In my last post I referred to an upcoming interview on BBC Radio 4’s “The World This Weekend” with Muhammad Yunus, the Bangladeshi economist and Nobel Laureate.

35 years ago he more or less invented microfinance (or microcredit or microloans, whatever you want to call the idea). The occasion: Yunus’ brainchild Grameen Bank (the name means “Village Bank”) was about to open its first UK branch, inGlasgow.

Since then I’ve heard the interview – several times, thanks to the BBC’s wonderful iPlayer – and I am just as much a fan of Yunus as I was.

Grameen Bank’s model

Grameen’s loans are for small amounts; they are short-term and unsecured; they tend to be to poorer, “non-creditworthy” people. In the early days especially, in many cases they were to self-employed women, to get loan sharks off their backs. However, some critics have said that Grameen also charged high interest rates; and two years ago some microfinance lenders (not Grameen) were shut down by the authorities in the Indian state of Andhra Pradesh.

So naturally I thought I needed to test my opinion. In the past I’ve been critical of the UK’s growing “Payday Loans” industry with its very high interest rates; many financial journalists have urged the Government to outlaw them, especially Simon Read in the Independent. So … was microfinance just a payday loan with the added credibility of a Nobel Laureate / economics professor? Was this just the acceptable face of payday loans?

In my view; it’s not the same thing at all. The interview, and what I’ve read since around the subject, has confirmed me in the view. Although Grameen has not existed in the UK up to now, we do have credit unions, which are comparable in many ways.

Soundbite time …

Here are some soundbites that give a flavour but I urge you to listen to the BBC piece in full.

Shaun Ley (Presenter, “The World This Weekend”): “A crisis has gripped capitalism … here’s Muhammad Yunus, one of the world’s leading economists.”

 “Grameen encourages small entrepreneurialism”

 Professor Pamela Gillies (Principal and Vice-Chancellor, Glasgow Caledonian University; and Prof. Yunus’s host here): “this reminds me of self-help groups I’ve seen in Dundee.”

 Vox pop, asked about the possibility of bad debts: “if I owe money to several people including a credit union… I feel part of the credit union, so I’d pay them first.”

 US author David Roodman: “the microfinance model appeals to both left and right, despite limited objective evidence that it transforms lives.”

 Yunus: “If the microfinance industry grows too fast, you can get a bubble, as happened in Andhra Pradesh.”

 Prof Gillies: “If this works in Glasgow it could work everywhere in the UK”

 Shaun Ley: “Should we encourage people to take on debt?” Yunus: “We don’t encourage, but we say if you are stuck, we can help. Our loans are all for the purpose of income generation. Our aim is to facilitate.”

 Ley: “What happened in the Indian state of Andhra Pradesh?” Yunus: “We have no intention of making money from microcredit. Others found this profit source attractive, got backers onboard through an IPO, and were aggressive in promoting loans. That was a derailment of the original idea. Making money out of poor people is not a new idea – that’s what loan sharks have been doing for years.”

 Yunus (asked about the microfinance industry in general) “If I could concentrate on Grameen specifically; we are owned by our borrowers. Two thirds of the money we lend comes from our borrowers.”

In conclusion …

Yes, Prof. Yunus and Grameen Bank may well have come in for criticism. Anyone who challenges financial orthodoxies and massive vested interests for 35 years will attract opposition. But it’s fair to say that the West’s banking sector has not covered itself in glory recently. Thus anyone who tries to develop an alternative financial model, especially when they do it from what seems to me an altruistic motive, deserves respect and support.

I’ll certainly be following the progress of the UK’s first Grameen Bank branch with interest; but I’ll also be following other alternative finance sources that are already established in the UK, e.g. credit unions and peer-to-peer lenders such as Zopa.

Watch this space!



 BBC interview with Muhammad Yunus; available only until Sunday 18 March 2012 at 12.59: http://www.bbc.co.uk/iplayer/console/b01d24ym (starts at 16 mins)

Grameen Bank: http://en.wikipedia.org/wiki/Grameen_Bank

Glasgow Caledonian University, Yunus visit: http://www.gcu.ac.uk/newsevents/news/article.php?id=40898&c=126

Daily Telegraph, Nick Stace, “Yunus resigns from Grameen Bank”: http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/8511461/Muhammad-Yunus-resigns-from-Grameen-Bank.html

The Independent, Simon Read, “Time to crack down on payday loans”: http://www.independent.co.uk/money/spend-save/simon-read-time-to-crack-down-on-payday-loans-7547420.html




A couple of years ago I was privileged to hear a talk, here in Bristol, by the groundbreaking and unassuming Bangladeshi economics professor Muhammad Yunus, the pioneer of the “microcredit” movement. The way he had lifted thousands of people out of poverty, by lending small sums without collateral, was inspirational. I loved too the fact he had just ignored the negative advice and nonexistent support of traditional bankers and set up his own bank. He has subsequently stepped down from the bank’s chairmanship after some negative publicity (buck the trend and that’s inevitable in our world, surely?) but what he achieved was impressive in the extreme.

Later, telecoms companies wouldn’t support him in his idea of supplying mobile phones to wannabe entrepreneurs in remote villages, so he just set up his own telecoms company and Village Phone Program. (“No mains electricity? No problem: solar power. No shortage of sunlight in Bangladesh; and solar panels are cheap here!”)

I had to smile when I saw the ICC (cricket) World Cup on TV a few years ago; the Bangladesh team were wearing the name of Grameen Telecom (the market leader, above all those global brands) on their shirts.

Grameen and its founder were jointly awarded a Nobel Peace Prize in 2006. The man himself will be talking today on BBC Radio 4 (“The World This Weekend”, 1pm) about the setting up of the first UK branch of his Grameen Bank, in Glasgow. I’ll be listening.


Wikipedia on Grameen Bank: LINK