The Poor Can Own Banks
Rising levels of poverty among the most vulnerable members of society call for a renewed approach to poverty eradication. Banking institutions play a critical role in development by providing credit to individuals, governments, and private organisations. However, they focus on the employed and established institutions and the poor and marginalised are not catered for since their socio-economic conditions do not allow them access to financial opportunities. This perpetuates the cycle of poverty. I would argue that the poor and unemployed can own banks.
Growing up in the then Zaire, I witnessed the complete absence of the government in all development sectors. Communities were left with no option but to fend for themselves. In response to the many challenges confronting them, they organised themselves and were able to build their own clinics, and water and road infrastructure. They also established successful businesses and were able to maintain economic and social stability.
The key factors that explain their success are shared awareness of the socio-economic challenges confronting communities; a strategy to build collective consciousness and a collective action plan; and collective action that brought people together to work for a common cause.
My experience motivated me to develop a model that could assist the poor and marginalised to establish their own financial institutions. Throughout human history, communities worked as a collective and were able to overcome most economic and social challenges. This was achieved by building collective consciousness and action.
Today, many countries are adopting a welfare system where citizens receive social grants. In South Africa for example around 20 million people receive such grants. This presents a golden opportunity to establish financial institutions owned by the poor and marginalised. If each recipient of a social grant were to contribute R1 per month, this would amount to R20 million. Over a period of three years, R720 million would be accumulated. These funds could be used to build a pro-poor banking scheme.
How would such a financial institution be structured and managed and how would the funds be utilised? The most appropriate form would be a shareholding, with a democratic structure to manage the institution elected by shareholders. These should be individuals with high moral standing in society and relevant skills. Members and non-members would be able to access funding in the form of credit at a very low interest rate. Communities could also access funding for collective business projects. In this way, the financial institution would provide the poor and unemployed with access to funding for development.
While some of those with whom I have discussed this proposal have been sceptical about the possibility of success, mainly due to challenges in mobilising people, this is not a unique concept. People are already organising themselves in stokvels and funeral insurance is growing among the most vulnerable members of society.
Potential challenges include management of the finances of institutions of this nature. Growing mismanagement of public goods calls for a new approach. It is important to select people with a high level and traceable record of integrity and skills in managing public goods. It is also crucial to ensure that there is transparency and full public participation in all processes. Modern technology means that infrastructure will be needed to ensure the effective running of such financial institutions.
It is my conviction that, in order to succeed as developing nations, we need to bring our people together to work towards the common good. The history of development in developed countries rests on collaboration and collective action. Our education, economic and social systems will fail unless we collaborate and work as a collective. It is high time that we identify and reflect on opportunities available in our communities and exploit these for the benefit of all.
• Dr Joseph Rudigi Rukema is a Senior Lecturer in the Sociology Discipline at the School of Social Sciences, College of Humanities.
*The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the University of KwaZulu-Natal.