What the Nobel Peace Prize means to Muhammad Yunus – and how it shows the way new ideas come into the world.
Jurriaan Kamp and Marco Visscher| December 2006 issue
When Muhammad Yunus began to lend money to hard-working poor people back in the 1970s, he wasn’t exactly following the crowd. At that time, if you wanted to help the poor, you gave them money. Lending? It simply wasn’t done. This was 1974, when famine was raging in Bangladesh. The 34-year-old Yunus, who had just been appointed head of the economics department at Chittagong University, went to villages and visited with people who were starving, lent them money from his own pockets—sometimes less than a dollar—and told them to pay it back when they could. Everyone who heard about it at the time thought the idea sounded faintly ridiculous.
More than 30 years later, Muhammad Yunus is a celebrated man. Microcredit, the system he devised to extend small loans so the poor could start their own businesses, has expanded into the success story in the war on poverty and a vital instrument to affect sustainable peace in afflicted areas. The United Nations designated 2005 as the International Year of Microcredit and recently the Nobel Peace Prize was awarded to Yunus and his Grameen Bank.
Is this belated applause hypocritical? Is it an unexpected, sudden acknowledgement of the fact that Yunus was right all along? Not at all. Microcredit has simply gone through the stages that every innovative idea undergoes: First, it is ridiculed; second, it is violently opposed; and third, it is accepted and embraced as self-evident. These are the same stages that such ideas as democracy have experienced. Ditto for women’s rights, environmental safeguards and union protections—as well as many other achievements once considered air castles. These are most likely the same stages that will be faced on the way to much-needed reforms in sustainable energy, corporate social responsibility, direct democracy, education and health care.
Those stages were identified by Arthur Schopenhauer. Mahatma Gandhi also said something similar: “First they ignore you, then they laugh at you, then they fight you, then you win.” But what criteria does a new idea—and its creator—have to satisfy to get through to the established order? After all, not every idea is rewarded with a Nobel Prize…
A certain incubation period is logical: The power of an idea must first be proven. Only then will it become fair game for the world at large. In the case of microcredit, the proof soon became evident in the bottom line. Grameen Bank and other microfinancing institutions that sprang up in its wake showed that 98 percent of loans were repaid on time, a much higher rate of return than any commercial bank could deliver. Microcredit banks showed that extending credit loans to the poorest segment of the population could be financially profitable.
The commercial success of Grameen Bank—and its ultimate ability to pay its way without donor funds—convinced larger banks to get involved with microfinancing, first in poorer countries, followed by wealthier Western nations.
This parallels the gradual development seen in Europe, where microcredit expanded thanks to the efforts of the small, idealistic bank Triodos Bank, operating in the Netherlands, Belgium, the United Kingdom and Spain. Since the 1990s, Triodos has been investing its clients’ savings, as well as special funds, with microfinancing institutions in developing countries. Marilou van Golstein Brouwers, managing director of international funds at Triodos, sees now how larger, well-known banks have followed in the footsteps of this small Dutch bank: “To achieve innovation, you always have to go with the pioneers, not the established parties.”
Initially, the road to recognition was rough for Grameen Bank. In 2001, a damaging article appeared in The Wall Street Journal. The first words of the front-page story set a savage tone: “Microcredit is a great idea with a problem: the bank that made it famous.” Just remembering the article makes Yunus seethe. Even outsiders agreed that the article, which lacked any degree of subtlety, was much too hard on Grameen.
Yunus sent the paper a carefully drafted reply. Did he realize back then that the article was confirmation of the fact that his bank, his idea, was on the way up? Did he understand that criticism—according to Schopenhauer—is simply part of an idea’s growth process?
In his phenomenal book The Tipping Point, journalist Malcolm Gladwell discusses how “social epidemics” come into being, whether the trend involves the miraculous comeback of outmoded shoes or a seemingly inexplicable increase in suicides among young adults in Micronesia. Gladwell distinguishes among three types of people, all of whom play a crucial role in helping bring an idea into the world: connectors (who have the right contacts), mavens (knowledgeable people with a strong need to help others make an informed choice) and salespeople (who influence people to buy certain things or behave a certain way).
Muhammad Yunus embodies at least two of these types, according to Iqbal Quadir, who took the initiative to establish a nationwide cellphone company in Bangladesh with the help of Grameen Bank, what later became known as GrameenPhone (see Ode, April 2005). “Yunus is a super connector. He knows exactly what to say when he is with people like Bill Clinton, who helped Yunus be known around the world, or when he is talking to poor people in the villages in Bangladesh. He can connect with people easily.” And Yunus is a salesperson par excellence in a positive sense, says Quadir: “He can convince people easily.”
But there’s an even more important factor at play, according to Quadir, founder and director of the MIT Program in Developmental Entrepreneurship. Yunus is “a very practical man,” he says. In other words: Yunus gets things done.
Perhaps Yunus’ idea has simply benefited from the spirit of our times. Thirty years ago it was not considered chic to lend money to the poor. It was not in keeping with the belief in a “patriarchal society” based on the idea that the government should handle matters from the top down. What made sense back then was the transfer of billions in aid from one government to another. But microcredit is based on the unique abilities and talents of the individual. It is therefore logical that to embrace microcredit, we first had to get away from our belief in the patriarchal society . That analysis comes from economist and astrologist Peter Delahay. “Bureaucracy does not tolerate microcredit, because civil servants adhere to the principle of equality.”
During the 1990s, the belief in the patriarchal society began to crumble. Borders were thrown open, the free market was reinvented and monopolies were abolished. These developments, Delahay reasons, created space for more diversified approaches. Development aid came under fire: The money wasn’t getting to the poor, who weren’t involved in how funds were spent. Previously, such complaints were only expressed in the margins; now they were heard in the mainstream. Thus, there was room for a “new” instrument to combat poverty based on the belief in an innate human urge to develop continually: microcredit.
The breakthrough of microcredit offers hope—hope for all the other ideas, initiatives and groundbreaking visions that will make the world a cleaner, more sustainable and just place. The success of microcredit and Muhammad Yunus is an antidote to the cynicism and skepticism that so often stand in the way of necessary reinvention.
Here at Ode we constantly see new contours of ideas and initiatives that will change the world forever. For example, the Netherlands is currently in the throes of revamping its education system, driven by the emergence of Iederwijs (literally “everycation,” known in the U.S. as “unschooling”), schools where children can learn what they consider important without the interference of teachers pushing a required curriculum on them. Iederwijs, a philosophy based on the example of America’s Sudbury Valley School founded in the 1960s, is doing to education what Grameen Bank did within the field of development aid. Consequently, it too is experiencing a wave of resistance as Schopenhauer would have predicted.
And what about fuel-cell and solar panels? And the hydrogen economy? How often do we read that these clean forms of energy won’t break through for decades while the ominous future of climate change is looming now? Nota bene: A new Nobel Prize is waiting in the wings. The American energy consultant Amory Lovins has been contending for years that the hydrogen economy can be implemented today, cheaply, sustainably and successfully. That was Muhammad Yunus’ rallying cry in the battle against poverty 30 years ago, which initially met with ridicule on nearly all fronts. Lovins on intimate terms with such derision. But the established order is now listening more often and more carefully to Lovins. And he will bring us closer to real, sustainable energy more quickly—with or without a Nobel Prize.
New ideas want to be realized. And the beautiful truth is that nothing can hold them back. Initially, a new idea or plan will always butt heads with an established order that has no interest in change and cannot and will not see its benefit. Examples abound. The coachman’s interest group didn’t see Henry Ford coming. Airplanes weren’t invented by shipping tycoons. And what did the CEO of Twentieth Century-Fox say in 1946 about the invention of television? “People will soon get tired of staring at a plywood box every night.”
Visionary education, the hydrogen economy, corporate social responsibility, health care that doesn’t battle illness but strengthens the body—the seeds of progress are cautiously emerging in many different places. And sometimes, someone like Muhammad Yunus is there to help the world take a step forward. That is the way of things.
As Victor Hugo put it: “No army can stop an idea whose time has come.” In that context, a Nobel Peace Prize is also an award for courage and perseverance. For not wanting to give up and for continuing to trust. A prize that gives hope and reaffirms that there is room for improvement.