Wednesday, June 03, 2009

Grameen Bank about to open in the U.K.

While in London to give a lecture, the Guardian had an opportunity to interview Muhammad Yunus. The "Banker To The Poor" set up Grameen Bank over 20 years ago and it became a model for microcredit lending to poor people who want to start up their own business.

Yunus is now bringing Grameen Bank to the western world, with a branch in New York and one coming soon to Glasgow. Interviewer Alison Benjamin asked Yunus about some of the challenges of setting up the branches in those two cities.

The biggest hurdle to setting up Grameen America last year, he explained, was finding a mainstream bank that would open a savings account for its borrowers. Under Grameen rules, borrowers are required to save a small weekly amount, but in the US, Grameen is a programme, not a bank. Even with Yunus's clout, it took time to persuade the branches of Citibank to open accounts for customers who wanted to deposit only $2 a week.

"These are the lessons that we need to now bring together to ask ourselves what kind of financial system we should be creating when we move out of this crisis," Yunus said.

There are now 660 Grameen borrowers in New York City, with an average loan of $2,200. More projects are planned in cities across the US, where, Yunus has said, he wants Grameen to become as "ubiquitous as fast food".

After the lecture, I ask him how the Grameen model will translate to inner-city Glasgow, where three generations of unemployment is not uncommon in some families. He readily admits it will be difficult to wean people off welfare and make them more self-reliant. "We don't know what all the problems will be," he replies.

Despite his calm, thoughtful demeanour, this champion of the poor is openly critical of welfare systems for deterring people from working. "Today, neither the welfare officer nor the welfare recipient has any incentive to move people out of welfare," he says. "If you earn a dollar it is deducted from your welfare cheque. Wrong things have been built into the system."

Yunus believes a better system would reward people for finding work by matching every dollar earned, rather then deducting it. In the US, Grameen has negotiated a welfare holiday that allows borrowers to claim welfare for three years while they build up their small business. Similar waivers may have to be looked at for the Scottish model, which is being developed with Glasgow Caledonian University and is in the process of raising £1.5m.

The full lecture that Yunus gave at the British Council is available at the Guardian, we have also linked to it at our Facebook group.

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