Loans For All, Laws For All
ROME, May 11 2016 (IPS) – On the evening of Tuesday, 10 May 2016, Professor Muhammad Yunus addressed an audience that included prominent government officials and dignitaries not only from Italy, but also from countries like Afghanistan, Indonesia, Liberia, reflecting the scope of Yunus’ work to alleviate global poverty. The event was hosted by the International Development Law Organization (IDLO), a Rome-based organization that advocates for development through promoting the rule of law worldwide. Professor Yunus was recently named to the International Advisory Council of IDLO.
Yunus began his address with a reflection on the obstacles both the banking and legal systems present to the poor. Forty years ago, Yunus created a microcredit initiative administering loans to the rural poor in Bangladesh when he saw that the traditional banking system perpetuated cycles of poverty. He remarked that even today, the banking system remains attached to serving the rich.
His response to a banking system that he believes “does not work for the poor” became Grameen Bank, which today works in over 40 countries at varying stages of development. Yunus has found it most effective to address poverty in families through women, and as such, Grameen Bank only administers its small loans to women.
Somewhat ironically as he presented at IDLO, Yunus explained that through Grameen Bank, there is no legal relationship between borrowers and lenders. His model has found success, he said, through human relationships rather than paperwork and legal recourses. Gramene Bank, he remarked, is probably the only bank in the world without lawyers, but the model works because it is based on trust.
Similarly, Yunus said, legal systems can work against the poor. He reiterated the importance of the rule of law, calling it “the only force that allows us to lead peacefully.” Law must be bought, he argued, and as such, it will only serve those who afford it. Yunus called for a fully inclusive legal system like the fully inclusive financial system he has strived to create through Grameen Bank.
Yunus was quick to identify Grameen Bank as a social business rather than a charity organization. The difference between a social business and a charity, Yunus explained, was that while a charity relies on continual external financial support to exist, a social business takes the social mission of a charity and uses a sustainable business model to thrive. When traditional big businesses are presented with the opportunity to solve social problems, he said, they often face laws that require companies to earn maximum profit or risk a lawsuit from any one of their stockholders. Even if CEOs have a vision to promote social responsibility, the laws of many countries prevent corporations from diverting from a maximization of profit.
Yunus stressed that countries must step away from conventional business law to expand the possibilities for development. When corporations are only concerned with maximizing profit, Yunus said, “we become one-eyed monsters. We see one thing: the profit. We are becoming robots, but human beings are not robots. Humans are not one dimensional beings. Humans are multidimensional.”
Yunus maintained that financial viability and social responsibility are not mutually exclusive. It is possible, he argued, to “do the selfish business” and also “do the selfless business.” He remarked that “people say profit is the only incentive that drives the business world […] I agree that profit is an incentive, but I disagree that profit is the incentive.” He concluded his discussion on the compatibility of profitable business and a social mission by asserting, “’Making money is happiness, but making people happy is super-happiness.”
As his remarks came to a close, Yunus reiterated the importance of the rule of law for development. He contended that law must become law that protects every individual, which is only possible through good governance that is sorely lacking in many parts of the world. This must be a collaborative effort, he asserted, and it is imperative that justice reaches every community and individual, rich or poor.
Following Yunus’ remarks, IDLO Director-General Irene Khan reflected on Yunus’ comments on the legal challenges faced by the world’s poor. Khan stressed, “when the law does not work for the poor, it is rule by law; when it works for everyone, it is rule of law.” Though people may not understand what it means to have the rule of law, Khan asserted that everyone understands the word “justice” in their language and what it means to live in a just society. IDLO’s mission is to promote a culture of justice for all, so it seems fitting that their guest of honor has made it his personal mission to promote a culture of economic justice for all.