Muhammad Yunus calls for shake-up of the financial system

The Nobel Laureate argued for an independent regulatory authority for microfinance in every country at the recent Islamic finance summit in Dubai

As the second edition of the Global Islamic Economy Summit convened in Dubai this week, Nobel Peace laureate and founder of Grameen Bank Muhammad Yunus called for the establishment of a new financial system to serve the world’s poor. Yunus criticised conventional banks that served the wealthy, saying the current global financial system contributed to making “the whole planet… entirely unsustainable”.

“Half the population of the world are left out of financial services – we need to introduce a new financial system,” Yunus said at the opening session of the summit. “For half of this population, banks really don’t exist. They are at the mercy of the loan sharks.”

Yunus is known as the father of microfinance, after founding Grameen Bank in his home country Bangladesh in 1976. The bank was established to issue small loans to the large segment of the population living in poverty and lacking access to bank accounts. Today, microfinance has expanded into a global industry valued at around $5 billion. However, close to 50 per cent of the world’s adult population still do not have bank accounts, according to the World Bank.

Dubai has moved in just a few years from a research and preparation phase to one of global engagement with the Islamic economy, represented by its numerous ethically-based sectors

Sami Al Qamzi, Director General of the Department of Economic Development in Dubai

In an on-stage conversation with CNN’s Middle East correspondent, John Defterios, Yunus explained how Grameen Bank revolutionised what was earlier being done by non-governmental organisations.

Answering a question on how to harness talent within the Islamic economy, Yunus said: “The only answer is to create a new institution to serve the people that are underserved or never served.”

“There needs to be an independent regulatory authority for microfinance in every country – pan-regional legislation will not work, it will only serve to encourage countries to start thinking about the poor and recognise that banking can be a solution to human problems.”

More than 2000 people from around the world attended the two-day summit, which saw participation from policymakers, thinkers and industry executives. His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai used the event to launch Salaam Gateway, the first online platform for all Islamic economy-related industry intelligence, news, information, and data.

The move aims to support the growth and development of the Islamic economy, with Salaam Gateway providing insights and intelligence in Arabic and English from Islamic economy experts, analysts, and industry leaders.

The Global Islamic Economy Summit is part of Dubai’s strategy to establish the emirate as a global Capital of Islamic Economy. To reach this goal, it founded the Dubai Islamic Economy Development Centre (DIEDC) in 2013. Dubai seeks to cement its position as a global hub through capitalising on a wide range of sectors in the estimated $6.7 trillion Islamic economy market serving some 1.6 billion Muslims worldwide.

For half of this population, banks really don’t exist. They are at the mercy of the loan sharks

Muhammad Yunus

Sami Al Qamzi, Director General of the Department of Economic Development in Dubai, and Deputy CEO of DIEDC, highlighted the progress Dubai’s made and the challenges that lie ahead.

“Dubai has moved in just a few years from a research and preparation phase to one of global engagement with the Islamic economy, represented by its numerous ethically-based sectors. From Halal products to Islamic banking and finance, this economy now represents a number of sectors that are receiving worldwide recognition and increasing demand,” he said.

“We look forward to global standards for Islamic products and services, and the provision of a stable and effective framework for the Islamic economy governed by appropriate legislative and regulatory organisations, and supported by studies, research, scientific knowledge and innovation. This pace of development will help meet the constantly evolving needs of markets, allowing this initiative to become a truly independent economy in and of itself, rather than merely being a subset of the broader global economy.”