Dear Mostofa I
have tried to assemble a contribution from father below. He's very happy if people edit out anything that doesn't
fit. Whatever makes for a booklet that feels OK to Dr Yunus. Is someone like Khalid
Shams there to help you finally put the conributions together? The Great Advocacy is a lovely type of book. I am still wondering about title such as ====================================== Innovating Collaboration - 2009 Year of Yes We Can -A Future Capitalism Fieldbook with Muhammad Yunus, End Poverty Networkers and Friends of Microcredit =============================================== Three entries from Journal of Norman Macrae: Diary of a Microeconomist 1943-2009 Entry 1 - After Royal Automobile Club lunch on Future Capitalism
with Dr Yunus (St
James’ London 2008, Feb15) The
Importance of Muhammad Yunus The Nobel Peace Prize for 2006 was controversially awarded in Oslo to
a "banker for the poor" in once basket case Bangladesh. Since the microcredit system pioneered by this Doctor Muhammad
Yunus really has raised record millions of Bangladeshi women from the world’s direst poverty, Yunus was greeted on his
recent visit to London largely by the misunderstanding Left. But as an octogenarian economist, I also
had lunch with him and thrill fully to his stated aim to "harness the powers of the free market to solve the problems
of poverty", and his brave belief that he can "do exactly that". This apparent appearance of a viable system
of banking for the poor has important implications. We had better start by examining how microcredit almost accidentally came
about.
START IN A STARVING VILLAGE During Bangladeshi’s
terrible famine year of 1974, Dr Yunus (who had attained his doctorate in economics in a fairly free market American university)
was back at his 1940 birthplace of Chittagong, Professor of Economics at the university there. He took a field
party of his students to one of the famine threatened villages. They analysed that all 42 of the village’s small businesses
(tiny farm plots and handcrafts) were poverty-trapped by moneylenders. To be productively free, they needed
to borrow a ridiculously tiny total of $27 on reasonable terms.
First thought was
to give the $27 as charity. But Yunus reflected: a social business dollar that needed to be entrepreneurially paid back from
careful use in an income generating activity can be much more effective than a charity dollar which might be used only once
and frittered away. All of those first 42 loans were fully repaid, and lent back, and after 9 years further experiments Yunus
in 1983 founded his Grameen (which means Village) Bank. Its priority was to make loans that were desperately needed by the
poor instead of the usual banking priority to make loans to the rich who could provide collateral against what they happened
to want to borrow.
In the next 24 years, Grameen provided $6 billion of loans to
poor people with an astonishing 99% repayment rate. In 2007, it had seven million borrowing customers, 97% of them women (who
tend to be the poorer sex in rural Islamic societies) in 73000 villages of Bangladesh. Microcredit banking
networks have now reached 80% of Bangladeshi’s poorest rural families and most of Grameen’s own borrowers have
risen above the absolute poverty line.
When a Grameen Bank manager goes to a
new village, he has entrepreneurially to search for poor but viable borrowers. He earns a star if he achieves 100% repayment
of loans, and another star if he attains achievement of the 16 guarantees that all customers are asked to pledge, ranging
from intensive vegetable growing through attendance of all children at school, to abolition of dowries. A branch with five
stars would often transfer to ownership by the poor women themselves. A branch with no stars would be in danger of closing,
so borrowers tend to rally round with suggestions, such as which unreliable repayers to exclude.
As early as 1996, a breakthrough income generator was the franchise of telephone ladies. They borrowed enough to buy
a cheap mobile phone from a Grameen subsidiary. They would draw fees for phoning to see if more profitable prices for crops
were available in a neighbouring village, and from anybody who wanted to hire the phone to contact the outside world. This
is a job that could only become important in a microcredit setting; the owner of a mobile phone in richer suburbia would not
find many customers to hire her set. The apparently small change of the mobile telephone lady has compounded the most extraordinary
end digital-divides consequence. Today Bangladesh is at the epicentre of mobile partnerships, one of which is cheerfully
known as http://bankabillion.org
Children have always been at the core of Yunus visions of sustainability investment.
So it was fitting that the innovation strategy of Future Capitalism began with a co-brand designed to improve the nutrition
of poor children in the villages of Bangladesh. This social business was formed with the large French food multinational
called Danone. Grameen-Danone test marketed to find what sorts of fortified yogurt Bangladeshi children would like. Although
Danone at first wanted large plants with refrigerated systems, Grameen won the debate to make then small plants who bought
local milk and very cheap local distributors who knew which families had children who might buy the cheap yogurt fresh. Danone
had to agree not to pay any dividend from the sales of the yogurt in Bangladesh so as to keep the price cheap at a few US
cents per cup, but its $1 million investment remains returnable, it has learnt a lot about sales of a new product in poor
countries, and immense goodwill is multiplying round Danone branding as the lead global corporate benchmark of Future Capitalism
THE FUTURE Future Capitalism partnering ( http://futurecapitalism.com ) is a leading idea for networked economies whose time has come. Yet my view is that Grameen will soon be seen as central
to an even more critical free market choice : what future of banking will people everywhere want? In this 2008, conventional
bankers to the rich have trotted in panic behind the American giants who grossly mislent on subprime mortgages, and then sold
these loans on in "securitised", and exploding and even "derivitavised" packages to weaker funds and banks
who have frantically tried to disguise from their shareholders and from themselves how unmarketable and worthless some of
these assets are. If all bank statements in early 2008 had been utterly and appallingly honest, runs by depositors out of
them could already have accelerated out of control. Such banking crises are likely to recur before and after next January
when a new American president takes office. Across the Atlantic, Britons should remember that our prime minister in 1929 was
our last previous dire right wing Labour Scot, and that he had to coalesce in 1931 with a Baldwin who was as deaf as today’s
Cameron to why it is better to widen budget deficits in a slump.
A lesson in how to
run village businesses and not to handle bank crises comes also from Japan. When I wrote my first
book on Japan’s economy nearly 50 years ago, Japan had about two dozen lightly
taxed exporting multinationals who bought their components marvelously cheaply. The car factories bought their ball bearings
from tiny village firms, and the banks attached to Toyota etc kept on lending even when some peasant’s first bearings
did not past muster but gradually propelled him to work with or under a brighter neighbouring peasant whose products did.
That seemed inefficient to American experts and in the early 1960’s I had a translated debate on Tokyo television
with an American who said that such slack banking would ruin the country. I rejoiced as Japan then quintupled
its living standards in the next twenty years and its banks became temporarily the most powerful and prosperous in the world.
The crash came when in the late 1980s American business schools convinced Japanese factories that components must be bought
just-in-time. The big banks turned to financing suppliers who could do this (which were not those striving to be cheapest).
Banks lent mainly to new firms who could provide collateral which meant to richer ones. Once they were lending mainly to the
rich they blew up such a bubble that the nearest golf course to Tokyo was said to have a greater land value
than the whole state of California. When this bubble burst, all the banks had bad debts, which the government helped
them to hide so Japanese living standards stop rising fast since circa 1989. This is the threat to the whole rich world today.
Entry 2 - Published in The 2024 Report – a concise Future History,
1984 - by Norman & Chris Macrae
The View from 1984 on whether going global and practicing economics will systemise sustainability networks, or
not? By 2005, the gap in income and expectations between the
rich and poor nations was recognised to be man's most dangerous problem. Internet linked television channels in sixty-eight
countries invited their viewers to participate in a computerised conference about it, in the form of a series of weekly programmes.
Recommendations tapped in by viewers were tried out on a computer model of the world economy. If recommendations were shown
by the model to be likely to make the world economic situation worse, they were to be discarded. If recommendations were reported
by the model to make the economic situation in poor countries better, they were retained for 'ongoing computer analysis'
in the next programme.
In 2024,
it will then be easy to see this as a forerunner of the TeleComputing (TC) conferences which play so large a part in our lives
today, both as pastime and principal innovative device in business. But the truth of the 2005-2010 breakthrough tends to irk
the highbrow. It succeeded because it was initially amplified by a rather downmarket television reality programme. About 400
million people watched the first programme, and 3 million individuals or groups tapped in suggestions. Around 99 per cent
of these were rejected by the computer as likely to increase the unhappiness of mankind. It became known that the rejects
included suggestions submitted by the World Council of Churches and by many other pressure groups. This still left 31,000
suggestions that were accepted by the computer as worthy of ongoing analysis. As these were honed, and details were added
to the most interesting, an exciting consensus began to emerge. Later programmes were watched by nearly a billion people as
it became recognised that something important was being born.
These audiences were swollen by successful telegimmicks. The presenter of the first part of the
first programme was a roly-poly professor who was that year's Nobel laureate in economics, and who proved a natural television
personality. He explained that economists now agreed that aid programmes could sometimes help poor countries, but sometimes
most definitely made their circumstances worse. When Mexico was inflating at over 80 per cent a year in the early 1980s , the inflow to it
of huge loanable funds made its inflation even faster and its crash more certain. The professor set Mexico's 1979-1981
economy on the model, pumped in the loaned funds and showed how all the indicators ( higher inflation, lower real gross domestic
product and so on) then flashed red, signaling an economy getting worse, rather than green, signaling an economy getting better.
..The professor then put the model back to mirror the contemporary world of 2005, and played into it various nostrums that
had been recommended by politicians of left, right and centre, but mostly left. The dials generally flashed red. Then the
professor provided another set of recommendations, and asked viewers who wished to play to tap in their own guesses on the
consequent movement of key economics variables in the model. Those who got their guesses right to within a set error were
told they had qualified for a second round of a knock-out economic guesstimators' world championship. Knockout competitions
of this sort continued for viewers throughout the series of programmes.
In the second part of that first programme, the presenters dared to introduce two political decisions
into the game. They said that government-to-government aid programmes had been particularly popular among politicians during
the age of over-government, but there was growing agreement that government-to-government aid was the worst method of hand-out.
The excessive role played by governments in poor countries was one of the barriers to their economic advance, and a main destroyer
of their people's freedom. Could anyone have thought it would be wise to give aid to President Mbogo?
In consequence, the most successful economic aid programmes
had been those operated through the International Monetary Fund, which imposed conditions on how borrowing governments should
operate. The professor showed that IMF-monitored operations in most years had brought more green flashes from the model than
red. But this involved IMF officials - often from the rich countries - in telling governments of poor countries what to do;
and one of the objectives of this town meeting of the world was to diminish such embarrassments.
The first questions to be asked in the next few programmes,
said the compilers, were 1) which countries should qualify for aid? ; and having decided that, 2) up to what limits and conditions?
; and 3) through what mechanisms? They promised that later programmes after the first half-dozen would examine how any scheme
could be used to diminish the power of governments and increase the power of free markets and free people. Entry 3 - View During Congress Trillion
Dollar Bailout ( Wimbledon
, last quarter 2008) How to Avert A Great
Depression Through the Hungry 2010s? Answer, By Making All Banking Very Much Cheaper
If banks in rich democracies had been truly competitive institutions, at least one of them somewhere would have seized
the main opportunity created by the computer. This main opportunity was to make all deposit-banking vastly cheaper than ever
before. By this cheapening it should make such banking hugely more profitable. Then further competition would search for the
cheapest ways to guide all the world’s saving into the most profitable (or otherwise most desirable) forms of capital
investment, thus enriching all mankind.
Instead, during 2008 the total losses of banks in rich democracies – in North America, West Europe and Japan – soared into trillions of
dollars. Fearful for their solvency, these banks virtually stopped lending. The issuance of corporate bonds, commercial paper,
and many other financial products largely ceased. Hedge and insurance firms also crashed. Mankind is thus threatened in the
2010s with its longest great depression since the hungry 1930s.
Why? The strange answer seems to be that other happy consequences of modern technology promised
to make this cheapening even faster. Call centres in Bangalore vastly undercut the middle class salaries of Midland bank clerk who until the 1950s expensively
answered clients’ questions in their branches in the City of London. Cheap mobile phones kept village ladies in once miserable Bangladesh as fully in touch with market
prices as is the chief research officer of the First National Bank of Somewhere in California. His weekly salary is still 1000 times greater
than the previous annual earnings of that village lady. The cost-effective way of running the old Midland or First National then seemed to
be to cut its total salary cost by something like 99%. This did not please Western welfare governments, or the decent chief
executives of the old Midland or First National bank.
Awaiting the sensation of a short sharp shock From a cheap and chippy chopper
on a big black block – WS Gilbert in The Mikado - why it is uncomfortable to work in an industry which needs 99%
redundancies. |
Western welfare governments have long preferred to run their banks in high cost cartels, and even invented reasons
why this seems to be moral. Their deposit-banks have usually kept in cash only 10% of the total amount
deposited with them. If 11% of depositors suddenly feared that their banks might go bust, this could accelerate a run that
would send them bust indeed. Governments therefore thought that depositors would be less fearful if they were assured that
the banks were officially and tightly regulated. Actually, this mainly meant that the banks had to hire ever more expensive
lawyers so as to escape any crippling consequences from this regulation. The attached quote shows that Samuel Pepys understood
this fact of life in his Diaries of July 21, 1662.
I see it is impossible for the King to have things done so cheaply as do other men – Samuel Pepys on
discovering an important commercial fact of life in his Diary, 21
July, 1662 |
The decent bosses of the deposit banks felt that the best
way of avoiding sacking nine tenths of their staffs was by competing with a very different sort of financing called merchant
banking whose earnings and bonuses were far more generous than those given to their own staff. These merchant banks were of
peculiarly differing pedigree. In London, it was assumed that they could best be run by families like Barings who had done the job for over
200 years. In the 1990s, Barings went totally bust because one of its hired traders bet much of its money on a hunch that
a bad earthquake in Japan meant that the shares of Japanese banks and insurance companies would become more profitable. In Zurich, merchant banks felt it most moral
to keep the accounts of their depositors totally secret, especially if these accounts were being used to defraud their own
countries’ tax authorities. In 2008 those secretive banks were then defrauded. In Wall Street, Goldman Sachs and Lehman
Bros bid up their annual bonuses to millions of dollars for each partner. In 2008 even Goldman Sachs made a loss and Lehman
Bros went bust.
A former chairman of the Federal
Reserve argues that “fearful investors clearly require a far larger capital cushion to lend unsecured to any financial
intermediary now”. He therefore thinks that taxpayers money should be ladled into them to make those investors less
fearful. This seems far more likely to make depositors intermittently more terrified and cause any depression into the 2010s
to linger on and on.
In the 1930s, the chief economic adviser to the
government of Siam was called Prince Damrong. I try always to remember it – quote from former director of International Monetary Fund. |
One of the few big banks to make a profit
in 2008 was the Grameen Bank (which means Village Bank) in that once basket-case country called Bangladesh. The sole staff in a branch
serving several villages was once a woman student. It is now more usually someone who has learnt to use the computer in the
right way.
How to create cost-cutting
banks? Learning from Dr Yunus and those who have exponentially sustained community rising microcredit seems to be the best
way forward worldwide women and USA Congressmen can get. http://www.results.org/website/article.asp?id=3709
MicroBio As a child, Norman Macrae bumped into
Peter Drucker. It was dinner time at the British Embassy in Stalin’s Moscow where Norman’s father was a consulate.
Both Norman and Peter’s experiences of the 1930s determined their love of writing up for big management stories
of why and how entrepreneurial systems are born micro. The teenage Norman studied economics from an Indian correspondence
course whilst waiting to fly RAF planes out of Bangladesh in world war 2. He then went up to Cambridge as part of the last student
generation to be lectured by Keynes. He married the daughter of the British Raj judge who was tutored for 25 years in change
by Mahatama Gandhi –Kenneth Kemp went from being the Mumbai judge who imprisoned Gandhi in the 1920s to helping write
up the legalese of India’s Independence in the 1940s.
Norman went on to Deputy Edit
The Economist for 4 decades. He enjoyed reporting system change before it exponentially compounded - including in 1962 the
exponential rise of Japan, and between 1976-1984 The Entrepreneurial Revolution trilogy. The latter provided a microeconomics
map of how to transform - and sustainability invest - through the end of the Industrial era whilst cross-culturally uniting
the generation destined to be worldwide. In 2009, Norman remains reasonably optimistic: Yes Human Beings Can End Poverty - if we choose
to collaborate and celebrate this as our generation’s defining goal.
--- On Sun, 4/1/09, Mostofa Zaman wrote from Dhaka:
From: Mostofa Zaman
Subject: Today's
Meeting with Muhammad Yunus
To: chris.macrae@yahoo.co.uk
Cc: "spencer" peloquin@ "rachel"
"Alexis "Peter R, "Peter B
Date: Sunday, 4 January, 2009, 7:30 PM
Hi Chris: I have met Muhammad Yunus
today at his office and tried to report him on what we have achieved in few months back. Yunus has read the booklet draft
and he would love to edit it slightly and he asked me - it that ok to do it? It was "YES" from me to
his question. Is the name of the book? Micro Guide to 5 Collaborations to End Poverty and Sustain
Humanity Anyway, the one aspect I was talking with him is the contents of the booklet
like 1. Forward by Yunus [ 1 page] 2. Preface by Chris [1 page] 3. A shorts induction on
Grameen [2 pages] 4. 5 Collaborations [20 pages] you have provoided 5. Article on Yunus by Norman Macrae
6. List of Webs on Yunus/Grameen [ 1 page] it will be helpful for the readers 7. List of books
on Yunus/Grameen [1 page] ditto 8. If possible, we can quote from Yunus Speeches on the 5 collaborations
[1 page] Besides, I was speaking on Clinton Global Initiative University 2009.
Best Regards, -------------------------- |
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