Nobel Peace Prize 2006 "Banker to the Poor" Gets Top Honor
Muhammed Yunus, economist and microcredit pioneer, has been awarded the 2006 Nobel Peace Prize for enabling "the poorest of the poor" to help themselves.
Professor Mohammed Yunus, founder of Grameen Bank, was delighted to learn that he and his bank have been awarded this year's Nobel Peace Prize.
Yunus, an economist, founded Bangladesh's Grameen Bank in 1976 to extend seemingly insignificant loans to entrepreneurs too poor to qualify for traditional bank loans. Typically no greater than $100, the microcredit helps poor people to make the small investments -- say, the purchase of a cow, some chickens or even a cell phone -- they need to get small, self-sustaining businesses off the ground.
The bank is said to have provided loans to as many as 6.6 million borrowers, some 97 percent of whom are women from rural villages in Bangladesh. The Nobel Committee noted this in their citation, saying "economic growth and political democracy cannot achieve their full potential unless the female half of humanity participates on an equal footing with the male."
Grameen's strategy for getting its loans repaid is as unique as the concept of microcredit: it has built a system that forces potential borrowers to apply peer pressure on existing borrowers in order to receive a microloan. Borrowers are put into groups of five. Once two people have borrowed money, the other three can't take out a loan until the others have been repaid. The system also seems to be effective: Grameen boasts a repayment rate of 98 percent. As a result, the microcredit concept has been taken on by governments and larger lending institutions around the world.
In a 2004 interview with the Associated Press, Yunus said that his "eureka moment" came while chatting to a shy woman weaving bamboo stools in a rural village in Bangladesh. She had borrowed about 5 takas (nine cents) per stool from a middleman for the bamboo, whom she then had to pay all but two cents of her proceeds. "I thought to myself, my God, for five takas she has become a slave," Yunus said in the interview.
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 856 taka (about 21). "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 over the course of a year, and his spur-of-the-moment generosity grew into a full-fledged business concept.
On Friday, Yunus said he was delighted to learn of the award. "I cannot believe that it has really happened," he told the Nobel Committee by telephone. "Everyone was telling me that I would get the prize, but it came as a surprise. It is fantastic news for the people who have supported us." Yunus and Grameen Bank will receive 10 million kronor (1.1 million) in prize money, a gold medal and a diploma during a formal ceremony on December 10.