Friday, 7 December 2012

In Person with Nobel Laureate

It is a great honour to listen on microfinance from the guru himself.

Alhamdulillah, I had the opportunity this morning to listen from the microfinance guru himself, Prof. Dr. Muhammad Yunus on the challenges and opportunities of microfinance in current changing business environment.

Some of the takeaways from the public lecture are as follows:

  • Malaysia (in this case, Amanah Ikhtiar Malaysia) is the first foreign country to implement a Gameen-based microfinance program.
  • Banking regulations in most countries, to some extent, are not microfinance-friendly and too conventional-banking-centrix. Nevertheless, there are one or two countries who have enacted law and regulations specific for development finance institutions which give flexibility for banking with specific development mandates (Although he did not mention example, DFIA fits the bill).
  • Dr. Yunus strongly believes that microfinance has been successful because it operates in a manner that is opposite of the traditional bankers. He summarised his points as follows (Note: I personally think that these points are debatable):
    • Grameen Bank
    1. Targets poor people
    2. Mostly female borrowers
    3. No collateral needed
    4. No legal papers involved
    • Traditional banks
    1. Target financially affluent people
    2. Mostly male borrowers
    3. Collateral needed in most cases
    4. Legal papers involved
  • He also believes that Grameen-model microfinance suits both rural and urban poor people. He claimed that Grameen America has started operating in New York city since 2008 and currently have 4 branches in New York with consistent repayment rate of 99%. The bank has also expanded its operations to 3 more cities in the United States.
  • Dr. Yunus also explained on social businesses undertaken by Grameen Foundation in order to take specific issues/challenges faced by poor people in Bangladesh. For examples: 
    1. A joint venture with a private company to sell affordable solar energy system to poor people who without electricity
    2. A joint venture with Danone to sell food-related products to address malnutrition issues in Bangladesh
    3. A joint venture with Uniqlo to manufacture and sell affordable and hygienic sanitary pads
  • Unlike charities, social business is to tackle developmental issues on a sustainable basis, whereby the businesses generated profits for it to remain self-sustained and do not rely on fund raising from donors. Another key point is the shareholders do not take dividend out from these businesses.
  • Dr. Yunus clarified that it is difficult to link the reduction in poverty rate in Bangladesh to the success of microfinance programs such as Grameen and BRAC. Nevertheless, since the implementation of microfinance, Bangladesh has seen significant improvements areas - lower poverty and mortality rate at birth as well as higher life expectancy rate.

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