Yunus paves road to altruistic innovation

By Rahul Rekhi     10/8/09 7:00pm

If the social and economic upheavals of the last 12 months could be summarized with the rhetorical flourishes of the average American teenager, it'd probably go something like this: "Capitalism is sooo 2007." Bruised by the bank bailouts and battered by the bursting of the financial bubble, marred by the Wall Street meltdown and crushed under the collapse of the auto industry, the 18th-century brainchild of Adam Smith has fallen, quite simply, out of vogue. Profit-driven executives, once respected and revered, are now subject to public vilification; formerly beloved corporations are widely seen as inherently soulless and destructive. Indeed, the very notion of profit-seeking, once the pinnacle of American ideology, has become to domestic policy what Crocs are to casual footwear - taboo.

Amongst the rubble of this disillusionment, however, lies buried a fundamental truth: Goodwill and economic gain are not mutually exclusive. In fact, at the intersection of capitalism and philanthropy lies a powerful force of growth and restoration, one that far surpasses the sum of its seemingly-disparate parts: microfinance.

The story of microfinance does not belong to 2009, or even to this century. In fact, the system finds its origins in the 19th century. But it was 2006 Nobel Laureate Muhammad Yunus who, in creating Grameen Bank, pioneered the practice of microfinance and brought it into the mainstream. Recognize the name? You should - he's the 2010 commencement speaker.

---

---

Yunus's premise is simple: Because traditional banking institutions are reluctant to lend to the destitute without imposing astronomical interest rates, the creditless impoverished often lack the means to escape their travails. If, however, one can establish a means of extending small loans to the needy, they can utilize the access to credit for entrepreneurial ventures, eventually becoming self sustaining and capable of repaying the money borrowed.

The seeds of this financial innovation have already begun to be reaped. Billions of dollars have been distributed to millions of the unprivileged, and countless lives around the world have been infinitely bettered. Perhaps the most striking indicator of the success of microfinance is that in many cases the repayment rates for microcredit loans far surpass the corresponding rates for credit cards or student loans here in the United States. Thus, quite remarkably, when coupled with capitalistic ideals, the very essence of philanthropy is infinitely augmented, for fostering entrepreneurial innovation in the impoverished promotes progress in ways that pure charity cannot even begin to accomplish.

Of course, Yunus's progressivist message conflicts sharply with the growing chorus of the detractors of capitalism, including, perhaps most notably, Michael Moore. In his latest film, Capitalism: A Love Story, Moore sharply condemns for-profit practice as a corruptive, quasi-parasitic force that threatens the innate stability of society.

But grouping predatory subprime mortgage lending with the microcredit loans of Grameen Bank is a fallacy that threatens to overshadow the overwhelmingly-positive changes that such institutions can affect.

Moore's cynical readiness to lambast capitalistic endeavors as a whole ignores the positive aspects of private enterprise, and the oft-underappreciated synergy that it can form with the unadulterated ideals of altruism.

Despite the strides it has made, microfinance is still in its infancy. Much more progress remains to be accomplished. The selection of Yunus as this year's commencement speaker will provide Rice students an invaluable look into the revolution that promises to change both the way we see capitalism and how we may better the world around us. Let us be the ones to carry the ideals of microfinance forward in the years to come.

Rahul Rekhi is a Sid Richardson College freshman.

---