interesting thing about microcredit is that it works in a business
way and the private sector produces the best result. As a matter
of fact, microfinance brings the financial sector to its logical
conclusion. Without microfinance, the financial sector remains half-done,
because more than half the population of the world remains ineligible
to access the services of the existing financial institutions.
of microfinance institutions makes credit universal. Looking at
it politically, it democratizes credit. I keep arguing that credit
should be accepted as a human right because it has such a fundamental
role to play in bringing out the potential creativity in each individual
human being. That is why it is so important for poverty reduction.
feel that it is important that we keep microfinance exclusively
in the private sector. If we make it a public sector initiative,
there will be heavy risks of running it on short-term political
considerations, rather than adhering to the sound financial principles
and practices to make it strong and permanent.
institutions are just like any other banks, but doing a completely
different kind of job with a very different methodology. Once governments
create the legal framework for microcredit banks, and set-up regulatory
commissions to supervise them, they can run like any other business
of microcredit banks can be of many kinds, such as:
by private investors.
by borrowers themselves (Grameen Bank is owned by its borrowers).
of a & b
financial institutions have expressed their rhetorical support to
microfinance, but this has not been followed up by resource allocations
to match with the verbal expressions. Not even one percent of the
annual World Bank funding goes to microfinance. Records of other
multilateral financial institutions are still poorer. Even within
the limits of their support, funds are not aimed at the poorest,
arguing that the poorest cannot benefit from microcredit. This argument
is absolutely wrong. Grameen Bank, which lends even to the beggars,
is rich with concrete evidence against this argument.
initiatives at the highest level are very much needed to encourage
the multilateral financial institutions to at least double their
present funding level to microfinance, and to make sure that at
least half of this money reaches less-than-a-dollar-a-day families
around the world. Grameen Bank currently lends to 3.7 million borrowers,
96% of whom are women. All of them come from less-than-a-dollar-a-day
families when they joined Grameen Bank.
multilateral funds can be best utilized by:
wholesale microfinance institutions within each country to provide
funding to the NGOs and microcredit banks at commercial interest
microcredit banks, and regulatory bodies.
sector reforms which will include opening of doors of conventional
banks to the poorest, directly or indirectly, by lending to
BOT (Build, Operate and Transfer) and BOO (Build, Operate and
Own) microcredit projects in various countries.
Sub-Saharan Africa and the Middle East, microfinance projects are
carried out basically by the NGOs. They are not allowed to take
is why they remain perennially dependent on donor funding. This
keeps them away from hard commercial calculations and sustainability.
important corrective measure will be to set up microcredit wholesale
funds as sources of commercial funds for NGO microcredit programs.
important step would be to set up commercially viable microcredit
programs on BOT and BOO basis with bilateral and multilateral donor
funding in various countries. Grameen Bank and Grameen Trust will
be happy to accept responsibility to set up microcredit programmes
in any country on BOT and BOO basis. This will help quick expansion
of good quality microcredit programs. These projects should be allowed
to take deposits to make them self-reliant. A legal framework should
be created to set up microcredit banks and a regulatory body to
supervise them. Centers of excellence should also be created, so
that all microcredit programs can look upto them.
in Europe have a long history of state taking care of the unemployed,
unemployables, immigrants, old and disabled people, through a very
elaborate welfare delivery system.
microfinance was introduced, there was no problem of any program
coming in conflict with welfare laws. But once microfinance is made
available, this immediately comes in conflict with the welfare system.
One reason for this contradiction originates from the fact that
the welfare system does not stipulate that a poor person can be
an independent, self-employed person. Even tax laws, licensing requirements,
which were actually created for a formal economy, come directly
in conflict with microfinance operations, which work within an informal
reforms are desperately needed to allow welfare-recipients to accept
and benefit from microfinance.
will prove to be a very attractive opportunity in the lives of many
families in Eastern and Central Europe, including the countries
which recently became new members of the EU. BOT and BOO microcredit
programs may be initiated in all these countries.
have been campaigning to convince people around the world that poverty
is not created by the poor. It has been created by the system we
have built around us. Institutions are to be blamed, not the people.
The poor are the victims, not the cause. If we can redesign our
existing institutions and/or build new institutions and policies,
to fix the mistakes we made in the past (such as, in designing the
financial institutions), nobody will remain poor.
nations of the world came together in the UN headquarters to commit
themselves to reduce the number of poor in the world by half by
2015. There are now less than 11.5 years to go. We need to act immediately.
must get into serious actions to achieve the 2015 goals. Among the
things we must do, two actions will remain very vital:
microfinance services available to the poorest, particularly
information technology available to the poorest so that they
can find answers to their own problems, they can design their
own lives based on all the available opportunities in the
world, their children can become world citizens, rather than
live in isolation and ignorance through of the lack of information.