At the Nobel Prize ceremony, you said poverty and injustice are threats to peace.
Is anyone surprised at the connection between microfinance and peace? People have been asking me for 15 years, “When are you going to win the Nobel Peace Prize?” on the premise that if you reduce poverty, you enhance peace. The position I take is that what threatens peace is some sense of injustice in people’s minds. Then they will resort to violence because they cannot address injustice by conventional means of democracy or negotiation. One form of violence is terrorism. “I’m poor for no reason, they have robbed me of everything, it is their fault.” Or, “Our next-door neighbor is a rich country, we are a poor country, they come and exploit us, so we resort to violence.” There is also political injustice. “My voice is not heard, my land has been conquered.” There is ethnic injustice, religious injustice. These are reasons that peace is disturbed. Poverty is one of those deprivations, so anyone who can reduce poverty could be enhancing peace. We’re setting a goal that 100 million of the poorest families get out of poverty by 2015.

But there is something else we have been seeing among the women who borrow money from Grameen Bank to start small businesses. They meet in groups to help each other with their businesses and to elect a chairperson and a secretary. When a woman is elected, she experiences power, often for the first time. She doesn’t like to give up that power. She knows now that she has to make decisions. These women have started contesting local governments. There are more than 3,000 Grameen women in local offices. This might be a woman who didn’t have the confidence to look you in the eye or talk to you before. Now she’s a public figure.

You have also said that access to credit should be a right.

The rights to food, shelter, education and healthcare are things that all humankind has come to accept as basic rights. But who is going to provide those rights? The state? The easier way to do it is to create an environment that makes it possible for individuals to establish their own human rights. But someone has to provide the facility for them to create income for themselves. In developing countries, no one has been there to provide capital except moneylenders. So we have established a financial system where everyone is entitled to go and borrow.

There are, however, microcredit institutions that charge interest rates as high as 30 percent, on a par with moneylenders.

You can add 10 percent above the cost of funding, and that should cover all of your risk. Sometimes you have to add another 5 percent, but above 15 percent you are basically imitating the moneylenders. Some people say those are high interest rates, meaning that the interest rate should be nominal. I disagree with that. You have to cover your costs, because otherwise you have a charitable business that cannot sustain itself.

Securitization of microfinance loans is one possible way to make more capital available.

Securitization within the country of operation, in the local currency, is a good option. I think we should gradually develop this facility with some kind of guarantee mechanism from willing partners abroad who can help securitize domestically with international support.

But, at the same time, this is a case where you need money from outside your organization. Our preferred strategy is to raise money from within a system instead of borrowing from someone else.

But how can you trade securities in a country without a capital market?
 
We have to encourage the banking and business communities to make it possible. But while we wait, an easier first step is to let the microfinance institution take deposits. Grameen Bank takes deposits that always stay ahead of our lending operation. The bank finances all of its loans from deposits now—more than 63 percent of the deposits come from the bank’s own borrowers—so that we’ve stopped taking donor funds. Local money is collected in deposits, goes to local poor people, and, in the process, helps the local economy. We want to encourage the banks in other countries to make this happen. If one country does it, it becomes model legislation.

You have shaken up banks in poor countries by getting them to lend money to people with no collateral. Did you have to start with your own capital?

In 1976 I was in a Bangladeshi village where people were starving, trying to see how I could help. I put together a list of 42 people who needed just a little money, and because the banks wouldn’t lend to them, I lent them money. The total amount they borrowed was $27. I thought, “I can solve the problem, so why don’t I do it?”

But since I’m a teacher, and not a moneylender, I thought the bank would be the right solution. I went to the local banker, and he told me, “Banks cannot lend money to the poor people.” So after months of running around, I finally offered myself as a guarantor. Luckily it worked. We got approval to start a bank in 1983, so it took seven years.

I said that at least 50 percent of the borrowers must be women, because I was campaigning against the traditional banks that didn’t lend to the poor and didn’t lend to women. The women themselves would say, “No, not me, give it to my husband.” They had never touched money before in their lives. I started having sessions with village women. But husbands wanted to control the money, so we had to go through another round of training with the men. They might bully their wives, but in a group with a bank official, they were very submissive. Our rules are very clear: Your wife makes the money; it has to stay with her; it benefits you because she uses it for the whole family.

Who is funding Grameen’s forays into what you call  “social business”?

There is tension in the microcredit world, with one group seeing it as a business opportunity, the other as an opportunity to help the poor. We see something in between. Business as we know it now exists for the single purpose of profit maximization. I say that that is too narrow of an interpretation. It depicts human beings as money-making machines. In my mind, a human being is much, much more. If we could define business in a wider way, we could open the way for businesses that exist with other objectives. You run a business as a business; however, you start the company not for the purpose of making money, but to provide poor people with safe drinking water or healthcare.

Right now, Bangladesh has 1.6 million cataract patients waiting for surgery, but the total capacity of the entire country is under 100,000. We want to set up small cataract surgery centers. They will be good hospitals, and we will charge market rates to patients who can afford it. But for the very poor, we will charge $1 to have the operation performed by the same surgeon. If a hospital is profitable, then that money will go toward building another one. If anyone is willing to lend $600,000, we will build a hospital, operate it, make it self-sustaining and then return your money. Your name will go on the hospital. And if we have a surplus, we will build another one.

We have two such hospitals now. One of these hospitals is being financed through the Green Children Foundation of Norway; the capital came from a Norwegian businessman. He asked how much it would cost. We hadn’t worked out all the costs, and I underestimated that it would be $500,000. Later I sent him a letter and said we made a low estimate, but we could put in $100,000 ourselves. He said, “Why should I let you make up the rest, because it’s my hospital?”

And you have other ventures in the works?

I had a chance meeting in November 2005 with Franck Riboud, the chairman and CEO of Groupe Danone, and I proposed a Danon company in Bangladesh. I suggested we make yogurt—but fortified yogurt for children who suffer from malnutrition—and then sell it at a price their parents could afford. He came for the launch of the factory and brought French soccer star Zinedine Zidane, who is such a big star in Bangladesh. The whole country was glowing over the fact that Zidane was there.
 
We are currently working on some refinements. The yogurt cups are biodegradable, made of cornstarch, but I would like them to also be edible. There is a small amount of plastic in the material now that keeps the cups from being edible, but they are researching the technology.

We are happy to do joint ventures in all kinds of social businesses, or encourage companies to do it on their own. For all of the problems we grumble about that never get solved, I say, “Build up a company.”  There could even be a stock exchange that trades social businesses—but you invest to do good and get your money back, not to make a profit.

Photograph by Terry O’Neil.