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Yunus, Muhammad

Muhammad Yunus

Nobel Prize-winning economist Muhammad Yunus (born 1940) has worked to make microlending and related social business models the norm rather than the exception in developing countries.


Muhammad Yunus was born on June 28, 1940, in the Bangladeshi seaport of Chittagong, when the city was still part of India under British rule. His father was Hazi Dula Mia Shoudagar and his mother was Sufia Khatun Yunus. Yunus was the third of 14 children, nine of which survived, and they grew up in the village of Bathua before moving into the city of Chittagong, where their father opened a jewelry shop. Yunus was always active, even in his youth. He participated in the Boy Scouts and even traveled with his troop to Canada in 1955.


Yunus first attended Chittagong Collegiate School, then Chittagong College and eventually Dhaka University. He earned an undergraduate degree in economics at Chittagong College in 1960, and a master's degree from Dhaka University a year later. Yunus then traveled to the United States to attend Vanderbilt University on a Fulbright scholarship, where he married a Russian student named Vera Forostenko. They had a daughter, Monica Yunus, who became an opera soprano. Yunus taught economics classes at Middle Tennessee State University from 1969 until 1972, when the Pakistani civil war ended and Bangladesh was born. He wanted to return to Bangladesh, but his wife chose not to come with their infant daughter. They divorced and Yunus returned, taking a position teaching economics at Chittagong University, where he was invited to head the University's economics department. In 1980 he would marry again, this time to fellow Bangladeshi Afroji Yunus, a physics professor, and they would have a daughter, Dina Yunus.

Bailed Out Bangladesh

Bangladesh is known as one of the poorest places in the world, and has a population close to 120 million people. In 1974 Yunus took his economics class into the local village of Jobra on a field trip, where, according to a now-wellknown story, as reported in Contemporary Heroes and Heroines, they “met a woman who made bamboo stools, but she earned just two cents for each. She told Yunus and the class that if she could save 20 cents to buy her own supply of bamboo, she would not have to borrow from the dealer who sold it to her; because she owed him money, he was allowed to dictate the price of each stool she sold.” Yunus felt that people should be able to sell their wares at a fair price and make enough money to pay their debts, support themselves and and make a little profit. Commercial banks, however, would not issue loans to the poor, because they had no assets, business experience, collateral or often basic literacy skills, a combination that in view of lending institutions, made them the ultimate lending risk.

Yunus saw a great need for a bank that would lend money to the poor, and decided that it could be done at commercial interest rates. He developed an experiment with two other researchers, in which he lent money to a group of borrowers and tracked results. The experiment was successful: the debts to Yunus were repaid in full and on time. He continued to develop the lending model until he succeeded in founding the Grameen or “Village” Bank in Bangladesh in 1983.

Microlending Began with Grameen Bank

Only the destitute were eligible to borrow from Grameen's community banking system. The system used the pressure of a group of peers to keep borrowers from defaulting. A borrower might get enough to buy a chicken or cow and sell the eggs or milk, while raising and then selling the chicks or calves. The loan amounts were small, but the results turned out to be noteworthy. Yunus quickly learned that men tended to spend loan money on drink, new wives and other personal status items rather than reinvesting or saving it, as female borrowers reliably did. As a result, the majority of Grameen borrowers were women, although there have been both religious and social repercussions resulting from that practice. Islamic fundamentalists have attacked Yunus for his efforts to empower women. According to an article in Fortune by Sheridan Prasso, “Grameen has provided women the financial means to leave abusive husbands. They own homes in their own names, no longer pay dowries, live longer, have improved nutrition and hygiene, and are better able to care for their families …. ‘I am destroying the culture, yes,’ Yunus says, beaming mischievously at the thought. ‘Culture is a dynamic thing. If you stay with the same old thing over and over, you don't get anywhere.’ ”

Reached For the Stars

Yunus has stated on many occasions that his goal is to put poverty in a museum, where it belongs, and he has stated that, with credit as a fundamental human right, people can rise out of poverty with dignity. A 1986 article in The Economist explained the unusual services that Grameen Bank offered: “Borrowers can get cheap seeds, seedlings and ducks, lessons in reading and writing, medical help, and advice on family planning. The bank also dabbles in social engineering: borrowers who accept dowry from their son's bride may have their loan recalled.” According to a 2007 article in Social Education, the Grameen Bank also developed a “social agenda, outlined in four principles: discipline, unity, courage and hard work; and 16 decisions—including the abolition of dowries, attention to environmental causes, and education for all children.” A throng of Grameen bank model replicas—often called MFI's or Micro Financing Institutions—have sprung up in other countries and cultures, and Grameen has branched out to include a wealth of telecommunications services and other efforts at economy building.

Congratulation and Criticism

There are many critics, as well as devout enthusiasts, of microlending in general and Yunus in particular, from both the left and right ends of the political spectrum. In a 2007 article in The American, writer Tom Bethell was critical of Yunus and the microcredit movement, but granted that Yunus is developing market opportunities in a country that sorely needs them, and added that “he seems to represent an emerging consensus that government-to-government aid enriches only the rulers.” Bethell noted that some critics have questioned Grameen's assumption that poor individuals want to be self-employed instead of earning a paycheck, or that accumulating debt rather than savings will alleviate their poverty.

Social Business

Yunus's current book, Creating a World Without Poverty: How Social Business Can Transform Our Lives (2007), briefly tells the story of microcredit, then communicates the ways in which the “social” business model can help people while still generating a profit. Many have noted the swiftly growing field of social entrepreneurs and professionals— who espouse more than just the traditional motivation of maximizing profit—who have established a tri-fold bottom line of profit generation, worker welfare and environmental responsibility. More than half the world's population is under 25 years of age, and a great portion of this youth base is openly motivated to seek out a profession that improves life for everyone as well as supporting their own subsistence.

Always one to try and transform theory into reality, Yunus and French food company Danone agreed to partner up and build a yogurt factory in Dhaka, Bangladesh. It opened in November of 2007. Prasso explained the system: “The yogurt … would be fortified to curb malnutrition and priced (at 7 cents a cup) to be affordable. Revenue would be reinvested, with Danone only taking out its initial cost of capital …. The factory—and ultimately 50 more, if it works—will rely on Grameen microborrowers buying cows to sell it milk on the front end, Grameen microvendors selling the yogurt door to door, and Grameen's 6.6 million members purchasing it for their kids. It will employ 15 to 20 women, and provide income for 1,600 people within a 20-mile radius. Biodegradable cups made from cornstarch, solar panels for electricity, and rainwater collection vats make the enterprise environmentally friendly.”

According to Anne W. Howard, writing in the Chronicle of Philanthropy, Yunus strongly believes that such social businesses “can solve problems that capitalism, government, and nonprofit groups cannot.” She said that Yunus maintained that a social business operates like a “profit maximizing” business … by charging for goods and services. “However, its goal is not to return the largest profit to investors but [in Yunus's words] ‘to create social benefits for those whose lives it touches.’ ”

Man and Mission for the Masses

Whether Yunus is described as a “mesmerizing salesman,” in Bethell's words, or as “a bona fide visionary,” as on the Grameen Web site, the popularity of his personality and professional ideas are not in question. The United Nations declared that 2005 would be known as the Year of Microcredit, and in 2006 Yunus and Grameen Bank were awarded the Nobel Prize for Peace. While it was not the first time the Nobel Committee related peace to the eradication of poverty, they stated that “lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Microcredit is one such means,” as reported on the Web site. The Committee's choice not only underscored the growing efforts to eradicate poverty, but also opened channels of communication with the Muslim world while highlighting the importance of empowering women.

In 2007 a commemorative postage stamp was issued in Yunus's honor. Celebrities of the music world gathered at a benefit to celebrate the Nobel Laureate with proceeds that went to fight poverty, and early in the year there was media buzz about whether or not Yunus would take his success and popularity into the political arena. Many sources said a party named Nagarik Shakti or “Citizen's Power” was being developed by Yunus and his supporters. According to BBC Monitoring South Asia, Yunus sent open letters “to all Bangladeshis urging them to give their opinion on whether he should join politics and launch a party,” and “proposed that his party activists would work as ‘volunteers’ and bear all costs of electing nominees for their constituencies … arguing that ‘If locals want to see good people elected, they will have to spend their own money.’ ”

While the political career appears to have been shelved, people from all over the world have continued to shower Yunus with praise. Messages have included thanks to Yunus from many countries, including Kenya, Malaysia, the Peruvian Amazon, New Zealand, Somalia, Italy, and the United States. An article in the Economist suggested that “to rid the globe of poverty through credit would require many, many more people with [Yunus's] energy and optimism.” A 2006 PR Newswire article commented that Yunus “has broken countless rules of banking …. He provided loans to the poor, not the rich; to women, not men; in small amounts, not large; and without collateral or excessive paperwork.” Despite the inevitable critics, most hope that Yunus will continue breaking the social “rules” that oppress the poor, and that it will inspire others to do the same.


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"Yunus, Muhammad." Encyclopedia of World Biography. . 17 Dec. 2017 <>.

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Yunus, Muhammad

Muhammad Yunus, 1940–, Bangladeshi economist and banker, b. Chittagong (then in British India), grad. Vanderbilt Univ., Nashville, Tenn. (Ph.D. 1971). Yunus, who taught economics in the United States after receiving his doctorate, returned to his homeland when it won its independence from Pakistan in 1972, and became an economics professor at Chittagong Univ.

In 1976 he began offering small loans, using his own money, to poor village women who could not qualify for conventional bank loans, creating what has become known as microcredit or microfinance. His efforts, which expanded in the late 1970s and early 1980s, led to the establishment of the Grameen Bank [Bengali,=rural or village] in 1983. Bankrolled in part by loans and grants in the 1980s and 90s, the Grameen Bank has since become self-supporting. The concept of microfinance has spread to many developing countries, allowing some of the world's most improverished people the means to improve their lives through their own initiative; the borrowers continue to be largely women. Yunus and the Grameen Bank were awarded the Nobel Peace Prize in 2006 for their work to create economic and social development from below.

More recently, in a scheme aimed at eliminating poverty, he has called for the creation of self-sustaining businesses whose profits would be used to aid the underprivileged. Yunus outlines this proposed new economy in his books Creating a World without Poverty: Social Business and the Future of Capitalism (2007) and Building Social Business: The New Kind of Capitalism That Serves Humanity's Most Pressing Needs (2010), and he has created a number of such ventures in cooperation with several major corporations.

In 2007 Yunus considered forming a political party in Bangladesh. Though he ultimately abandoned the idea, the move led to tensions with the established political parties. By 2010 the Awami League–led government was openly critical of the Grameen Bank and his management of it, and he was forced out as the bank's managing director in 2011. The government subsequently (2013) reduced the independence of the bank.

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"Yunus, Muhammad." The Columbia Encyclopedia, 6th ed.. . 17 Dec. 2017 <>.

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"Yunus, Muhammad." The Columbia Encyclopedia, 6th ed.. . Retrieved December 17, 2017 from