Following the global financial crisis, conventional banks have lost a trillion dollars, yet they are still not in favour of lending to the poor, Nobel Peace Prize winner Muhammad Yunus said on Saturday.
The banker and economist was delivering the seventh Nelson Mandela Annual Lecture in Johannesburg.
”I had to create Grameen Bank because the conventional banks refused to lend to the poor, this is the same for conventional banks the world over,” he said.
”They do not mind writing off a trillion dollars in a sub-prime crisis, but they still do not lend $100 to a poor woman despite the fact such loans have near a 100% repayment record globally,” he added.
Yunus said conventional banks complained that the poor were not credit worthy.
”The real question to ask is whether banks are people worthy,” he added.
At Grameen Bank, there were no legal instruments between lender and borrower, no guarantees, no collateral.
”And yet our money comes back while the prestigious banks all over the world that went down had all their intelligent paperwork, all their collateral, all the lawyers and legal systems to back up their lending.”
”Here’s how Grameen Bank works, when we give a $100 loan, behind that there’s a cow, there’s a few chickens, there’s something real.,” Yunus noted.
”The banks that are collapsing were based on chasing papers. It was a race to create a fantasy world of papers. And when something went wrong, the whole thing collapsed.”
He said the Grameen Bank was locally based and its source of money was local.
”In other words, the money comes from the deposits of the people in the bank. We take the depositors money and lend it, we are not connected with international banks, so their crisis could not reach us,” he explained. – Sapa