William Kay: How one man may have found the answer to the loan sharks

A modest genius strode into the City the other day: a Muslim who, I am convinced, will change the way we help the poor. His name is Dr Muhammad Yunus, head of Grameen Bank in Bangladesh. He lends to beggars.

A modest genius strode into the City the other day: a Muslim who, I am convinced, will change the way we help the poor. His name is Dr Muhammad Yunus, head of Grameen Bank in Bangladesh. He lends to beggars.

Dr Yunus virtually invented micro-credit in its modern form. Grameen has 3.7 million borrowers, mainly women, who live in 45,000 of Bangladesh's 68,000 villages. The bank is currently lending them the equivalent of £280m, an average of only £75 each. But that is enough for someone to buy beads, trinkets, toys or food to sell, instead of begging.

Many use the loan to buy a mobile phone, which they rent to other villagers on a call-by-call basis. "Families were able to contact one another during this year's floods to make sure they were all right," Dr Yunus said. "That wasn't possible in the last big flood a few years ago."

Dr Yunus, a former economics professor at Chittagong University, had the insight to see that lending to the poor - shunned by orthodox lenders in all but the most exceptional circumstances - could be made to work and the money would be repaid. Grameen encourages its customers to keep a clean credit record by offering their children scholarships and by creating a star system for its 1,300 branches as they become more successful.

Dr Yunus said: "We have struggled to convince the world that what we are doing is not only a serious business in itself, but it also opens up endless possibilities for the poor by creating self-employment opportunities. It can be done anywhere in the world, and we have demonstrated umpteen times that not only are the poor creditworthy, in many countries they are more creditworthy than the rich." He launched the embryo of Grameen nearly 30 years ago, and a number of other Third World countries have spawned micro-finance institutions (MFIs).

Ockenden International, one of the three charities supported by The Independent's Christmas appeal last year, enables Cambodian villagers to buy a cow, paying in instalments. In Venezuela the Women's Development Bank (Banmujer) lends only to women who combine to develop a viable community project.

We are going to hear a lot more about this sort of finance, as the United Nations has designated 2005 its International Year of Micro-credit. The mainstream banks are going to come under pressure to explain why they do not undertake more or - in many cases - any micro-lending.

Grameen is profitable but Dr Yunus warns that, while the idea seems simple, lenders need to know what they are doing. He is more than willing to teach the secrets.

I do not suggest that micro-credit is going to eradicate poverty or even begging. But it will have done us all a service if it removes the common assumption that the poor must be punished with high interest rates because they are "sub-prime", in the awful jargon, and have to serve painful time building up a credit record before they can be welcomed into the privileged club of those who pay the going rate.

Even better, it may stop doorstep lenders from arguing that they have to charge 100 per cent interest rates because small loans are so labour-intensive to administer. Loan sharks are on the run in Cambodia. It is time they were drummed out of business in Britain.

* The contempt with which Stuart Rose seems to regard his 350,000 private shareholders in Marks & Spencer is breathtaking. This week they received documents about the company's offer to buy back shares worth up to £2.3bn, as promised at the time of Philip Green's abortive takeover bid. But when Mr Rose was fending off Mr Green, he was also promising that M&S was worth "significantly" more than 400p a share. Now he expects loyal followers to accept 332p to 380p. The PR spinners say that over 400p was a long-term aim. Cynics should take the new offer and get out. But I think Mr Green will return, and he may let investors share in the benefits of his shake-up.

Scrambled Government thinking on pensions

Breakfast with Mr B is always a pleasure, but this week he was on sparkling form. Mr B, better known as Steve Bee, pensions guru at Royal London Group, was holding court at London's Ritz Hotel.

Over the scrambled eggs and black pudding, he deftly tore the Government's pensions policy to shreds, condemning it as retrospective legislation that will leave over half the population dependent on state handouts.

Mr B wants the Government to set the state pension at £105 a week, up from the present £79, link it to the rise in average earnings and abolish means testing. Net cost: £4.8bn a year, to be paid for by putting 1.5 per cent on National Insurance.

He predicts that, once the new pensions law takes effect in 2006, we will all be taking out Self-Invested Personal Pensions (Sipps) and using them to buy villas in Spain. "Marrying a Sipp with a buy-to-let property will be a no-brainer," he says.

While putting their main home into a Sipp will be attractive to many, it will clash head-on with the Inland Revenue principle that we should not be able to pass on pension-fund assets in our wills. But Mr B reckons that principle will be scrapped.

There is a catch. He says: "Because the Government is prepared for the first time to make retrospective changes to pensions in the current Pensions Bill, who is to say it won't do that again? You can't rely on it, so how can people make long-term plans for their retirement?"


Club legend Paul Scholes is scared United could disappear into 'the wilderness'
Life and Style
food + drink
Malky Mackay salutes the Cardiff fans after the 3-1 defeat at Liverpool on Sunday
footballFormer Cardiff boss accused of sending homophobic, racist and messages
Arts and Entertainment
Martin Amis: Taken to task over rash decisions and ill-judged statements
booksThe Zone of Interest just doesn't work, says James Runcie
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Business Analyst / Project Manager - Financial Services

    £40000 - £45000 per annum + BONUS + BENEFITS: Harrington Starr: One of the mos...

    Lead Business Analyst - Banking - London - £585

    £525 - £585 per day: Orgtel: Lead Business Analyst - Investment Banking - Lond...

    Service Desk Analyst- Desktop Support, Helpdesk, ITIL

    £20000 - £27000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

    Service Desk Engineer-(Support, ITIL, Software Vendor)

    £30000 - £35000 per annum: Harrington Starr: Service Desk Engineer-(Support, S...

    Day In a Page

    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
    eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

    eBay's enduring appeal

    The online auction site is still the UK's most popular e-commerce site
    Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

    'Lack of ethnic minority and black faces on TV is weird'

    Culture Minister Ed Vaizey calls for immediate action to address the problem
    Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

    Magic circles: Artist Olafur Eliasson

    Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
    Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

    Josephine Dickinson: 'How I discovered a new world of sound'

    After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
    Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

    Greggs gives lesson in crisis management

    After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
    Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

    Matthew McConaughey sings the praises of bumbags

    Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
    7 best quadcopters and drones

    Flying fun: 7 best quadcopters and drones

    From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
    Andy Murray: I quit while I’m ahead too often

    Andy Murray: I quit while I’m ahead too often

    British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
    Ferguson: In the heartlands of America, a descent into madness

    A descent into madness in America's heartlands

    David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
    BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

    BBC faces corruption allegation over its Sir Cliff police raid coverage

    Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home