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Economist Muhammad Yunus' idea to lend small sums of money to those who couldn't get loans from banks has offered millions of impoverished Bangladeshi women a way out of the poverty trap. It gave birth to the microcredit revolution and three decades later, has won its pioneer the Nobel Peace Prize
Micro-credit pioneer Muhammad Yunus and the Bangladeshi bank that he founded to help the country's very poor, Grameen, are joint winners of the Nobel Peace Prize for 2006 for lifting millions, mostly women, out of poverty by lending them small amounts of money to run their businesses, thus creating a nation of entrepreneurs.
On October 13, the 65 year-old economist and his bank were presented with the Nobel and 10 million Swedish kronor from the Nobel Committee which cited Yunus and Grameen Bank for their efforts "to help create social and economic development from below." "Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty," it said in its citation. "Microcredit is one such means. Development from below also serves to advance democracy and human rights."
The accolade is the latest and most significant for the much-lauded economist who has, since the 1970s, successfully created a model of lending that is contrary to accepted banking principles that proved that the poor are credit-worthy. Grameen Bank lends small sums to those who have no collateral, no business experience and therefore will not get loans from traditional banks to buy raw materials for their small business ventures.
In the past three decades the bank has advanced close to US $5.7 million in small loans to to 6.6 million poor Bangladeshis -- 96% of them women -- and created a model that has since been replicated in over a hundred countries, earning Yunus the tag, 'banker to the world's poor', and pioneering the internationally accepted system of micro-credit, or microfinance.
Yunus is well-known in international development circles for putting poverty at the centre stage of the agenda. Such was his reputation that in 1987, when former Bill Clinton was the governor of Arkansas, he approached him to help them replicate its model in his state.
Yunus' insight was to recognise that the surest route out of destitution was to help the poor to help themselves. As a professor of economics in 1974, a time when Bangladesh was experiencing a terrible famine, he was astonished to learn that women in a nearby village making bamboo stools could not make money because they were being charged extortionate rates of interest. The outstanding loan, which ensured a life of penury, was just US $27. Yunus advanced the $27 loan to 42 women.
Later, he lent the villagers the money to buy their own materials. They all paid him back, day-by-day over a period of a year, and his impulsive gesture slowly became a full- fledged business with the founding of Grameen Bank in 1983.
Mahfuz Anam, editor of Bangladesh's Daily Star, said: "He passionately believes that, like freedom of speech, credit is a fundamental human right and everybody should have access to it. Without access to money how can you live, is his view."
Grameen has lent billions of dollars to the neediest people in a country where almost half the 140 million population people live in poverty, helping to make them self-sufficient. Many say this alone has changed the fabric of the Islamic nation. "This is a significant change empowering women. I think Grameen is powering a social revolution in our country. We have seen evidence of this in sharply increasing primary school enrolment rates," said Debrapriya Bhattacharya, director of Policy Exchange, a Dhaka thinktank.
For his part, Yunus, the first Bangladeshi to win the Nobel Peace Prize, almost immediately said he would use part of his share of the award money to create a company that would make low-cost, high-nutrition food for the poor.
He described winning the award as fantastic. "We have been working for 30 years and we have demonstrated beyond doubt in Latin America, Africa, France, the UK and the USA that microcredit works," Yunus said. "The problem with the conventional banking system is that it focuses on a privileged group of people. Two-thirds of the world's population does not qualify to take out loans from a conventional bank."
His remarks were seen as a criticism of the way development money is distributed by countries like Britain. Critics claim that little of the billions donated reaches the poor and much is squandered or stolen by corrupt officials. "In showing that poor people could be productive and make money he broke with the old mindset that all aid should be about providing services like education and health," said Kevin Watkins, director of the UN Human Development Report office.
This is a sentiment echoed by the International Fund for Agricultural Development (IFAD) in congratulating Yunus on winning the prize, when it said the Bangladeshi economist had found better ways to serve poor people. "Professor Yunus challenged IFAD and other international financial and humanitarian institutions to question their approaches and to find better ways to serve poor people," IFAD president Lennart Bage said.
Source: www.guardian.co.uk, October 15,
2006
-- PTI, October 14, 2006
Reuters, October 14, 2006
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