My Favorite Mistake: Muhammad Yunus

Article excerpt

Muhammad Yunus on the mistake that cost him his own bank.

In 1976 I started Grameen Bank with $27 and a desire to help the poor. Doing this required giving out small, noncollateral loans so poor entrepreneurs could start their own businesses.

The excitement Grameen created encouraged me to expand, so I went to Bangladesh's central bank to ask for the legal authority to create a bank for the poor. The government agreed, eventually passing a law that did just that. But the law included a stipulation: the bank could not operate in urban areas.

I was actually the one who proposed this provision. I was a professor. I thought the board would hire a banker who lived in the city to run Grameen, and that he or she might be tempted to shift the bank's focus away from the rural poor. In Bangladesh, only about 15 percent of the poor live in cities; the rest live in rural settings, and I did not want the people in the countryside to be forgotten. (The word grameen, after all, means "rural.")

Once we grew, I realized I had made a mistake. There were many people who needed our help but couldn't get it. We tried to go back and change the law, and in 2007 the government agreed. …