Bangladesh social entrepreneur says microfinance could solve NZ problems

Bangladeshi social entrepreneur Muhammad Yunus

Nobel Peace Prize winner and Bangladeshi social entrepreneur Muhammad Yunus says microfinance could work as well in New Zealand as it has in his home country to solve problems associated with poverty.

Professor Yunus is in New Zealand to open the country’s first Yunus Social Business centre at Lincoln University.  The centre, one of 35 globally, focuses on curriculum and courses on social businesses.

The 76-year-old was awarded the Nobel Peace Prize in 2006 for founding the Grameen Bank in Bangladesh in 1983 and pioneering the concepts of microfinance and microcredit. It started 40 years ago during a visit to the poorest households in the village of Jobra when the economics professor lent $US27 of his own money to 42 women in the village who made bamboo furniture. Formerly they had been forced to take usurious loans from loan sharks to buy the bamboo and had to repay their profits to the lenders.

Today the bank has lent more than $US13 billion to nearly nine million borrowers across Bangladesh.

Rewiring capitalism
Professor Yunus says he wasn’t thinking about the concept of microfinance when he made that first loan – rather he wanted to get the women out of the hands of the loan sharks and solve their problem for them.

“The reaction was many other people came forward to ask 'can you give us some money' and more and more people from the same village and neighbouring villages. I was happy what I was doing was changing their life and I then set up a bank for them, Grameen Bank or village bank.”

He finally secured a loan from the government Janata Bank to lend to the poor in Jobra and secured loans from other banks before finally setting up in 1983 as a fully-fledged bank in its own right. To ensure repayment, the bank uses a system of informal solidarity groups whose members act as co-guarantors for each others’ loans. Most of the borrowers are women.

Given more than 97% of the bank’s micro loans have been fully repaid, why aren't other banks moving into this area as well?

Professor Yunus says the capitalist economy means most business people don’t see microfinance as an opportunity because they can make more money out of traditional lending.

(Listen to the full interview on this week's episode of the Sunday Business Podcast)

“The capitalist system has only one kind of business – maximising profits. The whole world has become money-centric, we became sort of money-making robots but human beings are not robots, they are of many dimensions,” he says. "We want to build a new orientation for this. You can make a business to make money and another one to solve problems – we call it social business."

Bangladesh achieved its goal of reducing poverty by half in 2013, well ahead of its 2015 goal and now wants to cut poverty to zero by 2030. Professor Yunus says there’s no reason why microfinance and the economic benefits that has caused by allowing entrepreneurs to flourish can’t be applied to solving poverty problems in other countries such as New Zealand.

“People are people whether they live in Bangladesh or New Zealand or the US, it doesn’t matter. They all have problems they want to solve,” he says. “The basic human nature of human beings is to become an entrepreneur but financial institutions are not geared for that. But we put money on the table to invest in ideas – the same solution in Bangladesh can be the same here.”

The controversy
Since late 2010 Professor Yunus has faced allegations about the benefits of microfinance and Grameen Bank, which he says were politically inspired.  He was removed as managing director of the bank in 2011 by the Bangladeshi minister of finance, a move the professor unsuccessfully challenged in court.

News agency Al Jazeera reported in December 2016 that Bangladesh authorities had launched a new investigation into the financial affairs of Professor Yunus, his family and that of the bank he founded.

“These are local politics, nothing substantive,” he told NBR View’s Andrew Patterson. “It does impact on me but I concentrate on my work so I don’t have to worry about those things.”

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This is kind of sad because it might almost be true that some of NZ problems could be solved by a scheme used in third world countries.

The people in New Lynn should have a whip around and see if they can get their third world sewage main that got blown out by the seasonal rains fixed up on microfinance. The Auckland Council debt is heading for a downgrade last I heard, unless they start playing fast and loose by shuffling debts around on their books.

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This sounds like common sense to me. Most of the borrowers are woman, each backed up by the group. Small loans to women to become self employed or to gain employment is a good idea.

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Microfinance is already happening here in New Zealand - a colleague is a trustee of a church-based organisation, the Christchurch women's refuge has started one, the Salvation Army is big in this space (although more for necessities and then there is the Kiwibank backed Nga Tangata Microfinance Trust. There will be others I am not aware of.

One problem faced overseas is that a microfinance organisation can become so successful that they become takeover targets of hedge funds and regular banks - there are a bunch of these happening in India. It has happened in Mexico and the US, probably other places.

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I'd suggest on our march to being a global city we can also address our housing crisis with solutions from the third world. Let's open the inner city suburbs to temporary housing constructed from iron and cardboard, and add Jeepneys to help get the minions to their jobs.

Helps supporting our National party policy of importing as many people as we possibly can for as long as possible, as the sure route to prosperity.

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You can bet your bottom dollar -- that, unlike a third world country, any customer wanting a loan from a microfinance co. here, would be flat-out skint.

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Perhaps needing to be thought through In considering the potential for the fm model here in NZ, from a coincidental discussion with Prof Yunus in 2006 I learned that all of the mf borrowers he lent to had a demonstrated and established work ethic.

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