Muhammad Yunus choked back tears as he surveyed the wreckage: pulverized buildings, debris strewn for miles along urban waterfronts, giant ships sitting atop roads like discarded toys, macabre memorials to the thousands of dead and missing.

The Nobel Peace Prize winner is no stranger to nature’s wrath. In his native Bangladesh, earthquakes, floods, cyclones and mudslides are a tragic way of life. But these scenes were of another magnitude. The devastation surrounding him wasn’t testing the mettle of a poor nation, but prosperous Japan.

That visit to the devastated northeast Tohoku region was on March 11, the one-year anniversary of the nation’s worst earthquake and tsunami on record. Like many, Yunus came away haunted by an economic question: How can the Tohoku region not only rebuild, but reinvent itself and thrive in a time of austerity?

Yunus returned recently with an answer that may cause its own tremors: Japan needs a microfinance industry.

The Nobel Prize was for Yunus’s role in promoting lending to the poor, a group typically ignored by bankers. Tiny amounts -- $20, $50 or $100 so a family can buy a cow to start a dairy farm, or a mobile phone to open a communications business or chickens to launch an egg company. In 1976, he founded Grameen Bank, which brought microfinance global.

’Needed Everywhere’

What does any of this have to do with Japan? It is near the top of national per-capita income tables, has one of the highest savings rates, and Tokyo and Osaka are routinely in the running for world’s most expensive city. Japan gives impoverished Bangladesh billions of dollars in aid each year.

“It’s needed everywhere -- it doesn’t matter where you are,” Yunus said in Tokyo on July 26. “When you come to a disaster area like Tohoku, it’s all the more important. You have to rebuild everything all over again. There’s no house, there’s nothing.”

By “there’s nothing,” Yunus also means the general lack of economic life in a region that was dying even before the disaster. Take Rikuzentakata, which like many cities on Japan’s rugged northeast coast was suffering from economic decline and a shrinking population. When the tsunami hit, it killed 1,700 of its 24,000 inhabitants and destroyed most of its downtown buildings.

There was the expectation, however far-fetched, that the disaster would be the kind of event that would topple the status quo and complacency that has held Japan frozen in place for two decades.

That hope has since been dashed by paralysis in Tokyo and a return to the petty infighting that passes for political leadership. That is prompting local officials to take matters into their own hands. Rikuzentakata is working to create a small, self-sufficient city that creates new jobs in renewable energy to replace those lost to the decline of agriculture and fisheries.

That is a long-term project, though. It is being hindered by the central government’s failure to channel more money into Tohoku communities, and by its reluctance to delegate spending decisions to regional leaders. It is here where microfinance might pay sizable dividends. Locals can pool their savings and lend them out to would-be entrepreneurs -- $10,000 here, $100,000 there.

“Certainly it’s worth a shot and could do some good and restore flagging spirits in a region that is already feeling forgotten only 17 months since the tsunami,” says Jeff Kingston, the head of Asian studies at the Tokyo campus of Temple University in Philadelphia.

Microfinance’s Merits

Kingston has spent time in Bangladesh learning the ins and outs of microfinance. It can be a boon for households that lost everything, with an added benefit: Microfinance tends to extend more credit to women than other lenders.

“It could work because many people have lost their collateral and might be considered poor credit risks, and women are underutilized and they have skills associated with managing their household finances,” Kingston says. “Tohoku is a relatively poor region in Japan and enjoys strong social cohesion, something that would be useful in monitoring how loans are used and repaid.”

Microfinance-like currents are already stirring in Japan. Tokyo-based Music Securities Inc. has set up small-lot lending programs that helped sake brewers, coffee shops, musicians, fish retailers and soy-sauce makers gain access to financing. Yet we need to think bigger in a $5.9 trillion economy faced with a surplus of liquidity and a dearth of credit.

Clueless Bureaucrats

Microfinance on a grander scale might enable the northeast’s community leaders to steer around the paralysis in Tokyo, where bureaucrats are impervious to their demands and clueless about their needs. It would help local credit systems gain traction in ways the Bank of Japan’s zero-interest-rate policies can’t. Japanese need alternatives to banks, which aren’t lending or offering creative financial products. Micro-lending could help businesses and households steer around the credit logjam.

Japan’s government should provide some startup cash to supplement local savings. Given the huge sums of money it doles out for infrastructure projects in Hokkaido and Kyushu in the far north and south of the country respectively, the cost of setting up a kind of Grameen Japan would be minuscule and the risks limited.

Is that likely to happen? The odds aren’t great given how averse Tokyo’s bureaucrats are to anything that smacks of originality or setting a precedent. Yet Yunus showed it was possible for poor people in Bangladesh to get the credit they deserve. There’s no good reason to think the same can’t happen in Japan.

(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)

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To contact the writer of this article: William Pesek in Tokyo at wpesek@bloomberg.net

To contact the editor responsible for this article: James Greiff at jgreiff@bloomberg.net