Nobel Peace Prize winner, Professor Muhammad Yunus, founded the Grameen Bank in Bangladesh in 1976. Today, the institution's contribution amounts to 1.5 per cent of that country's coffers; has more than seven million borrowers, 2,500 branches and provides service to 81,000 villages.

The Grameen Bank provides credit to the poorest people in rural Bangladesh without collateral. It sees credit as a cost-effective way to fight poverty, and it serves as a catalyst in the overall development of the socio-economic life of the country.

Professor Yunus, who was the special guest at the fifth annual Scotiabank lecture series held at The Jamaica Pegasus hotel in New Kingston yesterday, spoke exclusively with The Gleaner about micro lending and other practices of the bank.

He said lending money to poor people, particularly women, without collateral or guarantors, is how Grameen Bank operates.

"It's mainly trust-based and the money is used for income-generating activities," he said.

Reasonable Interest rates

Interest rates are also very reasonable. The bank has now expanded all over the world, including Canada, North America and the Caribbean.

Micro lending has proved effective in fighting poverty because the loans are made to persons at a rate they can afford to repay. They can plan for the future and pull their families out of poverty. The system works when small groups of five persons come together for loans; two of the number get the first loan and, depending on their repayment performance, the next two can apply and, after them, the fifth.

"The bank is owned by the people and works for them. More than 90 per cent of the borrowers are women, and we focused on women because conventional banks excluded them. Not even one per cent of borrowers in conventional banks were women," Professor Yunus said.

His aim when Grameen Bank began was for half the borrowers to be women, but the task was not easy as women were led to believe their husbands would be the ones to take the loans.

"Finally, it worked, because women are very cautions with money and want the maximum mileage out of their money, and children are the main beneficiaries," he said.

He noted that women want to build a future quickly while men tend to be more relaxed. Since a major objective of the bank was to help families get out of poverty, it was logical to start with women, Yunus told The Gleaner.

Yunus said the group approach to lending is better because the social impact of groups on the family is greater. He said groups take pride through positive competitive methods of operating and help each other in difficulty.