Througout most of the developing countries, inadequate access to reasonable credit is most rural areas remains a major hurdle to the fulfillment of basic human aspirations. Complex application procedures and lack of connections and collateral are insurmountable impediments. Ironically, money-lending, especially to the poor, makes many fortunes and scarce resources are immobilized for consumption rather than invested in development.
In most parts of Asia, usury rates are deplorable. In Bangladesh, for instance, villagers routinely pay 120 percent annual interest on loans used for investment and consumption purposes. In the Philippines, Metro Manila market vendors commonly operate on a “five-six system,” paying 20 percent interest per week on their borrowed capital. Especially in agriculture, such exorbitant rates cripple investment. Access to credit at more reasonable rates often favors those who already hold wealth or exercise power, thus stifling more egalitarian participation in the economy.
One man who was very much aware of this problem was Dr. Muhammad Yunus. This Bangladeshi national was determined to find a way to free his country’s poor from the grip of usurious money-lenders. In the mid-70s, he was able to put into practice his philosophy of microcredit which he called Grameen - which means “rural bank.” The bank’s motto: “Take the bank to the people; not the people to the bank.”
(more…)
Posted on October 23rd, 2008 under SPOTlight. Tags: Microcredit. Comments: None