"Muhammad Yunus Invented Microcredit."
Yes, just as Henry Ford invented the car. Where Ford had the assembly line, Yunus's breakthrough innovation was joint liability, the practice of making small groups of borrowers -- the women of a particular village, for instance -- collectively responsible for each other's loans. The vouching for peers substituted for collateral and produced astonishingly high repayment rates.
Joint liability was not new, however. Proverbs 11:15 warns, "A foolish man hands over his bounty which he pledges for his neighbor as security." A similar concept was also at the core of the credit cooperatives that sprouted across Germany starting in the 1850s, in which groups of poor people would band together, borrow from outside benefactors, and then divvy out the credit among themselves. Around 1900, seeking to quell unrest, the British introduced credit groups into colonial India, which included the territory of modern Bangladesh. In the late 1970s, these already functioning cooperatives inspired Yunus and his students as they built their own microcredit method by trial and error.
Yet the comparison to the carmaker is apt. Truly, Yunus is the Henry Ford of microfinance. Over the course of 28 years, until Bangladesh's prime minster forced him out in 2011 in an act of political spite, Yunus built a bank with thousands of employees delivering useful services to millions of customers. He inspired competition within Bangladesh and imitation beyond, which led to a steady stream of new innovations in the name of serving the poor, including savings accounts and more flexible loans. He was the first leader of the modern microcredit movement to operate in a relatively businesslike way: to mass-produce and charge the poor enough interest to cover most operating costs so that the bank could expand to serve more people.
FARJANA K. GODHULY/AFP/Getty Images
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