Poor for the Money.

AWARDING the Nobel Peace Prize to Dr Muhammad Yunus and Grameen Bank in 2006 was an acknowledgement of how world peace is only possible when the most severe forms of poverty and deprivation are adequately addressed.

We live in a world where the winners and losers are identified by their financial worth. In Dr Yunus’ view this is because the orthodoxy of economics has given shape to the existing world where all investment is locked in only one category — profit maximisation. However, there’s another aspect of doing business that is more concerned with the promotion of some social objectives than with merely earning bucks. Grameen Bank is the best example of such a business model. It has taught millions of poor people, a majority of them women, how to fish. But in order to fish, these poor people need the net, the boat and off course the opportunities to fish.

Banking for the Poor

Here in our part of the world there is an extreme need to turn around the basic axioms of micro-credit policies practiced by the conventional banks which are based on the collateral offered by the borrowers; the higher the collateral the more chances of getting a loan. There is no room for the poor to get any kind of loan from any of the larger commercial banks on the face of the earth. The world witnessed 1st greatest financial crisis in the first decade of the 21st century. And this seems to be just the beginning if no proper measures are taken. The biggest banks collapsed, but they were saved. No government seems to bailout the deprived class of the global village. Despite heavy developments in S&T, R&D the poverty statistics are getting disturbing each day.

At least 80% of humanity lives on less than $10 a day.

The poorest 40% of the world’s population accounts for 5% of global income. The richest 20% accounts for three-quarters of world income.

According to UNICEF, 24,000 children die each day due to poverty. and they die quietly in come of the poorest villages on earth, far removed from the scrutiny and the conscience of the world. Being meek and weak in life makes these dying multitudes even more invisible in death.

Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen.

If accepted as a basic human right, the access to credit can play a pivotal role in bringing about an individual’s creativity.

In Pakistan the most widely spread microfinance bank is Khushhali Bank, The First Microfinance Bank comes second. They provide small loans without collateral. There is still space for the banks to improve upon their policies and practices in order to achieve the core objectives. Appraisal techniques should be used to evaluate potential clients and there should be plans to expand microfinance programs over a period of time so that more people can benefit from small loans. Another major shortfall of the MFIs is that they don’t help the debtors in identifying the avenues of investment for whatever little amount they are extended. Normal practice is that the MFIs give away money and sit back and wait for its return along with interest margin, and in microfinance case interest rate happens to be very high, the reason for this may be the ‘cleanliness’ (no-collateral) of the loans.

Microfinance policies should be very well-designed and properly managed. By redesigning our existing institutions and carving out more suitable institutions and policies, a poverty-free world is possible.

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