Toronto hears 'banker to poor'

from the Toronto Star

Need can happen here, Nobel Prize-winning microcredit messiah tells business people

by Rita Trichur

Muhammad Yunus doesn't talk like a typical banker. He believes that access to credit is a fundamental human right.

Nicknamed Bangladesh's "banker to the poor" for motivating a global microfinance movement, the Nobel Prize-winning economist told a Toronto business audience yesterday the financial system shuts out nearly two-thirds of the world's population, denying the poor both opportunity and dignity.

Poverty is often perceived as a dilemma of the developing world, Yunus said, but the problem is alive and well in North America.

"You'll be surprised how many people in Toronto do not qualify to do business with the banks," he said in a keynote address at the 2008 Top Employer Summit. "In the United States, a neighbouring country, there are millions of people who cannot open a bank account."

He told conference delegates "poverty is not created by poor people. It is created by the system." He challenged his audience to inspire "institutional change."

A bank for the poor is a hard sell in Canada's financial capital, especially at a time when big banks are bracing for more credit losses. Still, Yunus makes a strong business case for allowing people to borrow with dignity

He established the Grameen Bank, or village bank, about 25 years ago in Bangladesh with a mission to eradicate poverty through microlending to destitute craftspeople.

Grameen Bank now has 7.5 million borrowers, about 97 per cent of them impoverished women. The bank lends out about $1 billion each year in small loans to help stimulate the most basic entrepreneurial activities, such as processing rice, raising chickens or selling eggs. And even with no required collateral or default penalties, Grameen Bank boasts a repayment rate of more than 98 per cent.

"Conventional banks' principle is, the more you have, the more you can get," Yunus said.

"We reversed it. We said, the less you have, the more attractive you become. If you have absolutely nothing, you get the highest attention."

The Grameen Bank model has been successfully replicated in more than 100 countries.

In late April, Yunus officiated at the opening of the first branch of Grameen America in New York City.

Grameen America, which already has 225 borrowers, makes loans ranging between $500 (U.S.) and $3,500.

"We follow exactly the same thing we do in the village in Bangladesh," Yunus said. "In all these months, not a single weekly instalment has been missed."

He is now receiving inquiries from around the country, including from cities such as New Orleans, Baltimore, Los Angeles and Newark. He believes this proves the need for microcredit is great, even in the world's largest capitalist economy.

Nevertheless, Yunus continues to encounter skeptics.

"People said that maybe microcredit is good for Bangladesh, but in a rich country, another context, it will be difficult. We always say, 'It is not difficult. People are people. People need money.' "