From Books to Reality

Victoria Reca, 15 December 2016

By Victoria Reca, student of the HEC Paris' MSc in Sustainability and Social Innovation

Microcredits in Argentina

Victoria Reca TECHO

In 2013, as a young student and professional, I became involved in Techo, a pan-Latin American NGO that seeks to overcome poverty in slums through “collaborative work of families living in extreme poverty with youth volunteers”. Techo Argentina this year reported that 1 out of 10 people in the country live in slums. 73% don’t have access to electricity, 60% get flooded every time it rains, and 40% don’t count with a waste management system [1 ]. This should be put in the context of a national poverty rate of 32.2%, that is to say over 14 million Argentinians are poor [2]. These alarming numbers are facts that quantify the reality that one sees on the streets every day. They provoke calls for action from all sectors of society.
Techo’s aim is to help as many people as possible escape from this emergency situation. But they recognize that helping the community find long-term solutions is also vital. I became involved with their Microcredit Program. This involved giving small loans to women entrepreneurs that would not have access to the conventional banking system and wanted to start, or expand, their business. We also accompanied their projects every week, mentoring them in the management and growth of it. As it is commonly acknowledged, offering money to people in need will not eradicate poverty, but with education and commitment, we believed we were giving them practical tools to change their reality. Hoping to use my business background for more than just financial returns, I explored the on-the-ground effects of microcredits and social business through Techo. I also hoped to better understand how multinational companies could better address social problems by becoming part of a socially committed movement.

Professor Muhammad Yunus, founder of the Grameen Bank in Bangladesh, is known as a pioneer in the field of microcredits and social business, having had this model replicated in dozens of countries and institutions. As a volunteer in the Microcredit Program, I read Creating a World without Poverty: Social Business and the Future of Capitalism, and Building Social Business: The New Kind of Capitalism That Serves Humanity's Most Pressing Needs, just two of eight books he wrote or co-wrote on the subject. It piqued my curiosity: I wanted to learn more about how Yunus thought we could use business to solve social issues.

When Paris launched of its Social x Business Impact movement in November, we were given the opportunity to interview Prof. Yunus. With my experience on the field, I had many questions for him.

MYunus and VReca - November 9 2016

 Volunteering & Sustainability

Much of the success of the business empowered by Microcredits, especially those run by NGOs, relied on the commitment of the volunteers. Without the loans, these businesses would not exist, but without the volunteer’s desire to help business development, these would be difficult to sustain and grow. Most of the women entrepreneurs did not have past experience or studies in business. Their underprivileged living conditions influenced their priorities and dedicating enough time to their new business was, sometimes, difficult. Volunteers would help and guide them through the first months or years of it.  Still, the efforts of volunteers many times got frustrated for lack of commitment from the beneficiary. As in most NGOs, being a volunteer also means that there might be more “lack” of commitment, and it was not unusual for many to skip the weekly meetings for personal reasons. I would constantly ask myself: how sustainable are these efforts?
To this, Prof. Yunus answered: “You have to find a way where you are not dependent on volunteers, because you cannot make your system dependent on an element which doesn’t work for you … Get rid of it”.

Even though this might sound logical, Yunus’ answer was unexpected for he probably understands this need of volunteers, but dismissed it very quickly. In day-to-day practice I do not see this easily happening. In most NGOs in Argentina, “getting rid” of volunteers would mean the collapse of all of the NGOs’ efforts. Techo, for example, counts on over 9,000 volunteers nationwide for certain events. In the Microcredit program, young people are needed to help the program grow but it is not economically possible to pay them. The answer provoked in me more questions than answers: would Yunus think of an “exit strategy”, of these volunteer-based microcredit programs, with all of the impact it could have on the benefited communities, or would he keep trying with the ongoing projects, even though they might be unstable? How can we find a compromise between the growth in numbers of people impacted through this program and its dependency on volunteers?

Having a “Flexible” Objective

Microcredit models have been implemented worldwide, with various adaptations according to the context. Each claim to have different results: the US-based Microcredit Summit Campaign states that Microcredit has helped bring 10 million people in Bangladesh out of poverty [3]. But in India, the pressure created by the default on micro loans in 2010 generated what was referred to as the micro-finance suicide epidemic [4].
In his writings, Muhammad Yunus has always clearly stated the purpose of microcredits, as well as social business: to create a world without poverty. Recently, Yunus had raised his concern about microcredits being used as a profit-maximizing business. He stated in the New York Times in 2011: “I never imagined that one day microcredit would give rise to its own breed of loan sharks” and that “Commercialization has been a terrible wrong turn for microfinance, and it indicates a worrying “mission drift” in the motivation of those lending to the poor.”[5]
I was intrigued to know if Prof. Yunus thought there was something underlying that should be present in every Microcredit model in order to ensure its success. According to Prof. Yunus, the key for success is to have a clear objective: “If you have an objective-driven initiative, objective has to be there. That you don’t change... so you define your objective very clearly.”

Even so, in our conversation, this determination seems to be lost as he stated: “Your objective is to make money for yourself, then go ahead and make money, I don’t like it but that’s why you like it, you go ahead...” From what I had read, the objective of microcredits should have no deviation, but now it felt that all driven objective models, whatever these may be, were okay, whether he agrees or not with these objectives: the key for success of the model is the clarity of its purpose. I was left asking myself if anything has changed in the past few years to make Prof. Yunus “lighten up” in his definition of objective for microcredits?

Individuals & Ecosystem

Working in an ecosystem means different actors of society, governments, think-tanks, business, NGOs, individuals, all strive towards the same goal, each one understanding its respective role and its limits. I wanted to know how much importance Prof. Yunus gave to this issue, and if it could limit the results of potential solutions. His answer was clear: Prof. Yunus thinks that “each time you bring another force to collaborate (with) one force it becomes stronger than one” so “your total strength is better than one” but that this does not mean that collaboration is not essential. Prof. Yunus believes “a single individual is powerful enough to change the whole world”.
Again I was surprised: after all the experience he has had, I would have expected him to emphasize the strength of a network rather than the power of individuals by saying “don’t under-estimate the power of an individual”. Furthermore, Prof. Yunus made a special call for universalizing the concept of entrepreneurship: “Why are we working for somebody else? Why not work for ourselves? We are entrepreneurs”. But, I wondered, can’t this call for entrepreneurs generate competitions and individualism, which would go against the power of the ecosystem? Should we prioritize the power of an individual or that of an ecosystem?

Final Reactions

I admit it: I left the interview with more questions than I had come with. The strong messages and ideas I had learnt through his books are now more malleable than I had expected them to be. I was seeking more complex answers and sometimes found myself with sweeping replies that may be satisfying but I question how realistic, or practical, they may be. Even so, what remains clear is Prof. Yunus’ conviction that trial and error is our best way to solve a problem. Society often limits creativity and ideas. In response, Prof. Yunus frequently says: “The challenge is: Do it”. Hearing this from Prof. Yunus is encouraging and knowing that “there are many things that (he has tried) that didn’t work” is as well. The most important message I take from our exchange with Prof. Yunus is the need to find that inner drive, and motivation, that will serve as a motor to truly dedicate myself to one cause.

Find more about Professor Myuhammad Yunus 48-hour visit at HEC in November with Daniel Brown's article. Daniel is HEC Paris Communications editor.


[1] “Relevamiento de Asientos Informales” Techo. Cited November 28, 2016
[2] “Indec: El 32,2% de los argentinos es pobre y el 6,3% se encuentra en la indigencia.”Telam. September 28 2016. Cited November 28, 2016.
[3] “Microcredit in Bangladesh 'helped 10 million'” BBC News. January 27 2011. Cited November 28, 2016
[4] Biswas, Soutik. “India’s microfinance suicide epidemic.” BBC News. December 16 2010. Cited November 28, 2016
[5] Yunus, Muhammad. “Sacrificing Microcredit for Megaprofits”. The New York Times. January 14 2011. Cited November 28, 2016

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From Books to Reality

Victoria Reca 15 December 2016

By Victoria Reca, student of the HEC Paris' MSc in Sustainability and Social Innovation (...)