In a unipolar world, where we worship markets as the ultimate solution – where doing good is a by-product of doing well, it is important to understand what Muhammed Yunus brought to the table and why he should be treated with dignity as he moves on in life. It is passe to say that Yunus has been in the news lately for all the wrong reasons, which usually implies that he is creating the news. Unfortunately for Yunus, the news is about him, possibly for not what he has done, but for what he is!
Unlike many people who come from the civil society side of the argument, and work as outsiders questioning the status quo, the journey of Yunus is of a critical insider. He has not questioned the logic of the status quo, but contested it with an alternative model while continuing to largely play by the rules of the status quo.
Also read: Bangladesh Top Court Orders Nobel Laureate Muhammad Yunus to Pay $1.3 Million in Taxes
There are two phases in the life and work of Yunus that we need to examine – the first phase of working on an innovative microfinance model that led up to his Nobel Peace Prize; and crusading a model of social business. In both initiatives, he has engaged with the markets, with the structures, while providing alternative models of ownership and profit distribution. This is clearly seen in the paradox of microfinance in India, where his operative model was used to provide access to financial services, without the attendant ownership model – resulting in the enrichment of the investors.
When Yunus introduced the concept of microcredit in Bangladesh, he was providing for the reimagination on how the credit markets could operate at the last mile, with the poor. Information asymmetry between the lender and the borrower was bridged through an intervening group mechanism; standardisation and aggregation of transactions, that provided a social collateral and also brought in transaction efficiency. All these would delight any commercial outfit.
Yunus never argued for subsidies, and in fact, charged market rates of interest. So, what was different? The basic paradigm that Yunus questioned was not about the commercial viability of the operations but the mode of distribution of the residual profits. Both in the microfinance model – where the Grameen Bank was owned by the women who were customers – and in the social business model, he argued for ploughing back the profits to benefit the community rather than the investors. He formulated a redistribution model while arguing that the investors should get a fair (but not disproportionate) return. This is an important paradigm for people looking for a more equitable and just society while recognising the imperatives of commerce and markets.
By persecuting and maligning Yunus, the damage being done is not just to his person, but to the larger idea that he represents. It is important that we assess the implications of this. As stated earlier, Yunus’ innovation in microcredit was easily a commercial innovation – a clear evidence of that can be found in how the Grameen model is replicated in India. The Indian replication of Grameen is in the operational detail, while the ownership is not moving towards the redistribution of wealth. Instead, it resulted in polarisation in the hands of the investors. It is an irony that the report on the Social Stock Exchange claims that the microfinance sector turned in superior returns to the investors, when benchmarked with the average returns of the private equity firms.
Yunus represented a voice of credibility and conscience – a person who appreciated the operating model but never hesitated to criticise the ownership model, be it when the celebrated SKS Microfinance in India hit the stock market or when the leading Mexican microfinance organisation Compartamos came out with an Initial Public Offering. He represents the argument for equity in the world of commerce.
Is Yunus a threat to either the political dispensation or to anybody else?
It beats any logic to see him as a threat. Yes, he tried to float a political party under pressure from his admirers but soon abandoned it. He figured that while he could engage with the business world, it was quite different to engage with the political world. The business world has not seen him as a threat, but has constantly engaged with his ideas, whether it is the transnational Danone, or any of the organisations that examine the way of doing social business – a business with a heart.
Yunus brought glory to Bangladesh, through not only his Nobel, but more importantly by the endorsement of his idea that poverty should be in the regular conversation in the business world. People, including the business world, must continuously engage in these conversations to ensure equity. While the state has the primary function of taxation and redistribution, Yunus stands for a larger idea of equity. An idea that does not need the state to do redistribution if the business world itself becomes more equitable. He has demonstrated the idea with credible and alternative business models. But by doing this, he has only enhanced the brand of Bangladesh. While the current regime can claim to have ushered in better human development indicators for the small country, it is nobody’s case to persecute Yunus. It just destroys a wonderful brand and puts it on par with despotism.
It is sad that countries fail to celebrate their heroes for petty considerations. India did it to MF Hussein, Bangladesh is doing it to Yunus. It is important to handle our living legends with greater care. Yes, they are human and fallible, but we should not be losing a sense of balance. Particularly with someone like Yunus who has not only had an impact on the banking systems of Bangladesh but has immensely contributed to the idea of women’s participation in banking in India and much more!
M.S. Sriram is a Professor at the Centre for Public Policy, Indian Institute of Management Bangalore. Contact: mssriram@pm.me
