Time to ditch a financial system that makes us poorer as a whole

Grameen Bank in Bangladesh is the world's most well-known microfinance institution. It lends US$1.5 billion a year to 8.4 million people. Its establishment shows we do not always have to accept the systems we are given. Sometimes we have to think the impossible if we are really going to change the world.

My first venture into such small-scale lending was an instinctive response when I came face to face with gross injustice. In 1976, I was teaching economics in the port city of Chittagong in Bangladesh. I talked about sophisticated economic theories and models, but when I looked at people living in the adjoining settlements, I saw a harsh reality where these theories were irrelevant.

The poor near my university often depended on loan sharks, who would lend money at interest rates of 1,000per cent or more. I thought I could probably assist some of these people by lending money myself. I started with only US$27, which helped a few families. Then I thought that more families would benefit if banks provided loans to the poor.

I approached banks but they refused, arguing that the poor did not have any collateral to guarantee the loans. So I offered myself as the guarantor, which worked. The poor borrowed the money and returned it, too. It was at this stage that I started arguing for separate banks for the poor. Eventually, in 1983, I established Grameen Bank, a bank that has abandoned the whole idea of collateral.

Typically, commercial banks used to provide money to men but not to women. They told us that, in Bangladesh, money matters had always been handled by men and women were not interested. We believed women could contribute equally or even more than men to a family's development. So I tried to change the consciousness of women. It took us five long years. Now, 97 per cent of the bank's 8.4 million borrowers are women.

Almost all the women who borrow from the bank lack formal education. We decided this was something we should try to change and education became part of our programme. We started educational loans and helped educate hundreds of thousands of young people.

Grameen Bank's activities have now expanded beyond Bangladesh. We run programmes in China, Guatemala, Mexico, Scotland, Zambia and many other countries. In January 2008, the bank started operating in New York City. People were sceptical in the beginning. But the second half of 2008 was marked by the beginning of the financial crisis, and in New York we saw huge commercial banks melting down, whereas Grameen was flourishing. The urban poor in New York benefited as much from microcredit as the rural poor in Bangladesh. We have started similar projects in Detroit, Omaha, Indianapolis and San Francisco.