Banks 'chase fake world of papers'

AFTER the global financial crisis banks have lost a trillion dollars but are still not yet in favour of lending to the poor, Nobel Peace Prize winner Muhammad Yunus said on Saturday.

AFTER the global financial crisis banks have lost a trillion dollars but are still not yet in favour of lending to the poor, Nobel Peace Prize winner Muhammad Yunus said on Saturday.

The banker and economist was delivering the seventh Nelson Mandela Annual Lecture at the city hall in Johannesburg.

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

"They do not mind writing off a trillion dollars in a sub-prime crisis, but they still do not lend $100 (about R822) to a poor woman despite the fact that such loans have a near 100percent repayment record globally," he said.

Yunus said banks complained that the poor were not creditworthy.

"The real question to ask is whether banks are people-worthy," he said.

At Grameen Bank, he said, there were no legal instruments between lender and borrower, no guarantees, no collateral.

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

"When we give a $100 loan there a cow behind it, a few chickens, something real," Yunus noted.

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

He said Grameen Bank was locally based and its source of money was local.

"In other words, the money comes from deposits. We take the depositors' money and lend it. We are not connected with international banks, so their crisis could not reach us," Yunus said. - Sapa

X