Muhammad Yunus

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July 18, 2011 | 11:00 AM | By

Muhammad Yunus on the crisis in microfinance

World Economic Forum

Muhammad Yunus

The Guardian has published an excellent, in-depth interview with Muhammad Yunus that provides perspective on the current crisis in microfinance.

Yunus, the Nobel Prize-winning economist credited with developing this anti-poverty scheme, has been at the center of his own crisis, which overlaps with the general crisis but is largely due to a political power struggle in his home country Bangladesh.

It one of only a few interviews he’s given since the government forced him out of running his hugely successful Grameen Bank for the poor. A few excerpts:

As the saying goes, a prophet is never recognised in his own country. Neither the global acclaim – nor the protestations of both the French and the US government – is making much difference to a government intent on destroying Yunus’s hold on Grameen Bank and the network of social enterprise companies he has developed over the last four decades.

The most likely explanation for the attacks on him is that Yunus’s brief foray into politics in 2007 unnerved (Bangladeshi PM) Sheikh Hasina. He announced he was going to set up a political party but ended up abandoning his the idea after only two months. His huge global reputation and the economic weight of the Grameen brand has made enemies insecure.

That last bit may be the most likely explanation, but perhaps not the only one. There’s plenty of evidence to suggest the attacks on Yunus are not just due to Bangladeshi politics.

As I’ve noted before, there is a fight right now for the heart and soul of microfinance — between those like Yunus who focus on the social mission of microfinance first and those who focus on it as a profitable way to perhaps also help poor people. The criticism of Yunus’ approach to microfinance really only exploded after he condemned the “loan sharks” who seek profits while only claiming to help the poor.

 

FILED UNDER: Basics, microfinance, Muhammad Yunus
July 5, 2011 | 8:00 AM | By

Mysterious microfinance firm re-emerges

Flickr, TW Collins

Clay Holtzman, in his new blog Nonprofit Kingdom, notes that a year ago the Seattle microfinance firm Unitus closed its doors, laid off most of its staff and didn’t really tell anybody (including some major donors) why it did so.

Unitus, which had claimed its primary mission was to help poor people, also happened to have made a lot of money — having invested in an Indian company, SKS Microfinance, which had pursued this anti-poverty financing scheme as a for-profit venture.

Here’s a New York Times piece on the controversy about SKS making money while fighting poverty. Here’s what I wrote at the time Unitus closed its doors and a more recent post I did on the broader implications of all the weirdness. Here’s another post from last year that Clay cites as a good overview by Philanthropy Action.

Now, as Clay notes, Unitus has been resurrected as Unitus Labs. Here’s what Clay says:

Many wondered what the new mission would be, and why Unitus had to close so quickly. Unitus recently unveiled its reorganization plan, and while the charity will use a different approach to reduce poverty, its new business strategy appears very similar to the one that sparked an international controversy last year.

Continue reading →

FILED UNDER: Basics, Clay Holtzman, Global Partnerships, microfinance, Muhammad Yunus, SKS Microfinance, Unitus
May 9, 2011 | 9:00 AM | By

Has India jinxed microfinance?

Flickr, prolix6x

Indian woman cooking rice

The anti-poverty scheme known as microfinance is in crisis, or maybe several crises.

The political sacking of Muhammad Yunus as head of the pioneering Grameen Bank, allegations of loan-shark profiteering by some microfinanciers and suicides of poor people caught in “debt traps” have led to a drumbeat of negative media stories about microfinance.

The drumbeat is loudest in India where the crisis is most intense. But it has reverberated worldwide, including in Seattle. Continue reading →

FILED UNDER: Basics, Accion, Center for Global Development, David Roodman, Global Partnerships, Grameen Foundation, India, microfinance, Muhammad Yunus, SKS Microfinance
April 5, 2011 | 9:38 AM | By

Yunus loses appeal

Microfinance pioneer and Nobel Prize laureate Muhammad Yunus has lost his appeal to Bangladesh’s high court seeking to overturn the government’s attempt to remove him from a leadership role at Grameen Bank, which provides loans and financial services to the poor.

The AP reports that the move by politicians to oust the anti-poverty advocate “has sparked international concern and threatened to dampen ties between Bangladesh and the United States.”

As the BBC reports, it not exactly clear if Yunus will accept the ruling and step down or launch some other legal battle. Here is the New York Times‘ report on this new development in a long-running battle.

According to Al Ajazeera, Yunus has said he will step down.

Here are some earlier posts on what’s at stake here and why Yunus has become a lightning rod.

FILED UNDER: Politics, microfinance, Muhammad Yunus
April 1, 2011 | 12:28 PM | By

Try to catch “To Catch a Dollar” on Yunus and microfinance

To Catch A Dollar, film on microfinance in America

I was granted the opportunity, thanks to the good folks at SeaMo, to both join their party Thursday celebrating Seattle’s prominent role in the global microfinance community and to see the debut of a new documentary about this anti-poverty scheme and the Bangladeshi economist who pioneered it.

To Catch a Dollar: Muhammad Yunus Banks on America turns out to be a pretty compelling film, despite justifying my critique yesterday that it dodges some of the more controversial issues and critical questions about microfinance.

After joining some of the SeaMo folks for a VIP reception at the Bombay Grill (see posed photo below), I went to the Varsity Theatre on University Ave. to “catch” the film. (The name comes from Yunus’ statement that the poor need “to get a dollar to catch a dollar” — an initial loan that allows them to gain more income).

After seeing the movie trailer, and noting the odd (to me anyway) inclusion of the self-promoting personal finance advisor Suze Orman as a participant for this event, I went in dubious. I figured this would be just a promotional film, showing all those typical “triumph over tragedy” stories with Yunus playing the part normally played by Jimmy Stewart in It’s a Wonderful Life.

I was pleasantly proven wrong. The documentary does avoid much of the controversy surrounding Yunus and microfinance today, but it also provides an excellent view of why Yunus’ approach — and that of his Grameen Bank — may work when other approaches to microfinance fail, or become abusive.

In documenting the work of Grameen America — a project aimed at helping poor women in the U.S. start or grow their own businesses — they demonstrate how succeeding in microfinance likely depends first and foremost on establishing solid, reliable relationships. Among the borrowers, between the borrowers and their loan manager (who meets with them every week) and between the microloan bank and the community at large.

It’s not something you can do robotically, like going to an ATM machine, or demonstrate using economics lingo or in some accounting equation. And it’s not really something I can describe adequately in words. You’ll have to go see the film. You should.

A disclaimer: The goal of the film is clearly to raise support, and funding, for Grameen Bank’s expansion in the U.S. (with last night’s post-film panel discussion, weirdly, also plugging Orman’s new book). I’m agnostic on that. But the documentary, despite its flaws, is well worth seeing to give you a good sense of both Yunus and how microfinance works.

And speaking of relationships, here’s the folks at SeaMo having a good time at the Bombay Grill:

Tom Paulson

Seatte microfinanciers, Seamo gathering at Bombay Grill

FILED UNDER: Basics, Grameen America, microfinance, Muhammad Yunus, SeaMo
March 31, 2011 | 11:47 AM | By

New microfinance movie aiming to inspire, ignores the cage fight

Tonight, all around the country — 7:30 p.m. at Seattle’s University District Varsity Theatre — is the debut of a documentary celebrating microfinance, its Nobel Prize-winning creator Muhammad Yunus and a look at how it could work for the American poverty market, if you want to call it that.

Robert Deniro, Matt Damon and other luminaries will be there with Yunus (virtually, on a webcast) for a simulcast discussion accompanying the film’s premiere.

Here’s the website for To Catch a Dollar: Muhammad Yunus Banks on America and the film trailer:

Now, there’s an awful lot going on right now in microfinance, the anti-poverty strategy that – depending upon your point of view – is either one of the best ways to help the poor or one of the most disguised, devious and greedy ways to further exploit them.

I suspect that, like most things, it may be somewhere in between the polar extremes. And, based on what I’ve read about this film, little of this crucial debate will be mentioned in To Catch a Dollar.

For a sense of the current state of affairs in microfinance, here’s a quick survey of the landscape by the Chronicle of Philanthropy Nicole’s Wallace, reporting today out of the Skoll World Forum in Social Entrepreneurship going on right now in Oxford, England.

Here’s my own earlier take, on the five reasons why microfinance is in crisis.

A few quick highlights:

That last trend – which includes players like Citibank and MasterCard — is taken either as a sign that microfinance has finally proved Yunus’ claim that the poor are a good risk or that microfinance has been transmogrified into the latest scheme by Wall Street to make an easy buck.

World Economic Forum

Muhammad Yunus

Yunus has been a pretty outspoken critic of the profit-maximizing and more traditionally commercialized approaches that some fear are overtaking the social mission of microfinance. I’ve noted before that nobody ever seemed to have much problem with the Bangladeshi economist, until he started criticizing those in the financial industry who have taken to microfinance like “loan sharks.”

And the political firestorm around Yunus back home in Bangladesh didn’t really catch fire until an earlier, less-complimentary documentary called The Micro Debt aired. In it, microfinance is portrayed as largely an abuse of the poor — driving them further into debt — and Yunus as basically a financial manipulator who’s guilty of fraudulent business practices.

Most experts have dismissed the film, by Danish film-maker Tom Heinemann and which aired on Norwegian television, as fairly inaccurate and biased.

Perhaps the best, most recent overview and, well, defense of Yunus is by David Bornstein in the New York Times, Microfinance Under Fire.

I bet you had no idea that something as boring sounding as microfinance could get so exciting.

Tonight’s installment in this ongoing struggle for the soul, and the very definition, of microfinance could be called the battle of the two documentaries. It could be, except for the fact that To Catch a Dollar sounds like it will likely avoid all of the more critical and controversial issues.

FILED UNDER: Justice, Politics, microfinance, Muhammad Yunus
March 2, 2011 | 11:04 AM | By

Microfinance pioneer Muhammad Yunus ousted?

World Economic Forum

Muhammad Yunus

Update as of Friday afternoon: Still not clear.

Muhammad Yunus, the Nobel Peace Prize winning economist who created the anti-poverty loan strategy known as microfinance, has reportedly been ordered by the Bangladesh government to step down from his pioneering institution the Grameen Bank.

I say reportedly because the news, at the moment, is kind of schizoid — because the politics in Bangladesh are, uh, unpredictable and, well, because being told to do something is one thing and doing it is another.

Yunus has been in a political battle for a while which, depending upon your perspective, is either just an unjustified power struggle or the result of a broader crisis in microfinance.

The New York Times and Time magazine say Yunus has been ousted. The Associated Press and Forbes say he’s been ordered out, but plans to stay.

David Roodman, a microfinance expert at the Center for Global Development and one of those with his finger on the pulse, is also questioning whether some of the media reports might be jumping the gun to claim he’s actually been ousted.

As Roodman noted Monday, the board of the private bank refused to follow the dictates of politicians to vote him off the board and U.S. politicians have come to Yunus’ support.

My money is on Yunus putting up a fight. We’ll see.

FILED UNDER: Basics, Bangladesh, David Roodman, Grameen Bank, microfinance, Muhammad Yunus
February 25, 2011 | 5:51 PM | By

Five reasons why microfinance is in crisis – and why it matters

Flickr, TW Collins

The popular anti-poverty scheme of providing small loans and other financial services to poor people, generally known as microfinance, is in crisis.

“In one sense, you could say it’s a coming of age,” says Alex Counts, CEO at the Grameen Foundation, a leading non-profit microfinance organization with offices in Seattle and Washington D.C.. “Controversy often comes along with growing in size and impact.”

You could also say microfinance is actually suffering from several different crises: An external appearance of a crisis based on a damaged public image; a related, but slightly different, internal “identity crisis” and, at least according to one leading observer, a cash crisis in reverse — too much money.

Here are five reasons for the crisis:

  1. Microfinance has grown rapidly, from a simple anti-poverty program into a major player in the financial industry.
  2. Some now view microfinance primarily as an investment opportunity, with reducing poverty as either a secondary goal or not really the goal at all.
  3. Microfinance is a multi-headed creature with no agreed-upon strategy or approach.
  4. There is no consensus on how to measure “social performance” — for donors to tell the difference between a program focused on poverty reduction from one focused on maximizing profit.
  5. The evidence that microfinance does bring people out of poverty is mixed. Some say it has helped millions of poor people, mostly women. Others say it hasn’t and is, in fact, a debt trap for the poor.

All of these points, and most of the arguments, tend to circle back to the pioneer of microfinance, or microcredit, the Nobel Peace Prize-winning Bangladeshi economist Muhammad Yunus.

Tom Paulson

Muhammad Yunus visits with fans Seattle Town Hall May 2010

Yunus used to be golden, uniformly regarded as almost the patron saint of the anti-poverty movement. He still is seen as such by many of his supporters.

But Yunus is also in a bit of trouble these days, fighting off a push by politicians in Bangladesh to force him out of the Grameen Bank (his pioneering microfinance organization). The push comes after a film-maker’s allegations of corruption and the increasingly popular refrain among critics that these microloans hurt rather than help the poor — even driving some debtors to suicide.

Many in the microfinance industry see the power struggle in Bangladesh as more of a political sideshow, unjustified but more importantly unrelated to the real challenges facing the field. Continue reading →

FILED UNDER: Basics, Alex Counts, David Roodman, Elisabeth Rhyne, Grameen Foundation, microfinance, Muhammad Yunus