Nobel laureate: Banks still don't favour lending to the poor

Jul 11, 2009, 15:13 GMT

Johannesburg - The world's conventional banks have lost a trillion dollars since the onset of the financial crisis, yet they still do not favour lending to the poor, Nobel laureate Muhammad Yunus said on Saturday.

The former Bangladeshi Grameen Bank founder and economist who developed the concept of microcredit and won the Nobel Peace Prize in 2006, made the comments in delivering the Nelson Mandela Annual Lecture in South Africa.

'I had to create Grameen Bank because the conventional banks refused to lend to the poor, this is the same for conventional banks the world over,' Yunus said.

'They do not mind writing off a trillion dollars in a sub-prime crisis, but they still do not lend 100 US dollars to a poor woman despite the fact such loans have near a 100 per cent repayment record globally,' he added.

Conventional banks complained that the poor were not credit worthy, but the real question was 'whether banks are people worthy,' he said.

There were no legal instruments between lender and borrower, no guarantees, no collateral at the locally-based Grameen Bank that had no link with international banks and therefore no risk of being caught up in crisis, he explained.

'And yet our money comes back while the prestigious banks all over the world that went down had all their intelligent paperwork, all their collateral, all the lawyers and legal systems to back up their lending.'

'The banks that are collapsing were based on chasing papers. It was a race to create a fantasy world of papers. And when something went wrong, the whole thing collapsed.'