The Hindu Business Line : `Social banking critical to take credit to the poor'

`There are opportunities which financial services provide through micro-credit to unleash the hidden energy of the poor so that they can take care of themselves.'

MICRO CREDIT: Nobel laureate and founder of Grameen Bank, Prof Muhammad Yunus, with the RBI Governor, Dr Y.V. Reddy, at a meeting in Mumbai on Friday. — Paul Noronha

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Mumbai Feb. 2 For Mr Muhammad Yunus, the poor are like "bonsai", which could have grown into taller trees if given proper soil. The society has not given the poor a chance. "The champagne glass society" hones economic policies and the rest just watch.

The international banker of the poor, Mr. Muhammad Yunus, on Friday talked of his first experiment to place money in the hands of the poor.

"It was thought poor people cannot handle credit. I wanted to test it. My first branch manager said it was not worth a try but I said I wanted to try it," said Mr Muhammad Yunus, Nobel Prize winner, 2006 and founder of Grameen Bank.

From one borrower to many villages, Grameen Bank gave credit and money came back.

"It worked. Now if anyone tells me the poor are not credit worthy, I can scream and shout and say they are liars," he said.

Human right

Echoing views similar to Mr Yunus, the RBI Governor, Dr Y.V. Reddy, said that it would make a charter to include credit as a human right.

In a hall packed with bankers and RBI officials, Mr Yunus expanded on social banking making a critical difference in the lives of the poor.

Financial systems, especially banks, are entrusted with enormous powers to choose which institution or individual can be rich but they have no social controls. There are opportunities, which financial services provide through micro-credit, to unleash the hidden energy of the poor so that they can take care of themselves, he said.

Bangladesh model

Today within Bangladesh, 80 per cent of the poor households have access to credit. "We want to reach 100 per cent by 2010.We are in the business of financial inclusion,, and not exclusion," he pointed out.

As of December, 2006, the bank has 2,319 branches and provides services in 74,462 villages, covering more than 89 per cent of the total villages in Bangladesh.

Grameen Bank has 22 million individual borrowers. "While visiting one of the villages in Bangladesh, I met a young boy who had come to visit me from town. He said he bunked his college to meet me because his mother was one of the borrowers from Grameen Bank," he said.

Since then, Grameen Bank has introduced students' loan and scholarships to promote higher education.

Fifteen thousand students have taken students' loan and five of them have also been awarded Ph.D degrees.

"There is a possibility of stopping history in the first generation and that is where illiteracy should stop," he said. Grameen Bank has a separate department looking after the second generation and how to place them.

Grameen Bank is owned by the rural poor whom it serves. Borrowers of the bank own 90 per cent of its shares, while the remaining 10 per cent is owned by the Government, says the official Web site of the bank.

Danonoe tie-up

There is a form of business, which believes in doing good to people. "It is a non-loss and non-dividend kind of business," he said. Driven by passion and knowledge, Mr Yunus succeeded in convincing the France-based foods company, Danone, about social business. Danone has entered into a joint venture with Grameen Bank to produce nutritious yoghurt for the malnourished children in Bangladesh. Grameen Bank is aware that ill-health and poverty are related.

He defended the social business model and said there is a need to create social business to solve problems. It is not philanthropy but business which recycles money.

"There needs to be social business funds and business plans. We can create a social stock market where only social businesses are listed," he said.

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`Social banking critical to take credit to the poor'