KUWAIT: In an exclusive interview with Kuwait Times prior to his arrival in Kuwait, Dr Muhammad Yunus discusses his views on the global economy and the growth of microfinance in the Middle East. Some excerpts:
KUWAIT TIMES: You will be speaking at the Kuwait Chamber of Commerce on redesigning economics to redesign the world. What do you mean by this?
Professor Yunus: One of the issues I keep raising is that the problems we have created around the world for human beings are not accidental. This is by design. Not that we wanted to make this happen, but somehow these kinds of negative results came out of it – there are many positive results but there are negative results also built into the system. If you want to avoid and remove the flaws or the negative results of the current economic system, the point I have been promoting is that we have to look back to the thinking process, the conceptual framework, the entire economic thinking and entire economic system to find out the causes of the problems and remove the flaws.
For the present design or current economic system, you get the same old results – you create poverty, unemployment, health hazards and danger for the world, carbonization of the economy, and wealth concentration in a few hands. All these things are built into the current economic system. You can rethink it piece by piece but this does not solve the problem because it will come back soon unless you change the system which created it.
So, we need a redesigning process and once you redesign the process, the problems created in the past can be avoided or eliminated, and we can have a much better world than before. It is almost like building a road that leads you to a destination which is a good one, but on the way we have created problems by using this road, and if you keep on using the same road, you will just perpetuate the same problems that we have. In order to avoid these problems, we have to build a new road. We have to redesign the road in a way that those problems do not occur again and we can achieve the goals we wanted to achieve. The destination we have defined can be reached without creating a problem. This is what I have been saying – to redesign the economy to redesign the world – and this is what we will be talking today at the chamber of commerce.
KUWAIT TIMES: Microfinance has created much debate today on whether it works. How would you describe the state of this field?
Professor Yunus: You have to admit that access to capital or credit is very important. If you look at the world today, I would say probably two-thirds of the world’s population does not have access to financial services. That is the first thing that we should take care of. Money begets money. If you do not have it, you wait around to be hired by somebody and are at the mercy of others. If you have money in your hand, you desperately try to make the best use of it and move ahead. And this generates income for yourself.
I strongly believe that all human beings are very creative – full of potential, full of energy. Money allows them to express this. And if you are successful, you can make more money. You can expand your capacity, reach the next level of capacity, and so on.
If you remember long before the crisis of 2008, when financial institutions were crumbling all over the world, many of us had been saying that we need to redesign the financial system which only serves the top one-third of the world – two-thirds are left out. Microcredit has shown how you can reach out to people that conventional banking cannot. It has demonstrated that it’s a doable proposition.
When we designed microcredit, the purpose was to help people get out of poverty, but some people moved away from that motivation. Grameen is still the same. It reaches out to the poorest – the women – and has demonstrated that despite disasters, it can work.
KUWAIT TIMES: Microfinance is struggling to find its feet in the Middle East. Various reports say that institutional structures, poor regulations and a general backwardness of the financial system are hampering microfinance’s growth in the MENA region. Where do you see the role of respective countries to make microfinance a success?
Professor Yunus: We will be discussing these issues in the upcoming Microcredit Summit in Dubai in two weeks with MENA country representatives. Slowly, microcredit is taking root. Yes, microfinance has blossomed in recent years across parts of Asia and South America, but its start in the Middle East and North Africa hasn’t been as auspicious.
It is good that microfinance institutions have existed in the Middle East since the 1990s and they quickly made strides in countries like Egypt and Morocco, where large, relatively poor populations and pent-up demand for financing fed into its growth. But by the late 2000s, things stagnated. It seems to me that most of the financing firepower has become concentrated in the hands of a few players. We will discuss these issues at the summit, but I must attest that every country and region is different. I am hopeful that it takes good shape in the Middle East and MENA region.
Initially, there was confusion between microcredit and commercial banking, but now people understand these concepts. But there must be a policy in place to put microcredit to work, meaning that there must be a legal framework. There are banking laws in every country including countries in the Middle East, but banking laws are not suitable for microfinance to work properly. The existing banking law is framed for rich people. So you need to create a system or bank where poor people can have access to credit without collateral. There are nine such banks in the Middle East and I hope Kuwait will set up a bank for the poor in the future.
KUWAIT TIMES: You came up with an idea of social business, which you say is a kind of New Capitalism. Please describe this idea to us and explain how you reached it?
Professor Yunus: Social business is a cause-driven business where the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point. The purpose of the investment is purely to achieve one or more social objectives through the operation of the company, and no personal gain is desired by the investors. The company must cover all costs and make a profit, and at the same time achieve the social objective, such as healthcare for the poor, housing for the poor, financial services for the poor, nutrition for malnourished children, providing safe drinking water, introducing renewable energy, etc in a businesslike way.
I have been proposing and practicing a new kind of business which is based on selflessness, replacing the selfishness of human beings. This type of business runs parallel to the selfishness-driven business that rules the world. Conventional business is personal profit-seeking business. The new business, which I am proposing, is personal profit-forsaking business. It is a for-profit business, but not personal profits. I call it social business – a non-dividend company to solve human problems. The owner can take back his investment money, but nothing beyond that. After getting the investment money back, all profit is ploughed back into the business to make it better and bigger. It stands between charity and conventional business. It is designed with the objectives of charity and carried out with the methodology of business, but delinked from personal profit-taking.
Charity is a great concept to help people, and has been in use since time immemorial. But it is not sustainable. Charity money goes out, does a wonderful job, but does not come back. Social business money gets the job done and then it comes back. As a result, this money can be reused endlessly. It creates independent, self-sustaining enterprises, which have their own lives. These enterprises become self-fueled entities.
The capitalist system is justified on the assumption that making money is the sole source of happiness. The more money you make, the happier you are. Money is an incentive, no doubt, but it is not the only incentive for human beings. Making money is happiness; but I feel making the world happy is super-happiness. The capitalist system is about freedom to choose. But when it comes to looking for happiness, it gives no choice. By introducing social business to make the world happy, we give people another choice. Now they can choose.
Business schools today train young people to become business-warriors to capture market and money. They are not given any social mission. If we accept the concept of social business, business schools will be required to produce another category of graduates equipping them to become social problem-fighters to bring an end to social problems through social businesses. We would need to create social stock markets to attract investors who would like to invest in problem-solving enterprises, without having any intention of making personal profits.
The impact of the business on people or environment, rather than the amount of profit made in a given period, measures the success of social business. Sustainability of the company indicates that it is running as a business. The objective of the company is to achieve social goals.
Note: Dr Bhuiyan is a professor at Kuwait University
By Dr Serajul I Bhuiyan