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Lending to the poor has rich rewards
As banker to the world's most destitute people, Mohammad Yunus has been watching the moral collapse of western finance over the last year with a mixture of amazement and scientific curiosity.
"Our banking is sub-sub-sub-sub-prime: you can't get any lower than us. We have no collateral, no insurance, no taxpayer guarantees, and no lawyers in our system," he said. "Yet we have a loan repayment rate of over 98pc. Our model has never faltered over the years.
"The world's big banks had all the collateral, all the guarantees, all the lawyers, and what did they do? They sent us a $1 trillion bill."
His Grameen Bank -'Village Bank' in Bengali - makes a point of searching out those shunned as the greatest credit risk by orthodox banks. The more (seemingly) hopeless, the better.
"We send our people out on bicycles to check if they are poor enough. If a woman lives in a one-room house, she qualifies. If she has a leaky roof, she qualifies. We even give loans to beggars: this is risky," allowed Dr Yunus.
We met on the shores of Lake Constance, where he sat in Bengali dress gazing across shimmering waters at the Alpine peaks of Switzerland. The Muslim village boy from Chittagong, now 68, is at home anywhere these days.
The 2006 Nobel Peace Prize lifted him to global sainthood. He is the father of the micro-finance revolution, and the smiling face of an enlightened Feminist Islam.
"The banks gave the impression that they were almost perfect, and then we find there is a fundamental flaw in the structure of the system. The regulators allowed them to bundle the risk so that nobody could see what was inside, and then pass it around the world to people who had nothing to do with it.
"We don't seem to be accusing anybody over this whole debacle. It is as if nobody is responsible. We can all go off and play golf: the taxpayer will take care of the problem. When things go well the bankers take the profit, and when it goes wrong they are compensated. This is not symmetrical," he said.
What worries Professor Yunus - he has a doctorate in economics from Vanderbilt University in the US - is that the global banks have now twigged that there is real money to be made from the world's poor. They are muscling in on micro-loans.
JP Morgan estimates that the sector could be worth $300bn. Barclays, Citigroup, Morgan Stanley, and BNP Paribas are launching ventures.
"The next thing we are going to see is a micro-finance bubble. The players are becoming bigger and bigger. We've now got hedge funds and mutual funds going around saying 'this is a wonderful idea: you can make so much money and help people at the same time'. It's intoxicating," he said.
Asked about the latest scheme in Mexico where Comportamos is launching the first micro-loan flotation on the stock exchange for $470m, he exhibits a rare flash of irritation.
"We don't like them. This is an abuse of the whole philosophy of micro-finance," he said.
The Microfinance Information Exchange in Washington says the industry has already spread across the world with almost 80m borrowers and a loan portfolio of $24bn.
The Chinese and Brazilian governments have launched their versions. The model is at times falling prey to top-down elites and profiteers. The inevitable backlash has begun. Critics say savings are the way out of poverty, not debt.
The Yunus venture began in 1976 with loans worth a total of $27 to 42 women making bamboo furniture in the Bangladeshi village of Jobra.
It has grown into a giant network of 7.4m clients. Loans have totalled $7bn. Some $6.3bn has been repaid so far. There are no profits. All borrowers are owners of the bank. Revenue is ploughed back into the venture.
"This is about getting people out of poverty. It is a non-loss, non-dividend company with a social objective. It is totally de-linked from the profit system," he said.
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"Our banking is sub-sub-sub-sub-prime: you can't get any lower than us. We have no collateral, no insurance, no taxpayer guarantees, and no lawyers in our system," he said. "Yet we have a loan repayment rate of over 98pc. Our model has never faltered over the years.
"The world's big banks had all the collateral, all the guarantees, all the lawyers, and what did they do? They sent us a $1 trillion bill."
His Grameen Bank -'Village Bank' in Bengali - makes a point of searching out those shunned as the greatest credit risk by orthodox banks. The more (seemingly) hopeless, the better.
"We send our people out on bicycles to check if they are poor enough. If a woman lives in a one-room house, she qualifies. If she has a leaky roof, she qualifies. We even give loans to beggars: this is risky," allowed Dr Yunus.
We met on the shores of Lake Constance, where he sat in Bengali dress gazing across shimmering waters at the Alpine peaks of Switzerland. The Muslim village boy from Chittagong, now 68, is at home anywhere these days.
The 2006 Nobel Peace Prize lifted him to global sainthood. He is the father of the micro-finance revolution, and the smiling face of an enlightened Feminist Islam.
"The banks gave the impression that they were almost perfect, and then we find there is a fundamental flaw in the structure of the system. The regulators allowed them to bundle the risk so that nobody could see what was inside, and then pass it around the world to people who had nothing to do with it.
"We don't seem to be accusing anybody over this whole debacle. It is as if nobody is responsible. We can all go off and play golf: the taxpayer will take care of the problem. When things go well the bankers take the profit, and when it goes wrong they are compensated. This is not symmetrical," he said.
What worries Professor Yunus - he has a doctorate in economics from Vanderbilt University in the US - is that the global banks have now twigged that there is real money to be made from the world's poor. They are muscling in on micro-loans.
JP Morgan estimates that the sector could be worth $300bn. Barclays, Citigroup, Morgan Stanley, and BNP Paribas are launching ventures.
"The next thing we are going to see is a micro-finance bubble. The players are becoming bigger and bigger. We've now got hedge funds and mutual funds going around saying 'this is a wonderful idea: you can make so much money and help people at the same time'. It's intoxicating," he said.
Asked about the latest scheme in Mexico where Comportamos is launching the first micro-loan flotation on the stock exchange for $470m, he exhibits a rare flash of irritation.
"We don't like them. This is an abuse of the whole philosophy of micro-finance," he said.
The Microfinance Information Exchange in Washington says the industry has already spread across the world with almost 80m borrowers and a loan portfolio of $24bn.
The Chinese and Brazilian governments have launched their versions. The model is at times falling prey to top-down elites and profiteers. The inevitable backlash has begun. Critics say savings are the way out of poverty, not debt.
The Yunus venture began in 1976 with loans worth a total of $27 to 42 women making bamboo furniture in the Bangladeshi village of Jobra.
It has grown into a giant network of 7.4m clients. Loans have totalled $7bn. Some $6.3bn has been repaid so far. There are no profits. All borrowers are owners of the bank. Revenue is ploughed back into the venture.
"This is about getting people out of poverty. It is a non-loss, non-dividend company with a social objective. It is totally de-linked from the profit system," he said.
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for everything else there is Master Card
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