It all started 25 years ago. I was teaching economics at a university in Bangladesh. The country was in the middle of a famine. I felt terrible. Here I was, teaching the elegant theories of economics in a classroom with all the enthusiasm of a brand new Ph.D. from the US. But I would walk out of the classroom, and see skeletons around me, people waiting to die.
I felt that whatever I had learned, whatever I had been teaching, was all make-believe stories, with no meaning for peoples' lives. So I started trying to find out how people lived in the village next door to the university campus. I wanted to find out whether there was anything I could do, as a human being to delay or stop the death, even for one single person. I abandoned the bird's eye view that lets you see everything from above, from the sky. I assumed a worm eye's view, trying to find whatever comes right in front of you- smell it, touch it, see if you can do something about it.
One particular incident took me in a new direction. I met a woman who was making bamboo stools. After a long discussion, I found out that she made only two US pennies each day. I couldn't believe anybody could work so hard and make such beautiful bamboo stools yet make such a tiny amount of profit. She explained to me that because she didn't have the money to buy the bamboo to make the stools, she had to borrow from the trader- and the trader imposed the condition that she had to sell the product to him alone, at a price that he decided.
And that explains the two pennies- she was virtually in bonded labour to this person. And how much did the bamboo cost? She said, "Oh, about twenty cents. For a very good one twenty-five cents." I thought, "People suffer for twenty cents, and there's nothing anybody can do about it?". I debated whether I should give her twenty cents, but then I came up with another idea- let me make a list of people who needed that kind of money. I took a student of mine and we went around the village for several days and came up with a list of forty-two such people. When I added up the total amount they needed, I got the biggest shock of my life. It added up to twenty-seven dollars! I felt ashamed of myself for being part of a society which could not provide even twenty seven dollars to forty-two hard-working, skilled, human beings.
To escape the shame, I took that money out of my pocket and gave it to my student. I said, "You take this money and give it to those forty two people that we met, and tell them this is a loan, but they can pay me back whenever they are able to. In the meantime, they can sell their products wherever they can get a good price."
After receiving the money, they were very excited. And seeing that excitement made me think, "What do I do now?" I thought of the bank branch which was located at the campus of the university, and I went to the manager and suggested that he lend money to the poor people that I had met in the village. He fell from the sky! He said, "You are crazy! It's impossible! How can we lend money to poor people? They are not credit worthy". I pleaded with him and said, "At least give it a try- find out, it's only a small amount of money." He said, "No. Our rules don't permit it. They cannot offer collateral, and such a tiny amount is not worth lending." He suggested that I see higher officials in the banking hierarchy in Bangladesh.
I took his advice and went to the people who matter in the banking section. Everybody told me the same thing. Finally, after several days of running around, I offered myself as a guarantor. "I'll guarantee the loan, I'll sign whatever they want me to sign, and they can give me the money, and I can give it to the people I want to."
So that was the beginning. They warned me repeatedly that the poor people who receive the money will never pay it back. I said, "I'll take a chance". And the surprising thing was, they repaid me every penny. I got very excited and came to the manager and said, "Look, they pay me back, there's no problem." But he said, "Oh no, they're just fooling you. Soon they will take more money and never pay you back." So I gave them more money, and they paid me back. I told this to him and he said, "Well, maybe you can do this in one village, but if you do it in two villages, it won't work." And I hurriedly did it in two villages- and it worked.
So it became a kind of struggle between me and the bank manager and his colleagues in the highest positions. They kept saying that a larger number, five villages probably, will show it. So I did it in five villages, and it only showed that they paid back. Still they didn't give up. "Ten villages. Fifty villages. One hundred villages." And so it became a kind of contest between them and me. I came up with results they could not deny because it was their money I was giving, but they would not accept it because they are trained to believe that poor people are not reliable. Luckily, I was not trained that way so I could believe whatever I was seeing, as it revealed itself. But the bankers' eyes- their eyes were blinded by the knowledge they had.
Finally, I had the thought, "Why am I trying to convince them?" I am totally convinced that poor people can take money and pay it back. Why don't we set up a separate bank? That excited me, and I wrote down the proposal and went to the government to get the permission to set up a bank. It took me two years to convince the government.
On October 2nd, 1983, we became a bank. A formal, independent bank. And what excitement for all of us, now that we had our own bank, and we could expand as we wish. And expand we did.
-Excerpt from Stephen Covey's interview with Muhammad Yunus