The poor and unemployed can also own banks

THE rise in the level of poverty among the most vulnerable members of society calls for a renewed approach to poverty eradication.

Throughout history, banking institutions have played a critical role by providing finance to individuals, governments and private organisations.

However, poor and unemployed people have traditionally not been catered for. This means that a lack of access to financial opportunities perpetuates the cycle of poverty among the most vulnerable in society.

My argument is that poor and unemployed people can also own banks.

When I was growing up in the then Zaire, I witnessed a complete absence of government in all sectors of development. Communities were left with no option but to fend for themselves. They organised themselves and were able to build their own clinics, and water and road infrastructure.

They established successful businesses and were able to maintain economic and social stability. How did they manage to organise themselves?

1) There was awareness of the socio-economic challenge faced by the communities.

2) There was a strategy to build a collective consciousness and action plan.

3) People came together to work for a common cause.

My experience developed a deep desire to develop a possible model that could help poor people establish their own financial institutions. But how can this be achieved?

Today, many countries are adopting a welfare system in which a large portion of the population receive social grants. For instance, in a country where 20 million people receive social grants, this presents a very important opportunity to begin establishing a pro-poor and poor-owned financial institution.

For instance, if we mobilise 20 million grant recipients who each contribute $1 per month, this give us $20 million per month. If this figure is accumulated for three years, its adds up to $720m. This presents a massive opportunity for the poor and unemployed.

The structure of such an institution should be in the form of a shareholding. How would the fund be utilised? Members and non-members could access funding in the form of credit at a very low interest rate. Communities as a collective could come up with business projects and be able to access funding.

While talking to different people about this approach, some were sceptical about the possibility of bringing people together. My belief is that this has been done and, continues to be done, by our people in various ways.

For instance, funeral insurance is growing among the most vulnerable members of society. This is just one example.

I understand that some attempts have been made to establish micro-finance institutions, but these fall short of catering to the interests of the poor, and are synonymous with established financial institutions. They provide very little opportunity for the poor and unemployed to secure credit.

The management of financial institutions of this nature is critical if they are to succeed. The growing trend of the mismanagement of public utilities calls for new approach.

1) It is important to select people with a high level and track record of integrity and skills in managing public goods.

2) It is important to have transparency and full public participation in all the processes. With modern technology there is a need to establish infrastructure that will enable the effective running of the financial institutions.

It is my strong conviction that if we are to succeed as developing nations, we need to bring our people together to work towards the common good. It is high time to reflect on the possibilities available in our communities, and exploit these for the benefit of all.

If the poor and unemployed are to become empowered and establish their own financial institutions, there is a need to mobilise and appeal to collective consciousness and action.