How Muhammad Yunus Created an Impossible Business

Last Updated Jun 5, 2008 11:19 PM EDT

Grameen Bank is an improbable business worth study. In the second section of Creating a World Without Poverty, Muhammad Yunus details the ongoing evolution of what he calls "The Grameen Experiment." Yunus was an economist, not a banker, and he needed to invent his bank for the poor, ignoring naysayers and regulatory obstacles at almost every step. It's a classic example of how someone who does not realize that what he intends to do is impossible is thus able to achieve it.

Economists may find themselves frowning in this section of the book. Yunus tweaks his former colleagues for their blind spots and their refusal to look at people except in abstract terms like "labor." His is another voice in favor of 'experimental' economics, the part of the field that tries to look at human behavior as it is, rather than as economists say it should be.

That kind of anthropological economics resulted in many useful business practices at Grameen, and Yunus is generous in discussing what has worked and what has needed revising. For instance, it found that the wisdom of crowds works among the very poor: it has learned to lend to people in groups of five, and they all have to vouch for the person receiving the loan. It's also learned that lending to women has a bigger potential for getting families out of poverty than lending to men.

Grameen is also of interest because it has spawned 25 different kinds of social businesses. Yunus details some of them in this section and then walks us through the newest, Grameen Danone, a joint venture between Grameen and France's Danone Group (in the U.S. we know it best for Dannon yogurt). This venture is a ground-breaking social business that now sells very inexpensive yogurt to help feed Bangladeshi children. In his two chapters on the creation of what he hopes will be a trendsetting operation, some of what Yunus looks at focuses on how a very large corporation was able to shift its own mindset about things like manufacturing, distribution and packaging in ways that may help its regular business.

Grameen's creativity and ability to change minds and remake both markets and government regulation is strikingly evident in this section. So is its ability to listen to its customers and adapt to them, rather than forcing them to adapt to it.

The final section of the book looks at his prescription for eliminating poverty. My final post on this book will examine what it means for businesses.

UPDATE: Here is my post Summing up Muhammad Yunus, Creating a World Without Poverty.

  • Michael Fitzgerald

    Michael Fitzgerald writes about innovation and other big ideas in business for publications like the New York Times, The Economist, Fast Company, Inc. and CIO. He’s worked as a writer or editor at Red Herring, ZDNet, TechTV and Computerworld, and has received numerous awards as a writer and editor. Most recently, his piece on the hacker collective the l0pht won the 2008 award for best trade piece from the American Society of Journalists and Authors. He was also a 2007 Templeton-Cambridge Journalism Fellow in Science and Religion.