“I'm delighted that we can all assemble here with such a big attendance, particularly such a large representation from the microcredit group. I think this will be a good opportunity to reflect where we are, and where we want to go in the future.

This conference could have been held anywhere in the world. A good reason why I think that it should take place in Bangladesh, is not only because Bangladesh is the birthplace of microcredit, but also because this is where most of the world's microcredit operation is concentrated. The issues for the future are emerging here right now, because the intensity and density of microcredit is greater in Bangladesh than in any other country in the world.

Another reason why we should be looking at the microcredit situation in Bangladesh is because Bangladesh has changed the banking world forever. I don't think banks can forget microcredit and go on with their business as usual. Banks have to rethink, redesign and reposition themselves, for the questions raised by Bangladeshi microcredit. They have to answer a lot of difficult questions. So this is the place where the exercise can begin because of the long experience, outreach, and diversity of microcredit in this country.

Until now, the bankers were telling us that the poor are not credit-worthy. But now we have changed that. We insist that the question should be raised the other way around. The real question should be whether the banks are people-worthy. I think the answer is obvious: they are not.

Two thirds of the world's population remains ineligible for bank credit. So what kind of banking structure have we built? If that structure cannot serve all people, we must go back to the drawing board and find a way to make it all-inclusive. Again the question to be asked is: Are the banks people-worthy?

We are told that the conventional banks are watching us closely. But those conventional banks should be told that we are watching them too! It's not a one way process. We'll be watching you to ensure that you do the right thing and serve the people.

The subject of banking with SMEs naturally raises the question, which kind of banking is required for SMEs? Is it the kind of banking that doesn't require collateral or requires banking with collateral? If banks want to talk in terms of collateral, then unfortunately we cannot deal with them, because people are not eager for conventional style of banking. Therefore, this issue must be resolved first, i.e. SMEs with or without collateral.

What are the other issues? For example, are SMEs designed for illiterate people? If SMEs cannot be done with illiterate people, then we don't have any business here. Because in microcredit, we work with illiterate people. What about the kind of SMEs we are talking about? Is it SME for men or SME for women?

All these issues need to be addressed so that we can go into the microcredit area. There is a wide gap between credit for the poor and for the rich. Banking that exists is the banking for the rich. Poor people have no room there. Mr. Governor has mentioned about the summit goal of reaching 100 million poorest families by the year 2005, and this is 2005.

 We are celebrating the International Year of Microcredit and we are proudly announcing that we have reached those 100 million poorest families as we promised back in 1997.

But the question is - where are these 100 million poorest families located? Out of these 100 million, 85 million are in Asia and the remaining 15 million are in Africa and Latin America. Asia has become the hub of microcredit: Bangladesh alone has reached around 17 million families.

Try to imagine the meaning of reaching 17 million families with microcredit and doing business with them on a daily basis. With a billion plus population, for India this would mean 170 million families, i.e. if India had achieved the same intensity as in Bangladesh, they would have 170 million families reached with microcredit. But what's the real situation in India? It's 17 million at the most. India is way behind. There is plenty of room in India for microcredit to grow, develop and flourish.

Next issue that is usually raised is where is the money coming from? Who is providing the money for all this? We have been arguing over and over again that the money issue is not an issue; it's a non issue, because it is available right there where we work. We have made our legal system in such a way that MFIs cannot pick that money up and lend it to people. Because of the non existence of appropriate laws, NGOs are running around for money to carry out their jobs.

The solution is very simple. The solution is to create a law enabling the MFIs to convert themselves into microfinance banks. If they become microfinance banks, they'll take deposits from the same locality where they work. So the question of finding money from the donors disappears right away. Micro -credit should be working with the local money, to give it to the local poor and build the local economy, unlike conventional banks which mop up the local money and funnel them into big cities, preventing the money from being utilised locally. That is what our traditional banks have been doing. They invest very little in localities where they work.

Microcredit works in a very different way. It can mobilize deposits and use it right there for poor people of the locality. It's a win-win situation for everybody. People who have money to save, can save. People who need money to invest, can borrow. Poor people can borrow and create self-employment. The local economy becomes rejuvenated.

If MFIs are allowed by law to convert themselves into banks, they would not have to look for money outside. Along with the creation of that law, we need another law for creating a Microcredit Regulatory Authority. When you create banks, you need a regulatory authority to oversee whether they are doing things in the right way. This is important because dealing with public money is a very risky business.

This is a new kind of banking we are talking about. We have argued very passionately and convincingly in Bangladesh, that a central bank doesn't have the capacity or the expertise to regulate microcredit banks. We argued to create a separate regulatory body. In Bangladesh microcredit is a significant sub-sector of the financial sector. It should be taken seriously.

I'm happy to say that the Government, the Central Bank, and all concerned have responded to it positively. We have drafted both the laws, the law for creating "Microfinance Banks" and the draft law for a "Regulatory Authority". We are still waiting for it to be enacted by the Parliament. If these two laws are ratified, the Microfinance Banks can start functioning to fill all the gaps that we see existing in the financial picture.

We usually find an incomplete financial structure. We find financial services on the top of the structure, and then the rest is empty. That's where money-lenders step in to fill the empty space. We want to complete the financial structure. We are talking about SMEs; to me more important than SMEs is agricultural credit, which really doesn't exist. This too is a curious situation. We have agricultural banks that do not run as proper banks. We need genuine agricultural banks. If we create the legal framework we can move into filling up these existing gaps in the new structure.

So my question is, are we approaching this "filling the gap" issue with a traditional approach by extending the philosophy and technology of old, or are we talking about building a new structure from the bottom up? This is the issue we have to resolve in the coming discussions. My fear is that if we approach this from the old banking perspective, we would be going back to square one. The old structure is not suitable for the common people and we need to change that. In trying to resolve this issue with a new approach, we may make mistakes along the way. But today the chances of making those mistakes are less, since microcredit is so efficiently established in this country. We have a better chance in moving with a new approach.

The most reassuring aspect is that all human beings are endowed with enormous energy. The unfortunate part of the story is that very few get a chance to unleash that energy due to the failure of the banking structure. Microcredit has shown that if you give the poor a little money, they can explore themselves.

A woman who had nothing, if given a loan of Tk. 3,000 could buy some paddy from the market, husk it at home and sell the rice and earn her own living. If she is given more money, perhaps she can buy herself a cow, sell the milk and pay the bank back and move on with her life. Today through microcredit, the money is available; people are taking care of themselves and moving out of poverty.

In Grameen Bank, not only are we lending money to 5.5 million borrowers, we are also focusing on their children. We want to make sure that they are sent to school. This is not a job that the conventional banks will think of, but we do it as a social business institution owned by the borrowers. Many of their children are now getting their medical, engineering and other professional degrees.

Grameen Bank gave them student loans. As a result, a new generation of educated youth is emerging out of these rural families. We give housing loans so that they can build themselves houses. We give interest free loans to beggars so that they can start up their own door to door businesses, rather than continue door to door begging. They need tiny loans, as small as $ 10. Even a beggar has that wonderful gift of creativity and ingenuity. The only thing we need to do is to recognise them.

We need an appropriate financial system to match the enormous potential of all human beings, not a system to support only a few selected people. All human beings are entrepreneurs. If you don't know how to do business with all people, you'll have to learn, you cannot just give up. You cannot just say it cannot be done. It is against the universal human spirit to say "it cannot be done". It can be done! It has to be done! And that's what Bangladesh has done. It has shown the way. Bangladesh is the learning ground for the world. Our young people who made it happen make us proud. They have made the whole world look at Bangladesh, with the hope for creating a new financial structure.

Orthodox bankers keep raising questions. Let them keep on asking questions. We'll convince them. We'll show them that this new banking is as good, and even better, than the old.”