end 18 in their grandfathers'.
When YUNUS published and discussed the results of Tebhaga Khamar in Jobra at
conferences, officialdom expressed interest. Eventually the national
government borrowed the idea, renamed it the Package Input Program (PIP) and
ordered banks all over the country to provide loans for similar enterprises.
Tebhaga Khamar in Jobra received the President's Award in 1978 for
introducing innovative organization in agriculture. Unfortunately none of
the PIPs developed a sustained, successful operation comparable to the Jobra
experiment, probably because there was no arrangement for village
participation in the decision making. The program had been decreed from
above with a poor understanding of the concept.
YUNUS was active in the Bangladesh Economics Association and was one of the
founders of the Chittagong Economics Association. Both organizations held
annual conferences and published papers. In 1974 YUNUS tried to convince his
fellow economists and the government that local problems should be handled
at a local level where they were best understood, and that massive
government structure imposed from the top down does not work. YUNUS
advocated a village government to be responsible for village-related affairs
such as food supply, employment, health and literacy. He suggested that this
government, or gram sarkar, be comprised of two landless poor, two women,
two well-to-do persons, two youths and two others from the professions, ten
in all. The head of the government should be elected directly by all the
villagers, and thus be responsible to all, and not to one interest group.
The village should also produce a village book (gram boi) each year which
would be a socioeconomic report and a development plan containing all the
village statistics, and would be used in the village school.
He urged the need for new strategies and institutions, and used the example
of food shortages. No results, he maintained, are gained from the Food
Minister appearing on television, stating that there is a two-and-a-half
million ton food shortage, and appealing for help from the citizens of
Bangladesh. A villager who cannot count has no conception of two-and-a-half
million tons, and therefore dismisses the problem, being sure that it is far
beyond his ability to cope with. However, when the problem is approached on
a much smaller scale, on the village level, it becomes manageable. A
villager is aware that 30 or 40 of his neighbors survive from day to day,
and he can imagine how much extra rice needs to be grown to provide for
these people. YUNUS added that almost no effect is achieved by donations of
food from abroad. The US$1.5 billion per year in foreign aid, he said,
trickles down "about half an inch," when what it needs to do is "trickle
down a mile to reach those for whom it is intended and who really need it."
Moreover, far too many people spend time chasing the government and asking
for things, when in fact local initiative can usually provide what is
needed, and local initiative fosters pride and self-reliance instead of
dependence. He urged, therefore, the introduction of local planning through
village governments (gram sarkar) rather than central planning.
In 1975 President Zia Ur Rahman, who was looking for some way to reach the
villages, talked with YUNUS. Zia became convinced that gram sarkar was a
viable idea and began to try to convince his cabinet and new politicial
party of its validity. Unfortunately he chose to create the village
governments nationwide, by government decree, rather than by encouraging
villages to develop their own organizations, with the national government
giving help and support as needed. Although some were successful, most gram
sarkars survived in name only. When Zia was assassinated in 1981 they were
all abolished by the new regime.
At the Bangladesh Economics Association's meeting in 1976, "Self-Reliance"
was proposed as the topic for the next convention. The subject interested
YUNUS but he doubted that any proposals from government economists or
academicians would be effective. He pointed out two problems: the definition
of the term "poor," and the fact that no one at the convention, including
himself, had any real knowledge of the poor and how they lived.
The international definition of "poor" has usually been "a small or marginal
farmer," but in the context of Bangladesh, a small farmer is comparatively
well-off. YUNUS felt that the automatic connection between the words "poor"
and "farmer" was also incorrect. Not only were most of the truly poor
landless, but 50 percent of them were women who were thus totally ignored.
He was bothered, too, by the notions that the contribution of the poor to
society should be put as zero, that the poor were takers rather than
producers, and that they lacked skills. Statistics on caloric intake and per
capita income indicate that the poor should have disappeared long ago, but
instead, the poor were exhibiting tremendous survival skills, and in fact
were multiplying. These skills should be supported and encouraged, he
argued, and even if the input of a poor person was individually very small,
in view of their great numbers their effect could be enormous.
YUNUS returned to Chittagong determined to find out more about the poor in
his own village, Jobra. Tebhaga Khamar was thriving and had immeasurably
improved the lives of those involved. But the most deprived members of the
community, the landless women, had not seen any improvement, other than
having work for several days at harvest time husking paddy.
YUNUS sent two students from his Rural Economics Program into the village to
conduct a survey: how many families had food for a year, for ten months, for
six months, for one month, and how many lived from hand to mouth? Once this
data was assembled, the researchers went back to concentrate on those whose
lives were eked out on a day-to-day basis. These poor, particularly women,
performed many jobs during the year, but the profit from their labor never
came to them. For example, one woman who wove bamboo stools had been lent
money to purchase bamboo by a trader who would buy her stools. By the time
he deducted the amount of the loan, she was left with two cents for a full
day's work. Women were working and working hard, but someone else was taking
YUNUS sent the students back once more to see how much capital would be
needed to make each of these women independent, to finance their raw
materials so that they could sell their finished products to the highest
bidder. There were 42 women in the village who needed a total of Tk.850;
some needed only Tk.10 or 20, and the highest amount needed was Tk.65. It
was unbelievable that they should be forced into debt for such small sums,
as little as US$0.80.
His first idea was to lend them the money himself, but he knew he could not
go on doing that indefinitely. Who, he asked rhetorically, should be lending
them money? The obvious answer was the banks. As a trained economist who
taught the principles of banking to his students, YUNUS went first to the
campus branch of the Janata Bank where he had borrowed money for the Tebhaga
Khamar experiment, and asked if the bank would give small loans to poor
villagers who lacked collateral. The manager was amused, but firm. His job,
he said, was to take in money, not to give loans; that was the job of the
main office; the earlier loan had actually been approved at headquarters.
YUNUS therefore went to the main office in Chittagong and explained what he
wanted. The district manager approved the plan, provided a well-to-do
villager would underwrite each loan. Since this would be tantamount to
bondaging each poor borrower to a rich man, YUNUS rejected the offer, but
seized on the concept of underwriting. He offered to sign his name to any
number of loans but told the manager frankly that he had no intention of
paying if anyone defaulted; if there was a problem the bank would have to
take him to court. The manager admitted that his bank would never sue a
university professor because the publicity would be bad but agreed to give
YUNUS the financing he requested. The first money was available from Janata
Bank in December 1976.
The idea that eventually became the Grameen Bank Prakalpa (Village Bank
Project, GBP) was developed in Jobra, and three of the characteristics of
the bank were: borrowers were from the lowest income groups, the landless
poor; full repayment was expected; and a large percentage of the borrowers
Remembering his experience in the Tebhaga Khamar program, YUNUS took great
pains to organize his new project carefully and forestall any expensive
mistakes. In the four years he had been involved with Jobra he had
assimilated a large store of practical knowledge about the psychology of
working with villagers. He understood their wariness of institutions, so all
GBP transactions were carried out in Jobra.
Project workers were required to be seen in the village, answering questions
and collecting repayments. He also understood that aspect of human nature
which allows a borrower to repay small amounts on a regular basis, but makes
that same borrower reluctant to repay a large sum all at once. Thus YUNUS
decided that his borrowers would pay back small sums each week—roughly two
percent of the loan; initially he tried daily repayments but the process was
Most importantly YUNUS knew the value of group dynamics at the village
level: if a new idea is seen to be successful then others will be willing to
try it, as the Tebhaga Khamar experiment proved. The group dynamic provides
support and encouragement to its members, and constant monitoring should any
member not keep up with the others. Moreover he had discovered that in small
groups there is little opportunity for dissembling or laziness, and the
burden of success is placed squarely on the shoulders of those involved. He
thus decided that loans should be made to individuals who belonged to a
group with a minimum of five members and a maximum of ten; five evolved as
the optimum number. The members must each want a loan; they must understand
the loan process and be willing to work together; they may own no more than
0.4 acres of land and may not be from the same family and preferably not
closely related. Once the group has chosen a leader and discussed the
business proposition involved in each loan, it approaches a bank worker who
makes sure the members understand the repayment process and can sign their
names. Then two group members are allowed to borrow; they begin their new
businesses and start their weekly repayments under the watchful eyes of the
other members. If the first two are working hard and paying back their
loans, after two months two more members are allowed to take out loans. If
all goes well the fifth member receives his loan after a further two months
Each borrower has up to a year to repay the loan, and then begin to repay
the interest on the loan which is calculated at normal bank rates.
Groups are required to join with several other groups to form a Center. They
decide on a mutually convenient time for their required weekly meetings and
elect a Center Chief and Deputy-Chief who are responsible for the conduct of
all center members. The bank workers come to the Center to talk and collect
the weekly repayments.
Since the Grameen Bank Project was providing the only hope these landless
poor had to improve their economic status, YUNUS included a forced savings
plan and an insurance plan in his experiment, figuring (correctly) that
borrowers could not afford to object because they wanted the loans, and that
once they began to save, they would see the value of these plans. At the
weekly meeting each member deposits one taka in the Group Fund. This weekly
savings can be borrowed against but can only be withdrawn when a member
leaves the group.
When a member receives a loan, five percent of the loan is also put into the
Group Fund. All members have an equal right to this portion of the fund, but
money can be withdrawn only after unanimous approval of the group and with
the joint signatures of the group secretary and chairman and the Grameen
Bank field manager. If a member leaves the group or is expelled he is not
entitled to any of this part of the fund.
Bank workers explain the idea behind this enforced saving by using a homely
example: if a housewife sets aside one handful of rice each day from the
cooking pot, her family will not notice, but at the end of one year she will
have saved a significant amount of grain. The group members have been amazed
at the growth of their total Group Fund savings—nearly Tk.30 million by the
end of July 1984. And YUNUS has proven that the poor, if given the incentive
and the means, can save.
Another way of saving is the Emergency Fund. Each member pays into the
Emergency Fund an amount equal to half of the interest charged on his loan.
The fund can be tapped in times of personal emergency or disaster, such as
an illness, the death of an animal or floods. Groups members quickly
understand how lucky they are to have their own money to fall back on,
instead of being driven into the clutches of moneylenders, whose rates can
go as high as ten percent per day under extreme circumstances. The group can
set its own interest rate, but the rate must apply equally to all members.
The creation of these two funds explains in part the phenomenal loan
repayment rate of 99 percent; for the first time in their lives the poor
have some financial security, as well as seed money for their business
In the first two years of the Grameen Bank project YUNUS had proved to his
own satisfaction that the poor were "bankable," and the nearly perfect
repayment record had proven the norm instead of an exception. But dealing
through the Janata Bank, or any commercial bank, was very frustrating
because of the paperwork required and the waiting period necessary to obtain
even small loans.
In 1977 the Sonali Bank had expressed an interest in YUNUS' work and opened
a branch for the landless in a nearby village. But another opportunity for
expansion and, more importantly, an opportunity for gaining the control of
the loan operations, was provided by the Krishi (Agriculture) Bank in Dhaka,
a government institution.
In conversation with the managing director, A.M. Anisuzzaman, now
Undersecretary of Agriculture, YUNUS listened to his long list of complaints
about the bank—its corruption and ineffectiveness—and offered the director a
chance to participate in real rural development. What YUNUS suggested was
his own personal branch of the Krishi Bank in Jobra, Tk.1 million for loans
for one year, and no interference from the head office. If he was
successful, the Krishi Bank could use any of his ideas in the future; if he
failed; the bank could write the experiment off as a bad debt.
Despite the managing director's immediate enthusiasm and agreement, it took
almost a year to work out the details. Together with a Krishi representative
in Chittagong, YUNUS wrote out proposals for his ideas in proper banking
terminology. The Board of Directors had to be convinced of the worth of the
project and of its legality, especially since only a small percentage of the
loans would be used for agricultural projects. Anisuzzaman kept probing and
found a legal loophole which allowed YUNUS to become the "director" of a
"bank project" in Jobra. The new director immediately recruited students as
bank workers and at the end of one year he had greatly increased the number
of loans given, while maintaining a near-perfect repayment record.
At a seminar organized by the Bangladesh Central Bank held in late 1978,
YUNUS and other participants discussed financing the rural poor with U.S.
Agency for International Development experts and advisors from Ohio State
University. The thesis the experts wanted to test was, whether very high
interest rates (e.g. 36 percent), by making a prospective borrower think
long and hard about taking out a loan, would increase prompt loan
repayments. Using his experience with the Grameen Bank as ample proofs,
YUNUS argued that it was possible to create a workable system charging the
normal bank interest rate, which in Bangladesh is currently 16 percent.
The official view of the Central Bank was that YUNUS had accomplished a
one-time, one-place, one-person miracle which could not be transferred. The
bank challenged him to set up another project in an area totally unfamiliar
to him, and the two parties settled upon the district of Tangail. The
Central Bank agreed to fund the program, but insisted that YUNUS resign from
the university to become the new project's full-time director. A compromise
was reached, with YUNUS taking a leave of absence instead.
Field operations in Tangail began in November 1979. The lending program
itself was successful but the operational costs were high. The project had
to hire bank workers and rent space either in, or adjacent to, a
nationalized commercial bank. Critics pointed to the costs and the low
profits which resulted from the small loans. The project itself, however,
expanded. By March 1982 there were 25 branches of the Grameen Bank in
Tangail and Chittagong. Within the next year the program had expanded to 60
branches serving 790 villages in Dhaka, Rangpur and Patuakhali, as well as
Tangail and Chittagong.
The project by now had attracted international notice. The International
Fund for Agricultural Development (IFAD) lent it US$3.4 million in 1981 for
expansion purposes. In 1982 the Ford Foundation gave the GBP a grant of
US$125,000 for research and training, and provided a guarantee fund of
US$770,000 to be held in the United States in case of loan defaults (this
has not been needed.)
In early 1983 YUNUS felt that the GBP had long outgrown its experimental
phase. It was a proven success with a repayment rate other banks could only
dream about, and had grown in size and in profitability. Moreover its major
problem—high staff turnover—was caused by its status as a project. As a
project it could not pay competitive wages nor offer permanent employment,
and regular bank employees often resented the GBP workers, who shared the
same office with them but conducted their business in a totally unorthodox
manner. It would be much better, YUNUS felt, for the Grameen Bank to drop
the word "project" and become a financial entity on its own.
In September 1983 the Grameen Bank was therefore legally incorporated. Forty
percent of its shares are held by private shareholders—borrowers of Grameen
Bank. Shares were sold at Tk.100 each, one per person. YUNUS had hoped to
have the bank completely owned by the borrowers themselves but the
government insisted on being the majority shareholder and kept 60 percent of
the shares. Although having the power, it has not interfered in the bank's
The basis of the bank's funding was a concessional loan from the Central
Bank at a six percent rate of interest, the same rate given to all
commercial banks. Later it received the US$3.4 million loan from IFAD which
has since been increased to US$10 million. The IFAD loan funds are given
through and matched by the Central Bank, which charges the Grameen Bank an
overall 5.75 percent interest. The Grameen Bank, in turn, lends money at the
normal bank rate of 16 percent, with a resulting spread of 10.25 which
enables it to be a viable, profitable institution. It now hires employees at
competitive salaries and offers career opportunities for both men and women.
YUNUS is Managing Director of the bank, which has 105 branches operating in
five districts, with a staff of 1,150. There are at present 102,868 members
who have borrowed US$800,000 during the past three years. To have some idea
of the impact the Grameen Bank has had on its borrowers, it is useful to
look at a few statistics.
In real money terms, borrowers (who engage in some 300 different
occupations) increased their incomes by 35 percent in the period 1979 to
1982. The total amount of savings in the Group Fund in July 1984 was
Tk.27,605,000 and in the Emergency Fund Tk.4,714,000. YUNUS' original
commitment to disadvantaged women has been maintained; there are nearly
twice as many centers for landless women as for landless men, and women
represent 53 percent of the total number of borrowers. The program is one
which could well be a model for other developing nations.
Grameen Bank's instructions to its workers are still very close to what
Professor YUNUS used to tell his students working in Jobra. Bank workers
must live in their villages and, apart from a few set hours spent in the
office, must be in the village, circulating and available. They are never to
take part in a group formation; if anything, it is the worker's
responsibility to act as the devil's advocate, questioning the composition
of a prospective group and challenging the ideas for new business
enterprises. A business which cannot operate on the local or district market
level is rejected.
YUNUS hopes to expand the number of loan recipients to 500,000 in the next
five years and eventually to 2,000,000, and the number of branches from the
current total of 105 to an eventual 2,000.
Until recently there were no specific attempts at effecting social change,
but during weekly discussions at the centers it was possible to discuss new
ideas. One example involves the deeply ingrained and costly tradition of the
dowry. Some groups, and even whole centers, have agreed among themselves
that they will not provide a dowry for their daughters nor expect one from a
future daughter-in-law. This could be the basis for a slow change which
would greatly benefit the poor. YUNUS also views the active participation of
women in the bank as a catalyst for change. Female bank workers are
important role models for the village women; and women borrowers who improve
their socioeconomic status are usually concerned with the future of their
children and thus have a heightened awareness of the advantages of health
care and education. In consequence, UNICEF now channels its child health
programs through the centers, and family planning options are made
YUNUS is most happy about changes in the types of enterprises being
considered by borrowers. Confident in their ability to work in a group and
succeed in small individual businesses, and protected from unforeseen
setbacks by their savings and emergency funds, groups are now borrowing as a
unit for large, collective, more profitable enterprises, such as oil or rice
mills and machine-operated looms. A new loan for US$38 million was
negotiated with IFAD in August 1984 and the guarantee fund of US$770,000 at
the Ford Foundation will be used to finance more risky technological
During these busy years YUNUS found time to marry Dr. Afrozi Begum, a
physicist teaching at Jahangirnagar University. The couple was wed in April
1980, after knowing each other for a year, but they let the families arrange
their marriage in the traditional fashion. They make their home in Dhaka
where Grameen Bank's head office is located.
YUNUS has also found time to serve as an officer of the Bangladesh Economic
Association for several years, as a member of a delegation to the United
Nations General Assembly in 1977, and as a member of the Board of Directors
of the Bangladesh Institute of Development Studies. He has been on the
Executive Council (presided over by the president) of the National
Foundation for Research on Human Resource Development; on the Panel of
Economists advising the National Planning Commission; on the Education
Advisory Committee constituted by the president to formulate a new education
policy for the nation; on the Presidential Committee on Reviewing National
Policy on Population Control; on the Interministerial Committee on
Integrated Training Programs; and on the Committee on Formulating National
Strategy for Rural Development. He has also been a member of the Board of
Editors of the University Grants Commission publication on social science
Still on leave from his positions of Professor of Economics and Director of
the Rural Economics Program of Chittagong University, YUNUS acknowledges his
love for teaching. But he recognizes that his heart is in the project he is
now engaged in, the Grameen Bank—which the head of one international
nongovernmental aid organization says "is the best work here now," and a
woman borrower calls, "God's gift for us."
Ahmad, Q. K., and Mahabub Hossain. Rural Poverty Alleviation in
Bangladesh—Experiences and Policies. Rome: U.N. Food and Agriculture
Organization. May 1983. (Mimeographed.)
Alamgir, Mohinddin. "Report on Grameen Bank Project" (part of a report
prepared by the International Fund for Agricultural Development mission).
Dhaka: Grameen Bank. April 1982.
Claiborne, William. "Bangladesh Landless Prove Credit-Worthy," Washington
Post. March 19 1984.
Darshini, Priya. "A Bank That Has the Poor As Its Clients," Asian Monitor.
New York. March 9, 1984.
Ghosh, Manash. "Bank Project Resuscitates Rural Bangladesh," Sunday
Statesman. Calcutta September 4, 1983.
Government of Bangladesh Agricultural Credit Review. Dhaka. August 1983.
"Grameen Bank to Help Achieve Self-Reliance," Bangladesh Observer. Dhaka.
March 29, 1983.
"Gramin [sic] Bank Soon," ibid. March 29, 1983.
Harley, Richard. "Special Report: The Entrepreneurial Poor," Ford Foundation
Letter. New York. Vol. 14, no. 3, June 1, 1983.
Hossain, Mahabub. "Credit Program for the Landless, The Experience of
Grameen Bank Project." Paper presented at the National Conference of Krishi
Arthoniti Samity (Agricultural Economists' Association). Dhaka: Grameen
Bank. November 1983.
______. "Issues Concerning Employment Expansion in Non-crop Activities in
Bangladesh." Bangkok: ARTEP, International Labor Organization. 1982.
Hossain, Mahabub and Salimullah. "Socio-Economic Profile of Grameen Bank
Loanees," Working Paper 1, Evaluation of Grameen Bank Project. BIDS. May
Khan, Salma. Evaluation Report on Trainers' Training Program for Women Group
Leaders of Grameen Bank Project. Dhaka: Grameen Bank Project. January 1983.
Miyan, A. H. and V.U. Qintana. A Study of Bangladesh Krishi Bank-Grameen
Bank Project. Bangladesh Krishi Bank Central Training Institute. 1981.
Quasim, M.A. et al. Impact of Grameen Bank Project Operation on Landless
Women. Bangladesh Institute of Bank Management. December 1981.
Sarkar, Lotika and Chanchal. "Progress in Ershad's Dark World," Asian Post.
Dhaka. August 13, 1983.
Yunus, Muhammad. "Banking for the Landless." Presentation to Group
Discussion. Ramon Magsaysay Award Foundation, Manila. September 3,1984.
______. Experience in Organising Grass-Root Initiative and Mobilising
People's Participation: The Case of Grameen Bank Project." Paper presented
at SID World Conference. Baltimore. 1982.
______. "Foreword," Annual Report: 1980, Grameen Bank Project. Tangail,
Bangladesh. January 15, 1981.
______. "Foreword," Annual Report: 1981, Grameen Bank Project. Dhaka,
Bangladesh. February 15,1982.
______. "Foreword," Annual Report: 1982, Grameen Bank Project. Dhaka, May 1,
______. "Foreword," Annual Report: 1983, Grameen Bank Project. Dhaka. April
______. "Grameen Bank Project in Bangladesh—A Poverty Focused Rural
Development Programme." Dhaka: Grameen Bank Project. September 1982.
______. "Group Savings and Credit for the Rural Poor." Dhaka: Grameen Bank.
______. "Measures Needed to Make the Poverty Focused Programmes More
Effective in Reaching the Poor." Paper presented at Project Implementation
Workshop, organized by the International Fund for Agricultural Development,
Delhi. April 1984.
______. "Rural Agricultural Credit Operations in Bangladesh." Paper
presented at Annual Conference of Bangladesh Economic Association, Dhaka.
______. "Rural Development: A New Development Strategy, Not a New Priority."
Paper presented at National Seminar on Rural Development organized by the
Ministry of Local Government, Rural Development and Cooperatives, Dhaka.
April 24-29, 1978.
Yunus, Muhammad, ed. Jorimon of Beltoil Village and Others: In Search of a
Future. Dhaka: Grameen Bank. June 1984.
Yunus, Muhammad and Jowshan Ara Rahman. Jobra: The Grameen Bank Project.
Pamphlet Reprinted from Shishu Diganta, journal of UNICEF no 8, April 1980.
Interview with Muhammad Yunus and interviews with and letters from persons
acquainted with him and his work.