ROME-- Is there something special in the air of those countries that sit at the foot of the Himalayas that accounts for their amazing aptitude for innovative forms of banking? The Pakistanis, who built up the Bank of Credit and Commerce International from zero to world reach in a decade, are only one of a class on the Indian sub-continent.
Far from the high slopes of BCCI's corruption of its professed ideals of being a bank at the service of the poor of the Third World, I prefer to remember a former chairman of Pakistan's National Bank, Mohammed Nishtar, who spent the last 10 years of his life creating what he disarmingly called the "motorbike bank."
"These people," he explained to me, as he puffed his pipe of dark tobacco and drove his Landrover fast through the winding roads of the impoverished, dry, rugged valleys close to the Afghani border, pointing to the worn bodies in the fields, "have no time for a bank with an oak door and brass rails. They'll never go near one. It's too intimidating. So I've hired these young agricultural graduates, trained them in basic banking, and told them to put the bank on the back of a motorbike and go and visit the villagers at home."
What I saw up there on the northwest frontier had revolutionized the local economy. With small loans dealt out with good horticultural advice, the peasants of this impoverished and remote corner were now growing tomatoes and fruit for the big cities of Lahore and Karachi.
They had doubled their incomes within three years. It was a wiz of an idea, and was spreading almost as fast as Mr. Nishtar could get them trained to straddle a motorbike and read a map.
The bank got its seed money from a United Nations organization, the Rome-based International Fund for Agricultural Development (IFAD), with additional background help from UNICEF. So does the Grameen Bank of Bangladesh, an even greater work of banking inspiration.
Started in 1976 by a young professor from the University of Chittagong, Muhammed Yunus, it works only with the poorest of the poorest, in one of the most densely populated countries of Asia.
In effect, this means it works with the women, an overwhelming )) majority of whom are from landless families, who live in the country's flood-prone villages and are desperate to supplement their meager livelihood with a milch cow, a rice husker, a hand loom or cloth dying equipment.
Mr. Yunus works on a simple premise: The poor are poor because they have no access to capital. Give them capital and before too long they'll find the escape road from perpetual penury. The recipe works. In 1983, the bank had only 50,000 members. By 1988, it had 500,000.
Until the Grameen Bank came along, there was no way a villager could borrow except by paying the exorbitant rates of the local money-lender. Mainstream banks wouldn't look twice at someone who owned little or no land, and was, to boot, female and, worse perhaps, single, widowed, separated or divorced.
Three years ago I spent a week in the foothills of the Bangladeshi Himalayas. My companion was Muzamel Haq, the bank's number two officer. After a research fellowship at Oxford, he was now working seven days a week, and earning $200 a month.
Mr. Haq and Mr. Yunus are expanding the bank at the rate of 10,000 new customers a month, infecting with their own immense idealism the bank's staff of young graduates. "If someone has life they have a talent," he explained, "and with a talent, a person can make use of credit. With credit they can start to make money."
The credit the bank offers its customers is small $30 often, $240 at the most. Almost half the loans go for livestock and poultry raising, a quarter for processing and manufacturing and the remainder for trading and shopkeeping.
Amazingly, 97 per cent of its loans are paid back within one year. Repaying on time is made into a point of honor, reinforced by the peer pressure of the village group to which every borrower must belong. Only two members of each group can borrow at first. Then when they start to repay, two more can borrow, and so it goes on. The only collateral the bank asks for is the other group members' OK.
At the same time members must work to implement the ideals of the bank boiling their water, using contraceptives, refusing to participate in the traditional system of bride price, which over centuries has ruined family after family.
In this direct but effective way, the bank has created an ethos of thrift and purposefulness that has transformed village after village. Villages that have large Grameen memberships are a good third better off than those that do not.
Over the next four or five years, the bank expects to bring in another half-million borrowers, and to expand its lending with $140 million of new loans. It is still heavily subsidized by IFAD, but over the next 15 years the intention here in Rome is to make it self-sustaining.
Jonathan Power writes a syndicated column on Third World affairs.