Lend more to small firms: MIT professor

Economics expert calls for credit access to the poor in Pakistan.

KARACHI: Dr Abhijit Vinayak Banerjee, Professor of Economics at Massachusetts Institute of Technology (MIT) has said the best way to use finance is to promote the well-being of the poor and to find ways to lend more effectively to small and medium firms that have a chance to grow fast.

Delivering a lecture on ‘Micro-Credit and Financing of Small Business’, Banerjee said that financial access is more important for helping the poor manage poverty better, than making them rich.

The lecture, organised by the State Bank of Pakistan, was the 18th such event held as a part of Zahid Husain Memorial Lecture series instituted in 1973 in the name of its first Governor, Mr. Zahid Husain.

“Micro-credit has caused reduction in interest rates by 30% to 60% and increased the level of savings among the poor, thereby leading to the reduction in poverty,” observed Banerjee who has published more than 60 papers in the world’s leading economic journals

Professor Banerjee laid emphasis on the significance of financial access to the poor. He argued that big banks disburse loans on the basis of collateral involving a plethora of formalities which, on the one hand, depresses the volume of credit available to the poor and, on the other, limits the number of borrowers.

Published in The Express Tribune, December 23^rd, 2011.