Lack of microcredit laws in many African countries is denying millions of the continent’s poor access to loans, a Nobel Prize winner Mohammad Yunus, said.
Yunus, who won a Nobel Prize in 2006 for championing Microcredit, tiny loans to the poor in Bangladesh, is now pioneering an idea he calls “social business” as a way to fight poverty around the world — business not for profit but to solve social problems.
“To create a new kind of bank, which works with the poor people, we need new legislation but in most of the countries in Africa that legislation has not taken place, so we have left microcredit scenario to the NGOs,” Yunus told Reuters in an interview.
Nicknamed the “banker to the poor,” Yunus started his movement 30 years ago with a $27 loan to women in Chittagong, Bangladesh.
It has mushroomed and delivered millions of tiny loans to poor people who do not have access to mainstream banking.
“People are ready in Africa there is no problem with the people it’s a question of institutional and conceptual arrangement and microcredit could be wonderful social business,” he said.
Yunus is attending an annual microcredit summit in Kenya, where Africa’s microfinance institutions hope to emulate the success and growth of the industry in Asia, which hosts more than 80 % of the world’s 150 million microfinance beneficiaries.
“African women are very active compared to any women anywhere in the world and micro credits have the best chance of succeeding in Africa particularly in women but the financing is never brought to them,” he said.
Most African governments are still heavily dependent on donor aid from the west and some microfinance institutions are run by NGO’s. Yunus warned against continued channelling of donor aid through governments.
“Since you focus aid through the government, it encourages bureaucracy, it encourages corruption it encourages inefficiency and we still have the African and Asian development banks doing the same repetitive thing,” said Yunus.
Since winning the Nobel Peace Prize in 2006 jointly with Grameen Bank, the microcredit organization he founded, he has committed his portion of the $1 million prize money to developing social businesses and is trying to change the way the world views helping the poor.
He said the global financial crisis that hit western economies hardest, showed that the world needed to embrace social business as well.
“Let’s make it two models, profit maximising business and also social business, business to change the world. If we don’t redesign the global economy, we risk to fall in that trap again,” he said.