Leaving no poor man behind

• Prof Yunus, the king of micro-finance, says technology is key to deepening access to financial services

Almost 40 years since he began his love affair with micro credit Prof Muhammad Yunus says regulation is crucial to growth. As a number of countries move to consolidate their microfinance institutions (MFIs), tight but favourable rules are needed to spur growth.

“Regulation is still a thorny issue,” he says, “Others have it, some don’t but they all operate. However, in each country there needs to be an independent body to regulate the institutions.”

He says a regulatory authority is needed to protect deposits from misuse as well as promote growth.

“The conventional banks do not understand how the MFIs work and therefore should not come up with the regulations. However, the MFIs should also in developing the regulations be consistent with what they want to achieve.”

The experience of poor people being fleeced by shylocks in his home village is the strong encouragement for Prof Yunus in his quest for micro-credit financing. Out of his own pocket, he lent the women money to repay the loans as well as start up their own business. The loan of $27 was made to 42 women in the village, who made a net profit $0.02 each on the loan.

It is this concept that has today earned him the tag “Father of Micro Credit”.

“It pained me when I realised the kind of profits that the loan shacks were making from these poor people in the village. I decided that there could be a better way of empowering them to get access to credit for doing business,” said an interview on the sidelines the Africa Middle East Micro Credit Summit in Nairobi.

So he approached several commercial banks in Bangladesh that were reluctant to lend to the poor. Prof Yunus succeeded in securing a loan from the government Janata Bank to lend it to the poor in Jobra in December 1976.

“With the banks reluctant to lend directly to the people, I resolved to be a guarantor for them at the banks,” he says.

It is what started as a pilot project that in 1983 became Grameen Bank that today is a model Micro Finance Institution and a Nobel Peace Prize winner alongside its founder.

The model of bank-lending without collateral has today been replicated around the globe, especially in developing countries and is today core in the fight against poverty.

“It is a familiar phenomenon right now and most African countries including Kenya have come to visit us to learn and experience,” says Prof Yunus.

But several years after the concept was routed to a number of developing countries, there still are grey areas.

Currently, only one in five households has access to financial services in sub-Saharan Africa. In 2007, the 160 African MFIs registered on the global MIX Market database, reported more than 5.2 million borrowers and nine million savers. This is attributed to a wide range of institutions including NGOs, cooperatives and credit unions.

Others include rural banks, associations, non-bank financial institutions, microfinance banks, postal and savings banks, and commercial banks.

“There is still a lot more to do, but the question is not about how many borrowers we have reached but how many more we are yet to reach,” he says.

Strong regulations and technology are primed to deepen penetration of microfinance services. But in a drive to entrench technology in the growth of micro credit, Prof. Yunus says that the youth should not be left behind.

“Look at them on Facebook and Twitter, they are able to reach a huge part of the world with technology. This is what the micro credit sector needs,” he urges.