Creating a sustainable future: Grameen’s model is not a hand-out, but a hand-up

From

Kat Dunn

An executive high-flyer who spent her first years on the poverty-stricken streets of Manila has told how she walked away from corporate life – as she felt like a fraud.

Though Kat Dunn, who will be speaking at The BFO Crossroads Conference next month next month, is now back – this time a chief executive.

But the trained lawyer is doing it on her own terms, following the dreams she had as a child to make the world a better place, at the helm of Grameen Australia.

The story about her roller coaster career and that of the social financier she now works for makes salutary reading for anyone looking into how financial services really can make a difference.

By the age of 32, her ambition to become a human rights lawyer had been subsumed by an ambition to make money. She was very good at it, making deals worth three billion dollars in the previous year and a half.

Kat said: “I remember on the outside looking in, it looked like I had won the professional lottery. But on the inside, I felt like a fraud.

“I loved how business could work to generate the kind of money that had the power to transform people’s lives.

“But the way I was seeing traditional business work was that it was actually causing social problems, not fixing them.

“Things like cutting costs and adopting environmentally damaging practices,  which would make investors richer – but at the expense of other people.

“It was a mindset that chased personal wins over community balance. I aspired to grow up to have a career that valued generosity, but then ended up in one that valued greed.”

So she quit, without a job to go to.

But it looks as though she really did win the lottery when she was approached to be CEO of Grameen Australia to work for a Nobel Peace Prize winner.

Professor Muhammad Yunus, who founded Grameen Bank in Bangladesh which has now been replicated over 100 times around the world, is a rockstar in the social enterprise world and is widely credited as single-handedly lifting an entire nation out of poverty.

Kat said: “Many call him the Bangladeshi Mother Theresa or Nelson Mandela. And yet, what he did was really simple, and it started with just $27.”

The Fulbright Scholar Nobel Laureate and social entrepreneur saw people dying of starvation in the streets in a country where the job market was decimated and there was no money to go around.

“People were so poor that they didn’t qualify for bank loans,” Kat shared of Professor Yunus’ real world experience, which is set out in his book “The Banker to the Poor”.

“These poor people were mostly women. They would set up little businesses making bamboo furniture, and sell it to the market. But in order to this, they needed to have money to buy the bamboo.

“The women  were so poor that the banks wouldn’t give them a loan, and they would have no choice but to go to loan sharks, who would charge them crazy high interest rates.

“It meant that once they sold their furniture, and paid back their debt with interest, they had no money left over to feed their family, educate their kids, and get ahead.”

Professor Yunus decided to solve this social problem by performing an experiment which challenged conventional wisdom that poor people didn’t have the character to pay back loans. He initially lent the women small amounts of money from his own pocket, so they wouldn’t have to go through loan sharks – being $27USD between 42 women

“Because he wasn’t trying to make a profit from them, his interest rates were reasonable and when they sold their furniture, made a profit, and paid the debt back with interest, they had enough money left to get ahead.

“Instead of losing all his money by backing these women, they paid him back at a rate of 100%.

“What started out as $27 between 42 women, has become 27 billion dollars across ten million people. With worldwide repayment rates of 97%.”

The unique thing about this model is that, unlike charity, it is not a hand out – but a hand-up. Instead of worrying about what happens if charitable grants run out, future funding of the solution comes from the business model itself. And unlike traditional business, the primary goal of microfinance isn’t to make investors richer, but to give financially excluded people access to capital that can transform their lives and educate an entire generation of otherwise marginalised children.

This message ties into the BFO’s 5th tenant being “I will help create a sustainable future”.

Professor Yunus often states that the only thing stopping us from changing the world is our imagination. We can see through just one example that it is possible to imagine a future where appropriate moral and ethical standards are upheld and a good quality of life is enjoyed by all, whilst leveraging the powerful tool of business to generate resources to solve social problems that create self-employment opportunities for people that traditional banks have written off.

What has happened to these original borrowers of Grameen Bank? They have now collectively accumulated deposits within Grameen Bank that exceed the loans being issued – that means the women borrowers initially deemed “un-creditworthy” by traditional banks have become women lenders.

By Katrina Dunn, CEO of Grameen Australia

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You can hear Kat Dunn speak at The BFO Crossroads Conference on Thursday 8 August 2019 at Westpac, Barangaroo, Sydney. The Program, full list of speakers and tickets are available here.

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