Shake up financial system: Yunus

• Miscellaneous
• 31st March 2009
• YC

Nobel laureate Muhammad Yunus has called for a shakeup in the existing financial system and replacing it with a new inclusive one integrating microcredit for the poor, as the global economic turmoil is expected to intensify.The Daily Star

Nobel laureate Muhammad Yunus has called for a shakeup in the existing financial system and replacing it with a new inclusive one integrating microcredit for the poor, as the global economic turmoil is expected to intensify. Talking to reporters on the sidelines of a conference on “Women in South Asia: Partners in Development at the MA Ansari Auditorium of Jamia Millia Islamia University in New Delhi on Sunday, Prof Yunus said the current financial crisis offered a “great opportunity” to redesign the financial institution and create a “new financial structure taking lessons from the success of microcredit for the poor.

Nobel laureate Muhammad YunusPhoto
STAR Pallab Bhattacharya, New Delhi

Asked if the financial downturn has not exposed the fragility of the conventional banking system, Yunus said: “The crisis is not going to disappear. If anything, it is going to intensify.”

The crisis originated in one country due to a few individuals and engulfed the entire world.

"This shows the fragile structure of a country," he said.

“We cannot continue with the same framework of financial institutions which insist on collateral for giving credit. They have to be redesigned as two thirds of the world does not accept the present system," Yunus said.

"We have to create a new financial structure.”

The new financial system, he suggested, should be more inclusive.

Microcredit should not be relegated as a footnote but integrated into the main system, said the Nobel laureate, whose Grameen Bank has pulled millions out of poverty in Bangladesh.

Yunus said the financial meltdown offered a “great great opportunity to shake out old ideas about banking and bring in new ideas and a new system”.

“We cannot go back to the old system. We will have to go to a new system and come up with new ideas about banking," Yunus said.

He suggested the right to credit should be made a law like the right to food, education and health.

Earlier, in his keynote address at the seminar, Yunus opposed unregulated globalisation and cautioned that “globalisation must not become financial imperialism".

“I support globalisation and believe it can bring more benefits to the poor than any alternative. But it must be the right kind of globalisation," he said.

“To me, globalisation is a hundred-lane highway crisscrossing the world. If it is a free-for-all highway, its lanes will be taken over by the giant trucks from powerful economies. Bangladeshi rickshaws will be thrown off the highway.”

Emphasising rule-based globalisation, Yunus said: “In order to have a win-win globalisation, we must have traffic rules, traffic police and traffic authority for this global highway."

“Rule of 'strongest-takes-it-all' must be replaced by rules that ensure that the poorest have a place without being elbowed out by the strong”, he said.

He attributed many of the problems of the world today, including poverty, to “too narrow interpretation of capitalism”.

The theory of capitalism that advocates one-dimensional motive of maximisation of profit has to be added to another motive -- that of doing good to the world, Yunus said.

“The theory of capitalism assumes that entrepreneurs are one-dimensional human beings who are dedicated to one mission in their business lives -- to maximise poverty. This interpretation of capitalism insulates the entrepreneurs from all political, emotional, social, spiritual and environmental dimensions of their lives," he said.

“Capitalism is a half-told story. By defining 'entrepreneur' in a broader way, we can change the character of capitalism radically and solve many of the unresolved social and economic problems within the scope of free market," the Grameen Bank founder said.

He reiterated his proposals for social business as a panacea for almost all social and economic problems of the world and “the challenge is to innovate business models”.

“The personal profit-based private sector has its own agenda. It comes into a serious conflict with the pro-poor, pro-women, pro-environment agenda," he said.

“Even profit-maximising companies can be designed as social business by giving full or majority ownership to the poor."

The two-day seminar organised by Jamia Millia Islamia in collaboration with South Asia Foundation has been attend by women leaders from Afghanistan, Bangladesh, India, Pakistan, Nepal, the Maldives, Sri Lanka and Myanmar.

Link: http://www.thedailystar.net/newDesign/news-details.php?nid=82069