Can we really bank upon banks?

I recently finished reading The Alchemist by Paulo Coelho and have started to scroll down the Pdf version of Banker to the Poor by Muhammad Yunus and A. Jolis (yet another great book, sorry e-book for me J ). However, I have not yet finished a quarter of the entire reading, but I feel I have something to share. Although I am not a professor, nor an economist (let alone great), but yet as a lay man, or for that matter, by virtue of being a student of Economics and Finance during my Bachelors at Kathmandu Collegeof Management, I hope my words and ideas here would surely make some sense.

I am not even half way through his book, yet I am extremely influenced and attracted by Yunus’s viewpoint towards banking, money, credit , grant, debt, poverty and its alleviation, and some other tiny but heavy terms. When he says, “It’s not people who are not credit-worthy, its banks that are not people-worthy”, I immediately questioned myself - “Do we really bank upon our banks, in the real sense?”. I pondered over it for some time and did some solo-arguments. Absolutely no, to the extent “Collaterals” come into the picture. Banks are merely trading on our own wealth and the in the name of providing us with credit, they are simply substituting our less liquid assets (liquid assets mean those properties that are not readily sellable in the market, for example our houses, vehicles etc) with the ultimate liquid asset- Cash. And in doing so, they keep a margin; provide us with cash amounting, at the maximum, 70-80% of the value that we already owned. So is that really by the bank’s grace that we are getting the money, or merely by the accumulated wealth that we own? You know the answer better.

And now, coming to a very fancy term in the world economics- “Poverty Alleviation”, I have simply lots and lots to share. Just as Yunus explains in his book, no country can get rid of Poverty and its dark consequences unless it is ready to understand a simple English proverb that goes –“Do not give the poor a fish. Instead teach him how to fish”. And to this I add, “Also, help him just once with the fishing net and the bait; he should be able to earn hundreds of them, once he starts”. I believe, it is with this notion and belief that he started Grameen Bank in his home country- Bangladesh and today it has over 2.1 million borrowers with a smile on their faces. His vision of micro-credit and the powerful belief in it, despite severe challenges, has brought forth the fruits and today it is practiced in no less than 60 countries round the globe catering to poverty alleviation, in its truest sense.

 It is not with the conferences and meetings in the 5-stars or Air-conditioned halls that you can reach to the poor. One cannot know the taste of anything one actually eats or tastes it. Further, it cannot be assumed that merely with the millions and billions of dollars that a donor agency or country provides, we can indeed fight poverty. Again, as Yunus explains very beautifully, the aid never actually trickles down to the poor and in most cases a larger portion of the aid is often repatriated to the source country itself in the form of hefty remunerations and technological support provided for the aided project. It is symbolical to filling a bottle from the Filter and again pouring the liquid back in the filter through its upward opening!

My entire points and arguments are never meant to curse the current banking system or the players of the financial market in our country or in anyone else’s country. However, as far as the scenario of our country is concerned, we have faced numerous instances of bankruptcies of Banks themselves, and even the gather-and-run policy of the mushrooming cooperatives. People have started questioning the credibility of banks themselves, keeping aside banks questioning the people’s credibility! The point here is, despite numerous attempts and advances, the reach of banks (and here I mean the services that an ideal bank just like the Grameen bank) is not yet felt where it is desperately needed. Still, the banking industry is encircling those groups and communities that already have money or wealth or (let me be frank) COLLATERAL to furnish. Yet, the poorest of the poor are devoid of this ever-so “Rich-man’s Game”. In Physics, they say Energy cannot be created. But in economics I say, Money can be created and of course, it should be prime role of the entire banking industry to serve for that goal.

If, in my lifetime, the day comes, when no productive hands remain unproductive just because of the lack of money, and no individual is rejected for a loan just because he has nothing to furnish as a Collateral, I will rule out the question, Can we really bank upon banks?