Dr Yunus was happy to help the poor people financially. However, he knew that this ad hoc solution couldn't work on a large scale. After visiting Sufia, Prof. Yunus was wondering whether he should just give her the money she needed. However, such an idea would not solve the root cause of the problem. For Prof. Yunus, the root cause of the problem remains that poor people are heavily exploited by their creditors while such creditors are protected by law. He clearly understood that the poverty of the disadvantaged women could not be eliminated by his emotional response and he began to work on a long-term solution. He wanted a better arrangement - "an institutional arrangement" - so that these poor people could find money whenever they needed it. He decided to approach a bank to give them money when they needed it. After all, it was the business of the bank to lend money to those who needed it.
He climbed into his white Volkswagen Beetle and drove to the Janata Bank near the university. Janata Bank was a government bank and one of the biggest in the country. He met the bank manager and pitched an idea: small loans to the very poor. He outlined his vision of getting the bank to lend the money instead of paikari wholesalers who lent the capital at usurious rates.
It seemed like a simple solution to a complex problem. But the bank manager was bemused at Dr Yunus's suggestion. He "sputtered not knowing where to begin with his list of objections". He pointed out that the little money that the poor borrowed would not cover the cost of all the mandatory loan documents they had to fill in. The borrowers would also have to write down how much they were depositing and, since they were poor, there was no guarantee they would pay the money back. Dr Yunus questioned need for people to fill in lengthy documents and deposit amount, especially in a country where 75% of the people could not read and write. To him the complicated banking information system was anti-illiterate, making it demeaning for the poor to go to a bank. But the bank manager was adamant. He insisted traditional banks were not interested in making tiny loans at more reasonable interest rates to poor people, who were considered repayment risks.
Finally, conceding that the conversation was not getting either of them anywhere, the bank manager told Dr Yunus that if he wanted a loan he'd have to go to their head office in Chittagong city as only they could issue loan.
As I finished my tea and got ready to leave, the branch manager said, 'I know you'll not give up. But from what I know about banking, I can tell you for sure that this plan of yours will never take off.'
'Thank you', I said.
Back then, his naive idea of approaching the local bank manager to lend to the poor was soon to become unrealistic. When he visited the branch manager of the local Janata Bank to request loans for the poor people in Jobra, the branch manager thought that he was out of his mind.
Couple of days later Dr Yunus met Mr Howladar, the regional manager of the Janata Bank in his office in Chittagong. Following a lengthy conversation, Mr Howladar informed Dr Yunus that the bank needed a guarantor for a borrower to issue a loan without collateral. Dr Yunus did not like this idea. He argued that the guarantor would only end up taking advantage of the person whose loan he was guaranteeing and "could end up a tyrant, treating the borrower as a slave".
It was obvious that I was not up against Janata Bank per se, but against the whole banking system.
Dr Yunus suggested that he himself should become the guarantor. He asked to borrow 10,000 taka ($300) "to give myself a margin of error and room to expand". After few seconds of thought, Mr Howladar agreed as long as Dr Yunus didn't ask for more money. Mr Howladar had to get the loan approved from his head office in Dhaka. Finally, in December 1976, after six months of writing back and forth, the loan was formalised. From then on, Prof. Yunus devoted himself wholeheartedly to lifting the destitute women of Bangladesh and their families out of poverty.
All through 1977 Dr Yunus signed each and every loan request - even when he went on trips to Europe or America his assistant would send all the documents for him to sign. The bank was not interested in either meeting or dealing with the poor. As far as they were concerned, only the guarantor (i.e. Dr Yunus) mattered.
They did not want to deal with the actual poor who used their capital. In fact, they preferred never dealing with them. And I made sure the real borrowers, the ones I call the banking untouchables, never had to suffer the indignity and demeaning harassment of actually going to the bank.
Dr Yunus realised that the "world's basic banking principle" was that loan was related to income. The more money you had the more the bank gave you. If you had no money they gave you none.
Dr Yunus did not understand why banks had classified some people as 'not creditworthy'. Why they insisted on collateral. Why they designed the banking system to create "financial apartheid". He reasoned, may be it was a fallacy that was passed on from one generation to another without being questioned. It seemed the financial and credit systems were designed only for the benefit of the privileged with the destitute largely excluded. Since it was impossible for them to secure credit, the poor become poorer. This widening wealth disparity only increased the socio-economic problems that is a common feature of many developing nations.
His biggest frustration lied with the notion of collateral. In Bangladesh there was no way that the commercial banks would lend to the poor without collateral. Prof. Yunus nevertheless believed that the poor would repay their loan if they were given a fair chance to do so. When he and his Grameen team researched into the repayment of loans they discovered that borrowers without collateral was much better than those whose borrowings were secured by enormous assets. In fact, more than 98% of Grameen Bank borrowers repay their loan because the poor know this is their only opportunity to break out of poverty. And they don't have any cushion whatsoever to fall back on.
If they fall foul of this one loan, how will they survive?
On the other hand, people who are well-off don't care what the law will do to them because they know how to manipulate it.
People at the bottom are afraid of everything, so they want to do a good job because they have to. They have no choice.
The poorest of the poor work 12 hours a day. They need to sell and earn income to eat. They have every reason to pay you back, just to take another loan and live another day! That is the best security you can have - their life.
As frustrating as this period was, his ongoing experiment to lend to poor and destitute - especially Bangladeshi women - would provide the foundation for his greatest innovation.
Dr Yunus began to expand microcredit as part of an action research programme together with the REP to test his method for providing credit and banking services to the rural poor. He called this action research project "Grameen Bank Project" (Grameen means rural or village).
During the same time, Dr Yunus developed a system of cooperative three-share farming in his quest to empower the rural poor.