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Dubai: Some 30 years ago Bangladesh was hit by a series of devastating natural disasters which prompted economist Mohammad Younus to sow the seeds of ‘banking for the poor'.
Now Younus, who won the 2006 Nobel Peace Prize jointly with his Grameen Bank micro-credit institution, has set his sights on helping his native country recover from a new disaster which has killed thousands and affected an estimated one million families.
Cyclone Sidr, which struck late on Thursday, bringing winds of up to 240km/h and a tidal surge of several metres, has resulted at least 2,300 confirmed deaths.
Tens of thousands of survivors are now struggling for basic necessities like tents, rice and drinking water.
Speaking on the second day of the Leaders in Dubai Business Forum, Younus feared the death toll could reach 5,000 or more, many of whom would have been among those benefiting from Grameen Bank's microcredit - also known as banking for the poor.
"When we talk about these 5,000 people dying and others losing everything, many are our borrowers. These are not just numbers, these are people we know and work with and we get excited about their lives - it's personal.
"I hope we can overcome this tragedy and concentrate on building a much better future."
Younus, nicknamed ‘banker for the poor', told delegates he made his first loan in 1974 during a famine which hit Bangladesh in aftermath of the Bhola Cyclone of November, 1970.
While teaching economics he learnt that 42 impoverished villagers were being held in debt by loan sharks for just $27. Younus lent them money to repay their debt, they paid him back and the idea of microcredit was born.
Renewed crisis hit Bangladesh in 1991 when a deadly tropical cyclone struck the Chittagong district. The storm forced a six meter storm surge inland over a wide area, killing at least 138,000 people and leaving as many as 10 million homeless.
Now Younus knows that hundreds of thousands of rural poor Bangladeshis will once again require Grameen Bank's small loans, usually around $150, to re-build their shattered lives.
"We have more in deposits than the money we lend out so we have huge cushion of deposits to tackle emergencies like this," he said.
Grameen facts
- Formally became a bank in 1983
- Small loans (usually less than US$200) are used by the poor to start, establish, sustain, or expand very small, self-supporting businesses.
- As each loan is repaid, usually within six months to a year, the money is recycled as another loan, thus multiplying the value of each dollar.
- Loans are without collateral or security.
- The bank has handed out more than $5.72 billion (Dh21 billion) since its inception to 6.61 million people and been repaid $5.07 billion (Dh18.6 billion).
- Women account for 97 per cent of the loan takers.
- Grameen Bank has 2,226 branches, works in 71,371 villages and has a total staff of 18,795.
'Subprime is fault of system'
While Bangladesh begins to pick up the pieces from its latest humanitarian disaster, the financial world is struggling to cope with a crisis of its own.
According to Younus, blame for the ‘credit crunch' that has emerged from the US subprime lending industry rests not on market forces, but squarely on the shoulders of institutional lenders themselves.
"It's not the fault of the market - subprime is the fault of system that institutions have built," he said.
"The very name subprime indicates that it is a high risk area, but if there is a risk it means you don't know how to run the business.
"People say that lending to the poor is a high risk market, but the repayment is nearly 99 per cent - this is a much safer investment than lending to the rich."
In a message to new Citigroup chairman Robert Rubin, he said: "Pay attention to your system and the methodology you use so that this kind of thing is not repeated."
Younus also urged Dubai organisations to adopt the micro-credit concept to create widespread access to loans.
He even offered to set up a system and make it profitable before handing it over to another organisation to run.
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