'Father of Microcredit' Laments Unreformed Banking Sector

Oct 2009
Paris, France, October, 18 2009 - Bangladesh's "banker to the poor" says the world has missed a golden opportunity to help the neediest people on the planet with a redesign of the financial system in the wake of the global economic crisis.

Nobel laureate Muhammad Yunus, who along with his Grameen Bank won the peace prize in 2006 for his work in Bangladesh, said leaving the world's banking system in more or less the same state would not help the poor.

"This was the greatest opportunity we ever had to redesign the financial system globally and totally," the 69-year-old told AFP.

"But now we've gone back to the same old ways and we'll be ready for another crisis because we didn't fix anything that is missing."

Yunus, who created a billion-dollar micro-credit venture by lending 27 dollars to a group of village women in 1976, has been a vocal critic of the global banking system which he says deliberately excludes people.

He said a better, more inclusive global banking system was possible, one that lends money to poorest of the poor who lack collateral to secure credit.

"First we need to redesign the financial system to make it an inclusive system. Every person in the world will have easy access to this system. Grameen has proved that it can be done," he said.

"Secondly we have to make sure (the banking sector) never has to come back for taxpayers' bailouts for their mistakes."

Many of world's leading banks faced collapse in late 2008 due to ill-judged investments in loss-making financial instruments, leading governments in the US and Europe to pump billions of dollars into the sector.

Many of the same banks, such as US giant JP Morgan, have since reported huge profits despite the government bail-outs and critics are now wondering what has changed in the aftermath of the worst financial crisis since the 1930s.

Greater emphasis was needed on the social aspect of business, rather than the blind pursuit of profit, said Yunus, who also defended microcredit from critics.

Some studies by economists have criticised the high interest rates paid by borrowers and the spiral of indebtedness that can result.

But Yunus said that within the microcredit sector, there were various types of operator.

"Microcredit has become a buzz word but sometimes two things called the same thing are not the same," he said.

Grameen Bank has almost eight million borrowers who have more than 8 billion dollars in loans. The bank has 29,000 employees. He said five percent of his borrowers were lifted out of poverty every year.

Yunus also talked about his experience of winning the Nobel Peace Prize which helped bring legitimacy to his ideas and bring them to the forefront of global economic thinking because of an "explosion of attention".

"I keep saying the same thing I have been saying for the last 30 years. That the banking system is wrong, it needs to be redone, it should be inclusive. I still keep saying the same things."

He believed the same would happen to US President Barack Obama who was named last week as this year's winner.

"For him, this gives him another sign of approval from people. This seal of the Nobel Peace Prize should make it easier to achieve the things he wants to achieve," he said.

"We can have the election of presidents many times in the USA but to produce an Obama is very difficult." he said.

Source : MSN News

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