[Microcredit] Muhammad Yunus - the man behind microcredit

from Radio Netherlands

by Wendy Braanker

Professor Muhammad Yunus, the man behind the small loans or microcredit system, has just been in the Netherlands to receive the Freedom from Want Award 2006. While he regards the award as recognition for his work, this economist from Bangladesh says it's much more important that more people become aware that the provision of small loans - microcredit - is a way for the world's impoverished to escape from the vicious poverty trap. It's a method which too few people - in Africa and Latin America especially - are making use of.

Prior to receiving the award, Mr Yunus spoke to Radio Netherlands and explained that almost 100 million people across the globe have already availed themselves of microcredit. These small loans are meant for people who would not stand any chance of obtaining a standard loan from a commercial bank.

Bank for the poor
Muhammad Yunus launched the system in Bangladesh some 30 years ago, when he started the Grameen Bank. Now, more than six million of Bangladesh's poor have made use of these credit facilities, and the system has become popular in other parts of Asia, too.

He estimates that almost 88 million people across the continent have or are benefiting from the system. This contrasts sharply with take-up in Africa (eight million micro-loans) and Latin America (four million), and highlights the fact that the system's growth potential in these two continents is enormous.

Muhammad Yunus - a small and modest man - speaks convincingly about the microcredit system, for he sees access to loan facilities as a fundamental right. His attendance at the award ceremony in Middelburg was enough to bring various other people to the event - including representatives from other micro-loan organisations in other countries, from women's organisations and even a number of people from commercial banking institutions - and they had much praise from the man who dreamt up the system.

One of these these people explained, however, that money is not always the main problem in all cases. Lillian Nabwalakilwaki, a student from Kenya, spoke of how it is so difficult in her country to get a permit to set up a business. In her case, therefore, finance is less of a problem than getting the right papers from the authorities.

Larger loans
Jean Prosper Nbayiragige, who comes from a local organisation which provides small loans to poor people in Burundi, believes there's also a need to focus on more than just microcredit. He thinks money should also be made available for larger projects: "We need to make the move from micro-loans to macro-loans so businesses can be started and employment opportunities created. But this should be done under the same terms and conditions which apply for microcredit."At the moment, the average amount borrowed in Burundi by means of a micro-loan is around 30 euro. But, while the amounts may be small, the impact is often much bigger. Mr Nbayiragige explains that these loans allow people to leave the very worst extremes of poverty behind them.

The loan may, for example, be enough to finance the purchase of a cow. The cow's milk can be sold, with the proceeds making it easier for the owner to get access to healthcare or send their children to school. In short, it helps people to lead a more decent life. According to Mr Nbayiragige, the next step to be taken in the battle against poverty in his country is the provision of macro-loans.

Plank in a tidal wave
However, Muhammad Yunus wants to go on focusing primarily on small loans. To illustrate this, he draws a comparison: rapid economic growth and large-scale projects - which he sees as not necessarily being of direct benefit to the poor - are like a tidal wave, while those living in poverty need a plank to float on, otherwise they'll simply drown. Growth in itself is not enough to help them, and he says that no less than two thirds of the world's human population still haven't a chance of getting any kind of financial backing from a commercial bank.

Mr Yunus does note one remarkable development, however, in that interest in micro-loans is increasing among the commercial banking sector. Although he calls that a good thing, he follows by adding that this is all too often connected with banks wanting to promote themselves for their own purposes, and he has yet to see a real change in their attitude.

Beggars
He is sticking to the principle that the overriding goal must be to increase people's ability to take part in society… the profit motive is entirely subordinate to that. This is indeed why his Grameen Bank is even willing to lend to beggars. They can use that money to buy things like toys and biscuits, which they then go out and sell door to door. The result: extra income for the beggars.

Muhammad Yunus clearly hopes that the ultimate effect will be a decrease in poverty in his own nation. He even thinks that Bangladesh will be capable of achieving the Millennium goal of halving poverty by the year 2015 - and, as far as he's concerned - the way to do that is by providing micro-loans.