Banker to the poor

Has anyone tried to take a loan?
Think if you want to give a loan to someone. What all factors will you check?
-Repaying capacity based on Income
- Look for collateral
- A guarantor
- Credit History

Let’s analyze these factors for a say a beggar. Because that is the lowest level you can think of being poor.
- Does that person have income? Yes but irregular
- No collateral
- A guarantor
- A credit history
And that person will surely never get a loan?
This is our normal banking system.

Someone in Bangladesh did an experiment. Let’s subvert these checks and go ahead and give a loan anyways to such a person. He gives out $27 worth of loan to 42 people. Rationally one should never have got back the money. But he surprisingly got money back. Maybe my sample was wrong. Let’s do it again. Again he got the money back and slowly this micro loan was offered to 100,000 people. As result of which 22,000 stopped begging altogether. This success with these small loans led to the formation of Grameen Bank in Bangladesh. And you might think that they may be losing money to the poor people.. And interestingly it is not the case. The micro-finance bank has a recovery rate of 97%, higher than any successful private bank. The person who founded this bank is none other than Professor Muhammad Yunus who won the Nobel Peace Prize in 2006.

This success of Grameen Bank and of Micro-finance was replicated by Chandra Sekhar Ghosh in India who founded the Bandhan Bank which now has got the license to be a private bank. But why is this so relevant to you and in our times?
As you might guess correctly, it is because of how hard the economy has been hit because of covid.
The contribution of the informal sector is 56 % to India’s GDP and employees 90% of the workforce. And this sector for the reasons that we discussed, doesn’t get the banking facility that it requires. The only loan that it gets is through loan sharks or the micro-credit system. If we have to pull ourselves out of this economic crisis, we need to focus on strengthening the micro-credit environment.
So a question arise ,can you be a part of this story?
A short answer is …..Yes.
When you donate, you make the other person dependent on you. It’s not a good way to tackle poverty.
So how does one do micro-finance?
You get on the ground yourself and put in your money directly. Next time you see a beggar on the traffic light. Instead of giving alms, ignoring that person, just talk to that person and ask if he is given 1000 rupees how he will create a business.
If you don’t want to get your hands dirty, that’s okay. You could do this online as well. Just to get the feel of it, I am doing this online on the website Rang De where you can give the smallest loan of Rs.100. It’s beneficial to you monetarily as well because you are earning money and also creating social impact at the same time. A win-win situation.

To defy conventional norms and spark revolution we need to use DeFi- Decentralized Finance which is not just achieved through blockchain. So I urge all of you to come.. let’s be a part of this transformational journey. As this maybe a small step for you but a giant leap in someone life.