News Item (Sept 1995): Lend to poor, not rich, says pioneer banker

HUAIROU, China (Reuter) - The world's banks should alter their lending policies radically to lend to the poor and not to the rich, the founder and director of the world's biggest bank for the poor said Friday.

The Grameen Bank of Bangladesh will make loans of $500 million this year, averaging $140 each, to its two million clients in 35,000 villages, 94 percent of whom are women, Mohammad Yunus said. He spoke at the Credit Corner of the Non-Governmental Organizations Forum for Women, which opened Thursday in this suburb of Beijing, after attending a seminar on Women and Economic Empowerment: Banking on the Poor. The forum runs in parallel and hopes to influence the U.N.'s Fourth World Conference on Women, which opens Monday and has women's economic improvement as a major theme.

The Grameen Bank, established in 1983, has become a world model for alternative banking and was widely cited at the seminar by those who have established similar banks and credit institutions outside the financial mainstream. The Grameen Bank targets the very poor, with starting loans as low as $12-15 for items such as a sewing machine, materials to make baskets or to buy ducks or goats. "Our repayment rate is 98 percent, against a recovery rate of 80 percent for commercial loans, less than 25 percent for farm loans and less than 30 percent for housing loans in Bangladesh," said Yunus. "This is because the poorest are very active, agile and work harder than the rich," he said. "It is a question of survival. Women are better repayers than men and are better agents of development because they are longer-sighted and spend money on improving the home or their children's education, while the men spend it on something today," he said. "It is a sad commentary that the world's finances are founded on the wrong principles -- the more you have, the more you get. It should be that the less you have, the highest priority you have," he said.

Participants at the seminar spoke of similar banks, such as the Self-Employed Women's Association (SEWA) Bank in the west Indian state of Gujarat that was founded in 1974 with assets of $3,100 and which have now risen to $18.75 million, said SEWA official Namrata Bali. Like Grameen, it targets women, most of them illiterate, who cannot obtain a loan from a normal bank and whose families have been indebted to traders and moneylenders for generations. Both Grameen and SEWA banks are owned by their customers. Bari said the repayment rate was 94 percent, with women better savers than men, who spend money on themselves or consumer goods outside the home. One SEWA client, vegetable seller Rahima Hafiz Abdul Rehmanmusa Dholk, said that prior to borrowing from the bank, she had borrowed $3 each morning from a trader to buy vegetables, paying back $3.40 that evening. After joining SEWA, she had been able to take out a loan of as much as $16 and put the profit into her business, Dholk told the seminar.

Hari Srinivas -
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