Companies urged to set aside obsession with ‘profit maximization’
Nobel Peace Prize laureate and microfinance guru Muhammad Yunus has called on the private sector to set aside obsession with “profit maximization” to increase focus on the “real business of people” and achieve the overarching goal of poverty reduction.
Yunus, the founder of Grameen Bank of Bangladesh, was in town last week for the 2013 Microcredit Summit, which was attended by 800 delegates from more than 60 countries who committed to the advancement of microfinance to end extreme poverty.
In a roundtable with reporters, Yunus said that as the Millennium Development Goal (MDG) was going to an end by 2015 —the goal of which is to halve poverty incidence—the global community was next looking to total eradication of poverty by 2030.
Yunus said banking systems around the world would have to be redesigned to pave the way for financial inclusion, with microfinance having proven itself over the years as a “doable thing.”
“It’s financially viable. it’s a business proposition. It’s not a charity proposition,” he said.
He said global leaders should be taking efforts to ensure that nobody was excluded from this service, adding that a lot more should be done to reach out to people.
“We’re not just promoting microcredit. We’re saying everybody has to be included, bring them into the financial network so they can change their own life… without state intervention,” Yunus said, adding that doleout was not sustainable as this would go only to consumption purposes.
He said there must be a paradigm shift within the private sector to “delink itself from profit maximization” and “profit-making.”
“My position is that profit-making has pushed us away from the real business of people,” he said.
Asked about the common challenge of scaling up among microfinance institutions (MFIs), Yunus said Grameen Bank had no problem scaling up as it was a self-reliant bank that could open branches, thereby mobilize savings that could be lent out.
But for other MFIs without deposit-taking capabilities, he said it was indeed a problem to scale up operations as they would be dependent on external sources of funds. What Bangladesh has done, he said, was to create a fund that MFIs without deposit-taking capabilities could access. Such a fund has been able to bankroll the expansion of MFIs’ lending coverage.
