New banking laws required for microfinance to take root, says Nobel laureate Muhammad Yunus

Nobel laureate and founder of Grameen Bank Muhammad Yunus on Tuesday emphasised on the creation of a new law for banking to help microfinance reach unbanked people and encourage the creation of social businesses. He said that currently, there is one banking law that prescribes a number of regulations for banks, most importantly of having collateral for offering loans.

"The first thing that I have been repeating for many years is that in order for microfinance to take hold in business, you have to create a new law for banking.

"Today, there is only one law for banking called banking law which defines what a bank should be. The banking law means that you have to have collateral and other requirements," Yunus said at the 13th Sanklap Global Summit 2021.

According to him, for having a bank for the poor, there is a need for creation of a new banking structure which is not based on collateral.

"We need a complete redesign of the financial system. And within the financial system, we have to build a social business financial system-social business bank, social business investment funds, social business microcredit banks, and so on," Yunus noted.

He also raised concerns over concentration of wealth in the hands of very few people.

Yunus said this gap can be reduced if everyone becomes an entrepreneur.

Finance is the oxygen of entrepreneurship and one cannot have entrepreneurs without having connections with the financial set-up, he said.

"Why can't we create a new financial system, so that everyone has a connection with it. If you have a connection with it, then you change yourself and you can have a share in the wealth," he added.