Creating a World Without Poverty by Muhammad Yunus

Title: Creating a World Without Poverty: Social Business and the Future of Capitalism

Author: Muhammad Yunus

First Published: 2007

No. of Pages: 248

Synopsis (from B&N): "The winner of the Nobel Peace Prize outlines his vision for a new business model that combines the power of free markets with the quest for a more humane world—and tells the inspiring stories of companies that are doing this work today."

Fiction or Nonfiction: Nonfiction

Comments and Critique: I wasn't thrilled to pick up this book -- I needed a book about economics for the World Citizen challenge and I expected it to be a real snooze. It was the complete opposite -- a great book. The author writes about important issues in an easy-to-read style and neither makes the topics overly complicated nor talks down to the reader. He presents his views in a logical way, by telling you why a particular issue is important, a brief history of the issue, and his recommendation. I was a big believer in microcredit prior to reading this book and I'm now a believer in social business as well.

Given the importance of the issue, I'm going to make this post longer than usual and not just confine it to a review of the book, but give you a brief overview of what the book proposes. The author is promoting the idea of social business, which is a company that operates the same as any other business but whose goal is to provide a defined social benefit, such as the reduction of poverty, education, health care, etc. Investors receive their investments back, but do not receive dividends; instead, any profits made are reinvested in the business. The goal of a normal business is to make a profit and it sometimes also seeks to do good, but when the two goals conflict, profit wins out. A social business avoids that problem by making its social goal its only goal.

The book also gives a brief history of microcredit as conducted through Grameen Bank, the organization founded by the author in the mid-1970's. Microcredit provides financial services to the poorest of the poor by making collateral-free loans with more flexible requirements than you'd find in traditional loans. Loan recipients are often illiterate, so they are not required to fill out loan paperwork. Support systems are provided by requiring loan recipients to meet with each other, which makes the lending a community effort. Recipients also become shareholders in the bank and receive dividends when the bank does well. (These specifics apply only to Grameen Bank; other microcredit institutions may do things differently. The key to whether an organization is a microcredit lender is whether they provide financial services to the poor without taking advantage of the poor.) A microcredit organization may start out with the money coming from donors, but recipients pay interest on their loans, which then allows the organization to become self-sufficient. The interest rate should be reasonable. The imposition of interest also keeps the transaction from being a hand-out and encourages both responsibility and pride in the borrower.

Microcredit has reached 80% of poor families in Bangladesh and they expect to reach 100% by 2012. Grameen Bank operates solely in Bangladesh and has so far loaned out the equivalent of $6 billion (U.S.) with a repayment rate of 98.6%, enabling 64% of its borrowers to cross the poverty line. The bank now also offers student loans and scholarships (over 30,000 a year), housing loans including mortgage insurance to pay off the loan in case the borrower dies, a pension program, and even makes loans to beggers to enable them to become self-employed.

I've been a supporter of Kiva, another microcredit organization, for some time now. Kiva allows individuals to loan small amounts (as little as $25) to specific borrowers around the world. Borrower details are posted on Kiva's website. Kiva collects the funds and passes them on to their microfinance partners (regional banks and the like), who then make the loan to the individual and service the loan, including providing training and other assistance. As the borrowers pays the loan back, you are credited and can then relend to someone else. It's a great opportunity to help others -- I've donated $175 overall and have so far helped dozens of people. So far, Kiva has provided more than $63.5 million in loans with a repayment rate of 97.8%. Just under 78% of Kiva loans have been made to women, enabling millions of women and children to escape or take a step closer to escaping poverty (research has shown that making a loan to a woman is more likely to help a family than making the loan to a man).

I recently found an example of a social business that I'll be supporting from now on. It's called Better World Books. It's an online book seller whose social goal is to promote literacy and education. It sells both new and used books (used can be very cheap, I've seen them as low as $3) and supports literacy causes in the U.S. and around the world. It works with partner programs to donate books to the needy, including Books for Africa, Worldfund, the National Center for Family Literacy, Invisible Children, and my pet cause, Room to Read. So far, they've donated over 1 million books to these programs.

Used books are collected from universities and libraries across the country (libraries receive a portion of the sales price back) and you can also donate your old books to them, including textbooks (they also offer a buyback program for those). Many of the textbooks are not offered for sale but are donated to schools in Africa. Books that are too damaged for any use are recycled. The company offers free shipping in the U.S., $3.97 worldwide, and buys carbon offsets through Carbonfund.org so that its shipping is environmentally-neutral. So far, the company has raised over $5.5 million for global literacy and has saved 18 million books from landfills!

I can't encourage you enough to support Better World Books and/or Kiva, and to read Creating a World Without Poverty.

Challenges: A to Z (author "Y"); Orbis Terrarum 2 (Bangladesh); World Citizen ("Economics")