Here’s a Business Plan to Fight Poverty presents Muhammad Yunus’s latest market solution to poverty:
Yunus, 57, is the founder of Grameen Bank, headquartered in Dhaka, Bangladesh. (Grameen is the Bangladeshi word for “village.”) He started the bank to provide desperately needed credit to his country’s desperately poor villagers. The business model he pioneered — called “microlending” — broke all the rules of traditional finance. Yunus focused on making loans as small as $30, just enough to get a microbusiness started. He did not ask for collateral. Instead, he required borrowers to organize into small groups and guarantee one another’s loans. And he ended up lending almost exclusively to women, who account for 94% of the bank’s customers.The results have been stunning. Over the past two decades, Grameen Bank has grown to include nearly 1,100 branches, covering every corner of Bangladesh. It has made more than 2 million loans worth a combined $2 billion. It boasts a loan-repayment rate of 98%. It’s become a model for similar institutions in 50 countries.
The new venture is a mobile phone provider:
GrameenPhone Ltd. is the next twist in Muhammad Yunus’s brand of capitalism. The company is a consortium of four partners: Yunus’s Grameen Telecom (a 35% shareholder); Telenor AS, the main Norwegian telecommunications company (51%); Marubeni Corp. of Japan (9.5%); and New York-based Gonofone Development Corp. (4.5%). GrameenPhone opened for business last spring. It now offers service in Dhaka and in about 20 nearby villages. By the end of 1998, GrameenPhone will distribute 4,000 phones throughout the country. And it will keep adding not only phones but also services: fax, voice mail, Internet access.Yunus and his partners recognize the risks of their venture. There are fewer than 300,000 working telephones in all of Bangladesh, a country with a population of 120 million. Four years ago the government gave an exclusive cellular license to Pacific Bangladesh Telecom. By late 1996, when authorities ended PBT’s monopoly, it had sold just 4,000 cell-phone subscriptions.
Yunus’s approach to a tough market? Innovate. His strategy is to keep the service cheap so he can market it to the rural poor as well as the urban elite. And he plans to use the network as an engine of economic development, not just a source of revenue. The company is offering “village phones” to rural residents. Grameen Bank lends money to individual entrepreneurs to buy the phones. These entrepreneurs then sell the service to their fellow villagers and use the income to repay the loans. Yunus’s goal is to have at least one cell-phone in each of Bangladesh’s 65,000 villages within six years.