“ L et me begin by thanking you, and congratulating you Mr. President, for organizing this high level conference on Microfinance. This is a very significant event in the International Year of Microcredit. Thank you, Mr. President, for giving leadership in Europe, in G-8, and to the world, for correcting the historical incompleteness of the
world's financial system. Financial systems now serve the rich. More than half the population of the world remains outside the orbit of financial system. In some countries this un-reached portion of the population can be as high as 90%.
The inequity in the financial system has been justified by people who say that the poor are not creditworthy. Mr. President, it is time to examine whether the world's financial system is people worthy.
Microcredit programs have shown how the financial system can be all-inclusive, poor-people friendly, sustainable, and can help people overcome poverty with their own efforts.
Grameen Bank (GB) started in one village in Bangladesh back in 1976, lending US$ 27 to 52 people. Over years it has grown into a big bank serving nearly 5 million clients, 96% of them women. It is owned by the borrowers themselves. It runs with its own deposits. GB lends out half a billion dollars each year; average loan is just US$ 120. Some loans are even under US$ 10. It gives housing loans and student loans to the poor. It gives loans to beggars to help them get out of begging. Now there are 42,000 beggars in the program. Women's empowerment has been dramatic. Our borrowers are now more enterprising and empowered than before.
GB is not alone. Microcredit programs have come up all around the world. We are celebrating the International Year of Microcredit this year. We hope to reach 100 million families with microcredit by the end of 2005. We have now declared a second phase of the program to reach 175 million families, ensuring 100 million of them will move out of poverty by 2015.
Legal Framework
Microcredit programs are basically run by NGOs all over the world. They are in it because they see this as a very effective tool to reduce poverty and empower women. But in the strict eyes of law their work is illegal. At best they work in a legal gray area. We must create a new legal structure to allow them to convert themselves into microfinance banks. We also need to create independent microfinance regulatory authorities to oversee this new breed of microfinance banks.
Debate About the Poorest
A new debate is now being promoted around the issue whether the poorest people have any use for credit. This debate originates from the same people who always insisted in the past that the poor are not creditworthy.
Now they have amended their earlier statement to say that the poorest are not creditworthy. In GB, we have demonstrated time and again that the poorest need and use financial services as much as anybody else. Grameen Bank's program for beggars demonstrates very clearly how wrong they are.
Should conventional banks move into microfinance? Of course, they must. This is their chance to finish their unfinished work.
They can enter this new market segment for two reasons: (a) to make more money or (b) to help the poor get out of poverty, with marginal profit.If they enter this market simply to make more money, they may end up being only an institutionalized version of money-lenders. This is not at all good news for the poor.
I hope they will enter this market with a social mandate, to help the poor to get out of poverty. They can certainly make more money, once people are out of poverty.
Poverty is not created by the poor people. Poverty is created by the system that we have built. Let us fix the system. Once we do that, nobody will remain poor. Every human being has unlimited potential and an enormous creative
capacity. Correcting the mistakes in the financial sector will give the poor and the poorest, a big chance to overcome poverty. Let us do it quickly and efficiently under your leadership, Mr. President. Let us build a financial system where
no human being will be rejected because of his/her financial status. Let us firmly accept and establish credit and other financial services as a human right.
Let us make sure we create a world free from poverty very soon. Let us make sure we put poverty in the poverty museums, where they belong. ”
