The 2006 Nobel Peace Prize has been awarded to Bangladeshi economist Muhammad Yunus and the Grameen Bank - the innovative micro-credit program he founded thirty years ago to help some of the world's poorest people climb out of chronic poverty. The Nobel Peace Prize is the latest of many awards Yunus has won for bringing this powerful idea to fruition. After winning the coveted World Food Prize in 1994, Yunus sat down with me to talk about the origins and impact of the Grameen Bank.
Muhammad Yunus says the idea for the Grameen Bank was born 30 years ago, while he was a professor of economics at Bangladesh's Chittagong University. He recalls that his daily walk from home to campus took him through some of the country's poorest villages, where thousands of impoverished and malnourished families lived in what seemed hopeless conditions.
"So I felt very empty," he continues, "teaching beautiful, elegant economic theories in the classroom and walking through that cluster of villages where people are without food and about to die. So I questioned the validity of those theories. I thought, they don't have any meaning to the lives of these people."
Moved by their plight, and convinced by his daily conversations with the villagers that their foremost need was simple access to credit, the U.S.- trained economist and former Fulbright scholar began reaching into his own pockets to provide these people with small loans. Mr. Yunus' first loans -- to 42 local villagers -- totaled just $30 (U.S.). But that was enough to help them start modest businesses that generated income and began to lift them out of poverty.
Later, when Mr. Yunus approached local commercial banks to take over his expanding lending operation, he found them unsupportive. "The bank gave me a big laugh," he remembers. "They couldn't believe their ears, what they heard. They said banks don't lend money to poor people, because poor people cannot offer collateral (loan security). Banks cannot function without collateral. So my struggle began to see whether banking can be done without collateral, and that struggle is named the Grameen Bank today."
Today, the Grameen, or Rural Bank of Bangladesh is a hugely successful lending cooperative, with more than 2200 branch offices across the country serving 6 million member-borrowers in 71,000 rural villages.
This year (2006), the Grameen Bank expects to provide more than $800 million in loans, most averaging less than $100 apiece and most, 97 percent, going to poor landless women.
Many purchase a cow, selling their surplus milk and raising their calves. Others start craft or dress-making businesses, or buy a tubewell and market irrigation water to local farmers in exchange for cash or a share of the resulting harvest. Many women have begun home-based paddy- or rice-husking businesses. Muhammad Yunus points out that where a poor woman used to earn just a half kilogram of rice per day grinding grain for an employer, she now can buy unhusked rice on the market, grind it at home, and sell the cleaned grain for a profit. "And immediately she will raise her income," Yunus says, "for the same amount of work, by five times or eight times. And then you have the by-products she has not priced yet. With those by-products - the husks, the broken rice - she can raise poultry and so on, which is another source of income for her. So this is a very popular thing for a woman. She sees it is a guaranteed return on the investment she makes, and it is easy to pay back the bank."
The climb out of poverty is not an easy or a short one, and not all of these Grameen-aided enterprises have earned a profit. But they have succeeded in another way, says Mister Yunus. They have shown that with a little help and a little faith from those more fortunate, the landless poor can gain control over their lives, and break the shackles of poverty. That revolutionary idea has been replicated in Grameen-style banks in growing numbers of developing and developed countries-including the United States, where cooperative, small loan programs are serving the poor on Native American reservations, backwater rural communities and blighted urban neighborhoods.
Mohammad Yunus told a Washington news conference in 1994, as he accepted the World Food Prize, that the Grameen Bank's success provides an important lesson in the war on poverty. "If you are looking for one single action which will enable the poor to overcome their poverty, I would go for credit. Money is power. I have been trying to make the world accept and treat credit as a basic human right. If you can come up with a system that allows everybody access to credit, while ensuring excellent repayment, I can guarantee you -- poverty will not last long."