Muhammad Yunus: How Banking Should Change

Posted by: Steve Hamm on September 24

Noble Peace Prize winner Muhammad Yunus was his level-headed, provocative self this morning when my colleague, Jay Greene, and I met him at the Sheraton Hotel around the corner from our office. We asked him: How can the advocates for the poor capitalize on the downturn? His answer was that the financial system should be reformed in ways to make it more inclusive. “If the institutions have failed, let’s not go back to the same thing. Let’s fix it. Let’s build the bank as an inclusive institution. Let’s extend their services to people who don’t have them now.” He says government regulators and policy makers should make some of their help to banks contingent on their willingness to extend services to the poor, so they don’t have to relay on the loan sharks who operate pay-day loan operations and pawn shops. “The government should say, “If you expand, we’ll help you. If you don’t, we won’t,” Yunus says.

Unfortunately, most of the help that the US government is going to give banks has already been doled out, so the opportunity to do something constructive may be lost. And, also, unfortunately, banks making sub-prime loans to people who shouldn’t haven gotten them was one of the things that got us in this big mess. But, still, Yunus is right that now is the time for the government and the banks to consider new approaches that would extend banking services to the poor without causing unmanageable risk to the banking system.

I don’t hear anybody else talking about that. It’s a shame about wise men. They’re often honored but not heeded.

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Reader Comments

Timmy

September 24, 2009 01:04 PM

Why are you acting surprised ? These banks were the first to bankroll Obama's campaign so they just getting what is due to them at taxpayer cost. Just like Bush was helping Oil companies.

It is the same, it never changes in Washington. Only the actors change the act is the same- the corporation run this country; not left, right or the people. And off course the Saudis too with their minions embedded throughout the nations fabrics, as they dole out generous "consulting fees" for them to betray America at every step of the way.

Yasuko

September 25, 2009 12:39 PM

There are a number of people in the government and private sector who have addressed the financial integration in this country. The “Bank on San Francisco” initiative is a good example. The challenge is that the government does not provide incentives that are effective enough to justify the regulatory burden on many financial institutions, whose overall goal is to make profit and satisfy investors. Furthermore, financial regulations are not always consistent. There are regulations that discourage financial integration.

Strategery

September 27, 2009 02:02 PM

Disappointing article. The author refers to payday loans and pawn shops as "loan sharks" while praising finance companies that operate in the same way. Credit cards with 30% interest and junk fees that start at $30 or more, cardmember terms that change at the will of the issuer, and blackmailing people to pay or risk trashing their credit score, all sound like loan sharking to me. What about the subprime mortgages that were intentionally made to people who couldn't afford them, with the idea that the bank could foreclose on the house when prices were higher?

Squeezebox

September 28, 2009 12:40 PM

The eternal question for bankers is how to tell the creditworthy from the scoundrels? There are not enough lending institutions in the developing nations and too many of them in the first and second world.

Carol Realini

October 2, 2009 01:10 PM

Dr. Yunus is my hero and a mentor. This simple idea is so powerful. Just like micro-credit - it was simple but changed the world.

The US needs this thinking. Many people think that banking in the US does a good job of serving all the people. But many are underserved and overcharged. Of course, in places like Bangladesh, the unserved community is a much larger percent. But all people everywhere should have secure affordable access to financial services.

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