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?"


Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
footballShirt then goes on sale on Gumtree
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
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

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine