Yes, you read that correctly. And let me tell you, they definitely picked the right guy. From the Associated Press:
OSLO, Norway – Bangladeshi economist Muhammad Yunus and his Grameen Bank won the Nobel Peace Prize on Friday for their pioneering use of tiny, seemingly insignificant loans — microcredit — to lift millions out of poverty. Through Yunus’s efforts and those of the bank he founded, poor people around the world, especially women, have been able to buy cows, a few chickens or the cell phone they desperately needed to get ahead. “Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty,” the Nobel Committee said in its citation. “Microcredit is one such means. Development from below also serves to advance democracy and human rights.”
Loans of $200 change lives
Yunus, 65, is the first Noble Prize winner from Bangladesh, a poverty-stricken nation of about 141 million people located on the Bay on Bengal.“I am so so happy, it’s really a great news for the whole nation,” Yunus told The Associated Press shortly after the prize was announced. He was reached by telephone at his home in the Bangladeshi capital Dhaka.
Grameen Bank was the first lender to hand out microcredit, giving very small loans to poor Bangladeshis who could not qualify for loans from conventional banks. No collateral is needed and repayment is based on an honor system. Anyone can qualify for a loan — the average is about $200 — but recipients are put in groups of five and once two members of the group have borrowed money, the other three must wait for the funds to be repaid before they get a loan.
Grameen, which means rural in the Bengali language, says the method encourages social responsibility. The results are hard to argue with — the bank says it has a 99 percent repayment rate.
Microcredit pioneer
Since Yunus gave out his first loans in 1974, microcredit schemes have spread throughout the developing world and are now considered a key approach to alleviating poverty and spurring development.
Yunus’s told the AP in a 2004 interview that his “eureka moment” came while chatting to a shy woman weaving bamboo stools with calloused fingers. Sufia Begum was a 21-year-old villager and a mother of three when the economics professor met her in 1974 and asked her how much she earned. She replied that she borrowed about 5 taka (nine cents) from a middleman for the bamboo for each stool.
All but two cents of that went back to the lender.
“I thought to myself, my God, for five takas she has become a slave,” Yunus said in the interview.“I couldn’t understand how she could be so poor when she was making such beautiful things,” he said.
The following day, he and his students did a survey in the woman’s village, Jobra, and discovered that 43 of the villagers owed a total of about $27.“I couldn’t take it anymore. I put the $27 out there and told them they could liberate themselves,” he said, and pay him back whenever they could. The idea was to buy their own materials and cut out the middleman.
They all paid him back, day by day, over a year, and his spur-of-the-moment generosity grew into a full-fledged business concept that came to fruition with the founding of Grameen Bank in 1983.
Prize a tribute to women around the world
In the years since, the bank says it has lent $5.72 billion to more than six million Bangladeshis. Worldwide, microcredit financing is estimated to have helped some 17 million people.“Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development,” the citation said.
Today the bank claims to have 6.6 million borrowers, 97 percent of whom are women, and provides services in more than 70,000 villages in Bangladesh. Its model of micro-financing has inspired similar efforts around the world. The success has allowed Grameen Bank to expand its credit to include housing loans, financing for irrigation and fisheries as well as traditional savings accounts. One of Yunus’ aides, Dipal Barua, said the award was an “honor for millions of poor women who have made this possible.”
Yunus and the bank will share in the $1.4 million prize as well as a gold medal and diploma.
In a sea of failed Third World development efforts in recent years, the Grameen Bank is held up as a smashing success in multiple courses I’ve taken on the subject. Traditional foreign aid, for the most part, doesn’t work, because it is directed to the national government, which is usually corrupt and run by elites who, even if they are of good intentions, rarely know what the poor in their country actually need. If you’re going to actually lift people out of severe poverty (generally defined as earning less than $1 per day), it needs to happen on a very micro scale. Connecting these people to the awesome economic power of entrepreneurship, as Grameen Bank and its successors have done — using such mind-blowingly small amounts of money — has radically enhanced the standard of living for so many people. It’s truly awesome that the Nobel committee selected someone that economists have long known has done so much for the world’s poorest.
