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A Fix For The Economic Crisis

A Fix For The Economic Crisis

By Chana R. Schoenberger
Market Scan

Nobel winner Muhammad Yunus says microfinance lending to the poor can return the economy to health.

Forget multibillion-dollar bailouts. Muhammad Yunus thinks the solution to the global financial crisis can be found in loans of much smaller size, backed with more prosaic assets: ducks, chickens, and cows

The 2006 Nobel Peace Prize winner, who founded microfinance pioneer Grameen Bank in 1974, made his name lending tiny sums of money to poor women in his native Bangladesh. To date his bank (the name comes from the Sanskrit word for "village") has lent out $6 billion, making it one of the world's top microfinance institutions.

Currently 8 million borrowers take out $100 million each month, paying it back 99% of the time.

Contrasted with the subprime loan crisis that helped tank the world economy over the last year, microcredit could be the answer, Yunus told journalists Tuesday at the Foreign Correspondents Club of Japan in Tokyo.

Yunus thinks his model can be extended all over the world, including in developed countries like the U.S. and Japan, where workers are losing their jobs rapidly and where poor credit histories and unemployment mean people can't get bank accounts or traditional loans.

He cites a program his bank started last January in New York City's Jackson Heights section, a low-income neighborhood in the borough of Queens that is home to many immigrants. Grameen America disburses loans averaging a paltry $2,200 to women there. Although New York has been hit hard by unemployment tied to the financial turmoil, Grameen's repayment rate there is still 99%, Yunus says: "In the same city where big banks collapsed, we're untouched by the crisis."

Railing against banking systems that deny credit to poor people, Yunus argues that now is the time to redesign the world's finances and to redirect business toward solving social problems.

His kitty: companies' social-responsibility budgets. He points to Grameen's joint ventures with a handful of multinationals in Bangladesh, including Intel (nasdaq: INTC - news - people ) (Internet technology for rural towns), Groupe Danone (other-otc: GDNNY - news - people ) (inexpensive, fortified yogurt to combat malnutrition), and BASF (other-otc: BASFY - news - people ) (anti-malarial mosquito nets). The bank is in talks with Volkswagen (other-otc: VLKAY - news - people ), Adidas (other-otc: ADDYY - news - people ) and Allianz (nyse: AZ - news - people ) on new projects.

Link: http://www.forbes.com/2009/03/18/Yunus-Microfinance-grameen-markets-economy-loans.html?feed=rss_markets