By Obinna Chima, This Day Live, September 6, 2011
The founder of the Grameen Bank in Bangladesh, Professor Muhammad Yunus, yesterday emphasised the need for a complete overhaul of the microfinance banking strategy in Nigeria and other developing countries to enable them effectively win the battle against poverty in their respective countries.
He stressed that microfinance banks (MFBs) could not operate as conventional banks, adding that such financial institutions had no business operating in urban areas.
Yunus, who was a the recipient of the 2006 Nobel Peace Prize, made the call at the maiden edition of the First Bank of Nigeria Plc’s international conference with the theme: “Micro-Financing As a Tool for Poverty Eradication and Economic Growth,” held in Lagos.
He revealed that his firm was able to lend money to over 100,000 beggars in Bangladesh by providing them with funds at very flexible interest rates. According to Yunus, over 22,000 beggars in that country had completely stopped begging.
Yunus explained: “The whole idea of micro-financing started in a small village. It is not done in a kind of conventional institutional way, but a very informal non-institutional way. That is the sprit of micro-finance banking. The whole concept is all about banking for the poor. Let us not move away from that. If you want to talk about micro-credit, always remember where it came from. It is a credit for the poor. It is all about banking for the poor.
“Definitely, what we did was not an extension of conventional number. Banking for the rich is not the same thing as banking for the poor. We saw the problem in Bangladesh and we were determined to solve it. Then, how did we find out the solution? What we did was to look at the conventional banks and how they were doing their things and once we learnt what they were doing, we did exactly the opposite of what they were doing.”
He said further: “Conventional banks go to the rich, we went to the poor, conventional banks go to men, we ran to women. Conventional banks go to the cities; particularly the larger city centres, we went to the village. That is what micro-finance banking is all about. Micro-finance banking can never operate as conventional banks. This type of banking has never worked in any urban area, never! Grameen Bank does not work in any urban area. Anything covered by a municipality is a no fly zone for Grameen. All these years, we have been in the rural areas. Conventional banks want collateral, but we don’t request collateral.”
Yunus, who had created a lot of companies in Bangladesh to address the diverse issues of poverty and development in his country, also said that his primary motive of setting up Grameen Bank was not to make profit. According to him, Grameen Bank currently has over 8.5 million borrowers, which he said represented one-third of the Bangladeshi population.
“So, ownership for me was not an issue at all. It is owned by the poor people of Bangledash. My purpose was not to make money, but to see that the problems of the people are solved. My idea was to make sure that 97 per cent of the shares are owned by the poor women of Bangladesh. As a bank, we take deposit and we have plenty of deposits coming in daily.
“Nearly half of the deposits come from the borrowers themselves. Today, that money constitutes over 50 per cent of the loan that we give out.”
Director of Other Financial Institutions, Central Bank of Nigeria (CBN), Mr. Femi Fabamwo, also called for adherence to rules and regulations in the industry to be able to achieve the goals of the programme.
He added: “The sector also needs a lot of long term funding. What we have today is ‘hot money’ and that will not help to achieve the objective of micro-finance banking. There is also need for the development of micro-finance education programme; credit bureaux; rating agencies; and Micro, Small and Medium Enterprises (MSMEs) Fund.
“The CBN has also approved entrepreneurship development centres which are supposed to build capacity for micro-finance banks in Nigeria. In addition, because we realised that most of the micro-entrepreneurs live in the rural areas and they are engaged in agriculture, the CBN has also come up with a new agricultural lending strategy – NIRSAL, which is expected to de-risk the sector”
Group Managing Director and Chief Executive Officer, First Bank of Nigeria Plc., Mr. Bisi Onasanya, said the conference, which would be an annual event, will facilitate business and economic growth in the country.