The Big Bank That Didn’t Fail: Microfinance, the Bank of the Poor
Nobel Prize winner Muhammad Yunus claims that the global financial chaos has not hit the microfinance system.
I have this idea that if an institution has at its base, principles that are environmentally sustainable and socially just, and that the main goal of that institution is truly to serve, then it won’t be able to fail when times get tough. To put this theory to the test I went searching recently for some stock or institution that remained unscathed in the face of the recent market collapse. It didn’t surprise me at all, as a firm believer in the idea of microcredit, to hear that the institution of microfinance indeed is not feeling any strain whatsoever these days.
Specifically, the term microfinance refers to financial services, including loans, savings accounts, and insurance products, all serving people with very low incomes. Microfinance institutions are also popular investment opportunities among socially responsible investors.
Microfinance is good for people, and it is good for the planet.
“By helping individuals and villages replace firewood, oil, and kerosene with solar, wind, hydro, and biofuels, microfinance institutions help to improve the local environment while expanding access to electricity, boiled water, and refrigeration, dramatically improving the quality of life of the poor,” said Worldwatch Senior Researcher and Update author Gary Gardner.
From 2001-2006, (the latest year that data is available) microfinance averaged a 29% increase in services every single year. Jean Zwahlen, who chaired this week’s International Labour Organization symposium on microfinance, said that microfinance would indeed continue to “show its resilience” in the face of the current financial crisis.
Muhammad Yunus, aka “banker to the poor,” won the Nobel Prize for his microcredit program that allows people living in poverty to gain access to credit and small loans. “One good news in the middle of all these bad news: microfinance still works. Not hit by the meltdown process,” Yunus said at the sidelines of same symposium.
Yunus warns, however, that even though the institution of microfinance is going strong, a global economic slowdown would “affect the lives of the poor people much more” than others.
Source: ENN
Photo credit: Wikimedia Commons
