Muhammad Yunus vists Glasgow

With the global financial system teetering around him, a small man with the face of a cherubic gnome came to Scotland this week to suggest something we had all given up imagining: a solution.

On Monday, Dr Muhammad Yunus, Bangladeshi banker to the poor and recipient of the Nobel peace prize in 2006, glided serenely from Glasgow’s youngest university to its oldest, fomenting a quiet revolution every time he opened his mouth.

“This is our opportunity to design a new global economic architecture,” said the man who founded the Grameen Bank in 1983, which gives tiny loans to the very poor, without collateral, on the basis of trust. The principle is known as microcredit, described by the Economist recently as “an increasingly bright light in the gloom of the financial world”.

It’s possible, says Yunus, to take the multiple crises of 2008 – financial, food, energy, environmental – all of which are having a catastrophic combined effect on the world’s poorest, and build a new economic structure.

“So far, governments have kept themselves busy with super-size bail-out packages for the institutions which were responsible for creating the financial crisis,” he told me. “No bail-out package of any size was even discussed for the victims of the crisis – the three billion bottom people on the planet. I’m urging that this mega-crisis be taken as a mega-opportunity to redesign the existing economic and financial systems.”

Pie in the sky? No, he says. We’ve done it in Bangladesh, we’re starting to do it in New York. But won’t self-interest prevent it? No, because self-interest is only half the story of the human condition. We can tap into the selfless instinct as well. It’s not charity – it’s a different kind of entrepreneurship. It’s social business.

“What I’m proposing is a different structure of the market itself,” he says. “A second type of business to operate in the same market along with the existing kind of profit-maximising business.”

This way, he argues, the rule of “strongest takes all” can be replaced by rules that ensure the poorest have a slice of the action. This way we can enjoy the benefits of globalisation without financial imperialism. This way, banks can reconnect with the people.

People who heard this diminutive figure outlining his softly-spoken vision in the inaugural Magnus Magnusson lecture at Glasgow Caledonian University were surprised to find themselves blinking away tears. Not in response to soaring rhetoric or whipped-up sentiment, but from the spine-tingling sense that something you have always instinctively known, that should be true and ought to be possible, can be done. The shiver of recognition you feel in the presence of an idea whose time might just, at long last, have come.

I was also battling the lump in my own throat from wishing my father could have been there. It’s true my sisters and I had allowed ourselves a quiet giggle at the notion that this first lecture in his name, at the university where he was a devoted chancellor until his death in 2007, should be by a banker, about money. Among Magnus’s myriad interests, the intricacies of high finance (or low finance, come to that) had always rather passed him by.

What did engage our father, though, was human dignity, the possibility of access for everyone to the good things of life and the kind of enterprise directed to making that happen which Glasgow Caledonian enthusiastically embraces. This why Muhammad Yunus was invited to become part of the newly-created Magnus Magnusson Fellowship and challenge Scotland’s thinking.

I sometimes ask myself what my father would have made of the global financial disorder – especially its effect on his beloved, fatally over-exposed Iceland. Surveying the wreckage of homes, careers and dreams in his homeland, I imagine him drawing thoughtfully on his pipe and reflecting: “I wonder if we perhaps lost sight of our priorities somewhere along the fast lane to wealth.”

How invigorated he would have been by Dr Yunus, a man who offers the world a different set of priorities. True, Magnus the journalist would probably have found a moment to murmur politely: “Yes, professor, but how exactly do you transplant Bangladeshi loan conditions to welfare-rich Glasgow?”

But he have would admired the intellectual muscle and heartily acknowledged the evidence. Nearly $7bn given out in loans by Grameen Bank to millions of the world’s poor, 97% of them women. A repayment rate of 98.02%.

Have our mighty financial giants, clutching their toxic loans in their big, clunking fists, ever looked at Grameen Bank and wondered if they have missed something? Clearly not. But they should. They would discover that Grameen’s success was based on finding out exactly how they operate and then doing precisely the opposite.

Poor people taking these loans are paying back every penny. It’s the rich who are having problems

“They go to the rich,” Yunus told the audience in Caledonian’s Saltire Centre; “we went to the poor. They went for men; we went for women. They want collateral, contracts, lawyers; we want none of these. They want people to come to them to bank; we made it our first principle to go to the people. They said this thing will never fly. Well, we’re still flying – higher and higher than ever.”

He noted impishly: “The irony of the situation is that poor people taking micro-loans are paying back every penny. It’s the rich who are having problems. So who’s not credit-worthy now?”

Dr Yunus was a high-flying, American-trained professor of economics until the Bangladeshi famine in 1974 rattled his ivory tower and prompted a rethink of conventional economic theories. Later on Monday, he fleshed out his vision of “one major change in the theoretical framework of capitalism” in a second lecture at Glasgow University.

The change would be to enable the social impulse behind Adam Smith’s The Theory of Moral Sentiments to be expressed in a complementary market to the one which has so failed the world. Not through charity, given and then lost, but through entrepreneurship, invested and recycled.

“Imagine what we could achieve,” he said, “if talented entrepreneurs and business executives around the world devote themselves to ending, say, malnutrition in a business format, except that these businesses will have no intention of making money for their investors.” No loss of the original investment, but no dividend either.

Grameen has already joined the French multinational Danone to sell fortified yoghurt to the undernourished children of rural Bangladesh. They have just created a joint venture with Veolia of France to deliver safe drinking water. The water will be sold at an affordable price to make the company sustainable, but there will be no financial gain to either Grameen or Veolia.

“People and donor countries give away millions of dollars,” he says. “Imagine if those billions could be recycled again and again. Each company can create its own range of social businesses. We can pool resources in social business funds.”

Even profit-maximising companies can be social businesses, he says, if, like Grameen Bank itself, they are owned by the poor. Either way, he believes thousands of people will start to come forward to invest because, even when times are personally tough, we all have social dreams.

It would, of course, necessitate the creation of a social stock-exchange, where investors could trade the shares of social businesses. A crazy idea? No more crazy than the notion that one person’s enjoyment of life should not take away the right of survival of another person.

The effect Yunus had on Glasgow this week was electric. Thanking him for his Magnusson lecture, Scotland’s leading philanthropist, Sir Tom Hunter, himself a member of the Magnusson Fellowship, said Yunus had already shown how, with deep humility, you can change the world. “The greatest thanks we can give you,” he said, “is to commit to action.”

By the end of the day, the principal of Caledonian, Pamela Gillies, was doing just that over dinner. With details still to be worked out and her finance director probably having heart failure at the other side of the room, she pledged her support for a social business initiative in Scotland.

At my table, another Magnusson Fellow, the mesmerising Palestinian writer Raja Shehadeh, told me how moved he had been by the whole day. “Only in Scotland would something like this happen – low-key but inspiring, without fanfare, without calculation about how things look or embarrassment at how it sounds to express social passion and a confidence in humanity.”

A man who lives and writes in the West Bank city of Ramallah cannot be accused of naivety or sentimentality. Something in the vision of Yunus, the unabashed emotion of Tom Hunter, the caution-to-the-winds “yes we can” of the two university principals and the very practical celebration of my father’s humane legacy touched him to the core.

“We live in such a cynical world. To have something like this revives one,” Shehadeh said.

“I will not forget it.”