Momentary Musings: Needed - a Dr.Yunus for every Gulf state!

The awarding of Nobel Prize for Peace (instead of Economics) to Dr Mohammad Yunus could perhaps be one of the many controversial decisions that the Nobel Prize Committee has taken for the Peace prize over the years. However, it cannot be denied that Dr Yunus well deserved this kind of world recognition – esp. since his feat and achievement is perhaps a slap on the face of conventional banking as we know it! Ever since I read about him in "The 8th Habit" - a book by Stephen Covey, I’ve been feeling a mix of excitement and agitation.

“Microcredit” – the core system he pioneered and implemented in his “Grameen Bank” is perhaps not something new. In simplest terms, we all lend small amounts of monies to friends / acquaintances for a short period, against trust / emotional bonding we develop with them. However the flesh and blood he has put into the idea is a success story in itself.

The system has been copied in more than 100 nations, and even though economies of UAE / GCC are far stronger than Bangladesh, I feel the model can be utilized in this region too!

Majority of the banks in the Gulf region (kindly correct me) seem to be operating on “profit” model of business – i.e. “if you have a collateral we can give you a credit; if you want to manage your small finances, then pay us for the service; however sorry - no interests will be paid against your savings deposits with us!”

The result? Majority of the Expat savings are never kept in the banks for a longer periods; they are instead remitted to their home countries where they are able to invest and earn. And if that Expat happens to be the hapless laborers / construction-site workers – then even a bank remittance is avoided due to the fee involved! The meager savings are then invested in illegal, but close-knit groups known as “kitty” or “committee” or "society". Depending on the number of members, one can have the money back within 6-12 months or temporarily multiples of it, at any time.

However, come to think of this – if every person could approach a Dr Yunus (or his institution) operating in every Gulf country, then all the low paid Expats (e.g. site workers / laborers / maids etc.) would have preferred to keep the money here for a longer time, utilized it to the benefit of this country’s economy (in whatever little ways they can!) and had benefited themselves too to some extent. Simply a win-win situation for everybody!

To give an example, the outward remittances from the Gulf reached Dhs 213.15 billion in 2004-05. Assuming just 20% of this represents remittances from the low-salaried workers, who usually remit either in bulk or through trusted hands (not banks), at least a quarter of this money (or Dhs 10 billion) could be utilized! It could perhaps be in form of short-term investments, e.g. small-scale businesses, involving these workers, who’d love to recycle their monies, rather than working multiple shifts to earn that extra buck (see examples here and here)!

Doesn’t it make sense?

I currently do not have the statistics of unskilled low-wage earners in UAE to calculate how it could affect UAE alone. So stay tuned till I find some more data.

ADDENDUM:
Gulf News Print editorial today rightly comments "...It wasn't about money... It was about respect...". I strongly feel that here's a chance to give that respect to thousands of deprived Expat workers here.

(read comments on the article in UAE Community Blog)

Some useful links: