For the past several years, Muhammad Yunus had been a pariah in Bangladesh.
The country’s long-term leader, Sheikh Hasina — who was recently ousted, dramatically and unceremoniously, after weeks of student-led protests that her government violently suppressed — harbored intense animosity toward Yunus, who won the Nobel Peace Prize in 2006 for his “efforts to create economic and social development from below,” in the words of the prize committee. Theories about the reasons for Hasina’s enmity toward Yunus abounded. One was that Hasina was simply jealous of a man who had outshone the legacy of her father, Sheikh Mujibur Rahman, the anointed “father of the nation.” Another held that she felt Yunus had usurped what she saw as her rightful claim to the Nobel Peace Prize. The most credible theory is that she was petrified by his global name recognition and influence, which made him her most formidable opponent in Bangladesh.
But no one has been able to fully articulate why the world’s longest-serving female head of state had taken such a strong dislike to Bangladesh’s most distinguished global personality.
Known as the “banker to the poor” (the title of his 1998 autobiography, “Banker to the Poor: Micro-Lending and the Battle Against World Poverty”), Yunus is somewhat of a global celebrity. He has been honored not just with a Nobel Prize but also with the U.S. Presidential Medal of Freedom (awarded by President Barack Obama) and the U.S. Congressional Gold Medal, along with more than a dozen other prestigious awards. His close ties with French President Emmanuel Macron, who recently invited him to participate as an adviser at the 2024 Paris Olympics, former U.S. Presidents Jimmy Carter and Bill Clinton, former U.S. Secretary of State Hillary Clinton, and luminaries like Bono and Richard Branson have added to his profile in the global arena.
Yet for all of his distinction, and perhaps because of it, his persecution in Bangladesh had been petty, sustained and damaging. At the age of 84, Yunus faced hundreds of lawsuits, including allegations of embezzlement and breaking labor laws and other concocted charges relating to his past tenure leading the Grameen Bank, an institution he founded and with which he shared the Nobel Prize for lifting millions of rural women out of poverty using microfinance (also known as microcredit), an innovative method of financing designed to benefit the poor.
In June 2024, Yunus found himself, along with 13 of his colleagues, standing in an iron cage during a trial at a special judge’s court in Dhaka. The co-defendants included employees of the Grameen Bank and its sister organizations. A few of them were also victims of forced disappearances and were allegedly kept in a place known as “Aynaghor,” or the “House of Mirrors”: part of secret torture chambers, possibly run by rogue elements in law enforcement during the Hasina regime.
But in a stunning reversal of fortune after suffering years of persecution (more than 150 unsubstantiated cases were lodged to harass him), just two months later in August the students who led the protests unanimously chose Yunus to lead the country’s transitional government. On Aug. 8, he took the oath of office as chief adviser of the interim government.
Born in 1940 in Chittagong, a port city on the southeastern coast of Bangladesh, Yunus studied economics as an undergraduate student at Dhaka University. Later, he started his own packaging and printing business in his home city but moved to the United States when he received the prestigious Fulbright scholarship to attend Vanderbilt University in Nashville, Tennessee. In 1969 he earned a doctorate in economics, writing his thesis under the supervision of the renowned Romanian scholar Nicholas Georgescu-Roegen. In his dissertation, Yunus studied rural economies and models of development, which informed his future efforts to experiment with innovative strategies to reduce rural poverty.
When Yunus was teaching economics at Middle Tennessee State University near Nashville, his homeland of East Pakistan (which would become the nation-state of Bangladesh) was engulfed in a political conflict and a long civil war that led to a grave humanitarian crisis. (When Pakistan was established in 1947, it was divided into two distinct land masses — East and West Pakistan, separated by India.) In 1970, when Rahman’s electoral victory was undermined following years of discrimination, neglect and simmering resentment among the Bengali-speaking population of East Pakistan, it prompted an uprising. In response, Gen. Yahya Khan, the Pakistani military dictator, launched a violent crackdown, which led to the liberation war starting the following year.
After nine months of intense violence and one of the largest forced migrations the world had witnessed, with some 10 million refugees seeking shelter in neighboring India, the war eventually ended with the birth of an independent Bangladesh in 1971. However, during the months of struggle, Yunus joined other members of the Bangladeshi diaspora in the U.S. and traveled to Washington to plead with members of Congress to stop supporting the Pakistani military amid its genocidal campaign in East Pakistan.
Throughout the 1971 war, the Nixon administration had maintained a foreign policy largely supportive of West Pakistan, despite widespread evidence of brutal repression and human rights violations committed by Pakistan’s military junta. After the liberation of Bangladesh, U.S. National Security Adviser Henry Kissinger, who is reported to have agreed with the view that Bangladesh as a new nation would be an economic “basket case,” continued to prioritize geopolitical interests over humanitarian concerns faced by the young nation. In 1974, this translated into delayed food shipments for a nation already on the brink of famine. Bangladeshi economist Rehman Sobhan later wrote that because its government had reached out to Cuba to strengthen trade and diplomatic relations, Kissinger decided to penalize the new nation.
The nine-month war had devastated Bangladesh’s economy and infrastructure. News of a poor harvest and concern over shortages led to panic-buying and destabilizing speculation in rice markets. The huge increases in the price of food, along with other factors, resulted in the 1974 Bangladesh famine, which by some estimates caused more than 1 million deaths.
In his study of the famine, the Nobel Prize-winning economist Amartya Sen identified several factors, including “entitlement failure,” a term he coined to capture the decline in the ability of farmers and other low-income households to pay for food items such as rice. Other factors included rampant political and bureaucratic corruption and mismanagement. Sen concluded that this was more of a human-made famine than one caused by supply shortages in food markets. He also emphasized the role of political structure, arguing that history shows that functioning democracies have largely avoided famines.
As the war in Bangladesh concluded in 1972, Yunus gave up his American professorship to return home to help rebuild the nation. After a brief stint in the Planning Commission in Dhaka, he moved back to his hometown to teach at Chittagong University, where he became the chair of the department of economics. As the 1974 famine unfolded, and moved by the intense and visible misery of the poor and starving all around him, Yunus, along with a faculty colleague and a few of his students, decided to educate themselves on the social and economic lives of poor villagers who lived near the campus. As he wrote in “Banker to the Poor”:
My repeated trips to the villages around the Chittagong University campus led me to discoveries that were essential to establishing the Grameen Bank. The poor taught me an entirely new economics. I learned about the problems they face from their own perspective. I tried a great number of things. Some worked. Others did not.
He adopted the techniques used by scientists working in a lab. His lab was the village, and the subject of his investigation was the economic lives of the villagers, especially households without assets, often headed by a woman caring for her children. This was a revelation for someone who had lived in the city all his life. He discovered there was much he must learn from the poor if he was serious about helping them prosper. This was significant because most economists avoid field experiments and outsource the task of primary data collection. Hence, Yunus’ method of visiting the poor and learning from them was like the work of ethnographers and anthropologists. He wasn’t collecting data to write an academic paper or complete a dissertation. Rather, he was interested in answering one of the most challenging questions economists and social theorists have wrestled with since Adam Smith’s “The Wealth of Nations” was published in 1776: Why do the poor find it difficult to escape poverty?
Yunus discovered that the poor were hardworking and ambitious people who failed to break out of the proverbial “poverty trap” despite their best efforts, largely because of their extremely limited options. Often, the village moneylender is the only source of credit to finance an emergency or a viable business venture. Given the moneylender’s monopoly power, they extract a steep rent in the form of usurious interest rates. Yunus concluded that it is society, not the poor, which is guilty of keeping them in their social and economic misery. He also said that the poor are not lazy or lacking in skills or ambition and that every person is a “born entrepreneur.”
After some trial and error, one strategy that showed promise was to offer the poor small loans for self-employment, providing an opportunity to grow cottage industries and other income-generating activities based on their existing skills. Through much experimentation, Yunus and his team perfected the ideas of microfinance and microcredit. They found that poor women with no land or assets are entrepreneurial and possess a strong work ethic, along with a burning desire to overcome grinding poverty. All that was needed was someone who would have enough faith in their entrepreneurial ability to give them a small loan without demanding collateral, which they lacked. He also realized these borrowers would need some form of structure to repay the loan installments in time.
This project eventually became the Grameen Bank, an institution with salaried staff and a businesslike environment, which would send teams of young staffers and university students to villages to train poor women to form a group of five potential borrowers. Once the women completed their training, two of the five members would receive a microloan (around $12-$15 each) to start their business, on the condition that they would repay it in (mini) installments from the earnings from their venture, beginning the second week. After the first couple of members of the borrower’s club successfully repaid a part of the loan (usually six installments), the second set of borrowers would receive loans. This setup fostered positive social pressure in the close-knit village communities in Bangladesh, resulting in astonishing loan return rates of over 98% for the bank.
At first, no one believed these results. How could these be anything but exaggerated claims or fake statistics by an overenthusiastic social entrepreneur? But as the Grameen Bank and other nongovernmental organizations offering microloans, like the Bangladesh Rural Advancement Committee (BRAC) and the Association for Social Advancement (ASA), continued to expand their operations, the claims became increasingly credible. Soon replicas sprouted across the world, as evidence grew that the poor borrowers — more than 90% of the initial Grameen Bank borrowers were women — were not only excellent stewards of credit but were also smart entrepreneurs and astute businesspeople.
Yunus’ genius was to create an institution with a social mission and high ethical standards in a society where the public confidence in banks and other institutions was low due to endemic corruption and ineptitude. Unlike state-owned banks, the Grameen Bank continues to work with poor borrowers using the microlending model and serves over 10 million borrowers, who are also “members” and owners of the bank — and now entrepreneurs running small businesses to improve their lives. Women entrepreneurs would borrow money to purchase a goat or cow, whose milk would be their source of income. Some would buy a sewing machine or raw materials such as bamboo to make crafts. Others would borrow to pay for a rickshaw for their husbands.
“I never imagined that my micro-lending program would be the basis for a nationwide ‘bank for the poor’ serving 2.5 million people or that it would be adapted in more than one hundred countries spanning five continents,” Yunus wrote in 1998. “I was only trying to relieve my guilt and satisfy my desire to be useful to a few starving human beings. But it did not stop with a few people. Those who borrowed and survived would not let it. And after a while, neither would I.”
Over time he also developed some critics. Stories circulated in the media about overzealous staff on the ground using strong-arm tactics to collect loan installments or about borrowers in distress. But when journalists looked into these claims, they found the evidence lacking. Yet this did not prevent Hasina from labeling Yunus a “bloodsucker” of the poor. Her charge did not stick, however, since microfinance had spread around the globe, with microlending organizations in some 100-plus nations, including the U.S. The Grameen Bank model showed surprising signs of resilience and effectiveness as an alternative mode of financing small businesses and creating entrepreneurs among the poor.
The success of Grameen Bank, BRAC and ASA, among other microfinance nonprofits, made a huge contribution to rural economic development, with more than 1 billion dollars in loans circulating annually in the economy, which has resulted in a virtuous cycle or multiplier effect of new jobs and incomes, especially for millions of poor women.
It’s worth noting that although many economists have not been able to document gains from microlending using their traditional statistical models, some of the best studies show improvements such as an increase in the choices available to the poor, which improves their welfare. Economists from the Massachusetts Institute of Technology, Abhijit Banerjee and Esther Duflo, co-winners of the 2019 Nobel Prize in economics, found in their extensive fieldwork that microfinance is a helpful strategy for alleviating poverty. Most economists agree that microfinance works best when paired with other development strategies in a suitable macroeconomic environment.
Although not an orator in the classical sense, Yunus is a masterful communicator who uses storytelling to convey his message, sharing remarkable success stories of rural women. Whether speaking to a crowd of 5,000 or a group of 20, his style remains the same.
His charisma, personality and credibility attract not just the poor but also the rich and powerful. In 1986, Bill Clinton, then governor of Arkansas, invited Yunus to help establish a viable poverty-alleviation program in rural Arkansas modeled after the Grameen Bank. In due course, the economist also became a close friend of Hillary Clinton, who visited Bangladesh more than once to observe his work firsthand.
In his most recent work, “A World of Three Zeros: The New Economics of Zero Poverty, Zero Unemployment and Zero Net Carbon Emissions” (2017), Yunus advocated a new type of business — what he called “social business” — where the entrepreneur aims primarily to solve one or more social problems rather than earn (private) profits. Prime examples of social businesses are his own Grameen Bank and its sister organization Grameen Shakti, which helps low-income households and small businesses in Bangladesh acquire power through solar panels, especially in villages where electric power lines are yet to be installed. The enterprise offers a financing model that allows low-income families to repay the initial cost of installation and maintenance in manageable installments.
In “A World of Three Zeros,” Yunus writes:
The redesigned economic engine has three basic elements. First, we need to embrace the concept of social business — a new form of enterprise based on the human virtue of selflessness. Second, we need to replace the assumption that human beings are job seekers with the new assumption that human beings are entrepreneurs. Third, we need to redesign the entire financial system to make it work efficiently for the people at the bottom of the economic ladder.
Like other thinkers and activists, Yunus has faced criticism from economists, intellectuals and practitioners engaged in poverty alleviation. The World Bank, which considers itself the paragon of the world’s poor, was initially unhappy with this new model for poverty alleviation and, indirectly, for economic development.
These initial negative responses have changed as the microcredit movement has gained global visibility and momentum, and microfinance has now become an accepted form of development strategy across the globe.
As Yunus shows, poverty is as old as human civilization. It is an example of what sociologists call a “wicked problem”; a problem so complex that finding a solution defies the best models and minds. How could one scholar from a poor country like Bangladesh offer a solution to global poverty?
In 2007, the year after Yunus was honored with the Nobel Peace Prize, he briefly flirted with the idea of launching his own political party. Although he quickly retreated from the project, the damage was done. His nemesis, Hasina, would not forget this episode, and in later years unleashed a campaign of unrelenting harassment against him. A steady stream of politicians and global celebrities visited Dhaka to plead the case for Yunus and his work. Support came from the U.S. president and members of Congress. All of this failed to convince Hasina, who, if anything, doubled down on her scorn for the economist, using the state apparatus to expel him from his own organization, the Grameen Bank, and later entangling him in court cases.
In January 2024, Yunus and some of the staff of one of his social business companies, Grameen Telecom, received a sentence of six months in prison for allegedly violating the nation’s labor laws. However, they were immediately released and bailed, pending an appeal.
Then the remarkable events of the summer suddenly thrust Yunus into power at a pivotal moment in his country’s history. Although not without his critics, Bangladesh’s new leader has a reputation for being a person of integrity, an advocate for the poor and a visionary with a global network of influential friends. However, a small section of society has also pointed out that Yunus has gained power with the backing of not only the students but also the military.
The main conflict Yunus faces is when to hold the next elections. The Bangladesh Nationalist Party, which was in opposition to Hasina’s Awami League, has called on the interim government to open talks with politicians and hold the elections within a “reasonable time.” They have intensified pressure on Yunus amid fears that there could be a repeat of the past: When Bangladesh had an army-controlled caretaker government in 2006, it stayed beyond its mandated three months and took two years to organize elections, which brought Hasina back to power. Meanwhile, students who led the protest movement argue that Yunus’ government should be given as much time as needed to enact fundamental reforms, including constitutional changes, to prevent another leader from subverting democracy.
On Aug. 25, in his first televised address to the nation since the revolution — which some thought he should have made earlier — Yunus said that the interim government will be in charge for as long as the people want it to be. “We are not the people from the governing class. We came here responding to the plea of the student protesters. The date of the election will be decided through a political consultation,” he said, while emphasizing that no citizen will be discriminated against on the basis of their religion or political beliefs.
Some critics have observed that Yunus, in his mid-80s, may be too old to lead the difficult journey ahead for the nation. Before he took the oath of office, a foreign journalist asked him whether it was not ironic, given that the movement was spearheaded by university students and has been dubbed a Gen-Z movement, that student leaders would place their faith in someone so much older. Others have questioned why, given his work experience and background in academia and in the nonprofit world, he is the best person for the role of chief adviser. After all, to lead a government in times of crisis requires political skills. Some critics have also dredged up allegations (made by the ousted government) that as the founding leader of Grameen Bank and other mission-driven institutions, Yunus resisted demands by low-ranking employees for profit-sharing and even prevented them from going on strike.
Now that Yunus has attained not just international prominence but also executive power, it remains to be seen how his vision for the nation, his life’s work on poverty alleviation, his global network of admirers, his experience as a social entrepreneur par excellence and his ideas on good governance might decisively alter the course of this nation in transition.
Become a member today to receive access to all our paywalled essays and the best of New Lines delivered to your inbox through our newsletters.