Posted on May 14, 2009 - by Gavin

Faith in the Poor: Grameen CEO Sees an Entrepreneurial Path from Poverty…

Knowledge Wharton

Almost everyone wants to help the poor. In a world where many demand profits of 10%, 20%, 30% or more on their money, people donate to the poor despite a return of “negative 100%,” said Alex Counts, president and chief executive of the Grameen Foundation, which is dedicated to lifting people out of poverty by lending them money so that they can start small businesses.

Few people seem to consider the middle path pioneered by Grameen Bank, an institution that revolutionized methods of dealing with poverty through lending to the poor. Loans from Grameen Bank help people, most of them Bangladeshi women, to buy animals, open food stands and purchase phones that owners can rent out to generate profits. Why do most anti-poverty programs emphasize charitable giving over help to entrepreneurs? One reason, Counts said, is that people of relative privilege assume that the poor aren’t educated or experienced enough to succeed in business.

Counts, speaking recently as part of the Coleman Social Impact Lecture Series, urged the audience to reconsider their notions of the poor as incapable of starting and running a business. Living on $1 or $2 a day hones persistence, creativity and thrift, the very skills that make for a good entrepreneur, Counts said. “Those of us who have grown up in affluence underestimate the abilities of the poor and what is learned in survival mode,” he said, adding that he has never seen a “Help Wanted” ad in the world’s poorest villages. The poor work for themselves or not at all.

Counts often tells this story about Grameen Bank’s experience in the cell-phone business: When founder Muhammad Yunus wanted to help women in small, poor villages in Bangladesh start businesses by lending them money to buy cell phones so that they could charge neighbors to use them, several people told him it wouldn’t work. Such women were too poorly educated to learn to use a cell-phone quickly, the thinking went. Yunus launched the project anyway and then checked in on the women. He asked one how long it had taken her to figure out how to use the phone. “You must own a very complicated phone,” the woman told him. “My phone only has 10 numbers. I was in business in about 10 minutes. Professor Yunus, you should get one of these phones.”

Grameen Bank has been profitable since 1983, but it does not follow the standard advice of charging what the market will bear, according to Counts. “Professor Yunus said that when you lend to the poor, what you should try to do is recover your costs.”

Source: http://knowledge.wharton.upenn.edu/article.cfm?articleid=2233