THE global banking crisis is threatening the world's poorest people, Manchester economists warn.

Thousands of small-scale projects in India and African are funded by 'microfinance' loans which help people claw their way out of poverty.

But experts from Manchester University's Brooks World Poverty Institute say major banks are now pulling out of these projects fearing their investments are at risk.

Working with the United Nations and researchers in India, the team spoke with microfinance managers in several countries who all reported a dramatic reduction in the amount of foreign investment.

Work

The loans are a route out of poverty for millions, helping create work and fund small businesses.

But as banks and other investors raise their lending criteria, many projects now face difficulty getting off the ground. Existing schemes face higher interest rates or are being told to pay back their debts sooner.

Dr Katsushi Imai said: "There is a real apprehension that in trying to save the existing financial architecture the poor and vulnerable may not get the attention they deserve. The lack of funds from banks and the scaling down of targets is a real issue.

"The contraction of credit and the risk aversion of investors, together with a looming global recession, underline the gloomy prospects for the poor."