October 13, 2006
Peace Prize Surprise
Posted by Gordon Smith

Muhammad Yunus and the Grameen Bank have been awarded the the Nobel Peace Prize. Last year, in my law and entrepreneurship seminar, one of my students did a report on Banker to the Poor, Yunus' autobiography. The Grameen Bank is a fascinating study in relationship structure. This is from WaPo:

By organizing his borrowers into small support groups and insisting on a competitive interest rate, he built the concept into a self-sustaining business that can finance larger capital purchases for enterprises that are doing well, but will also lend money at no interest to beggars to buy blankets or mosquito nets.

Borrowers are not asked for loan guarantees or collateral, or even asked to sign legally binding documents. However the social dynamics of the small groups, combined with seminars that teach everything from money management to good nutrition, reinforce the need to repay. Grameen Bank has made an estimated $5.7 billion in loans to more than 6.6 million people since it was founded, according to the bank's Web site, and claims a repayment rate in excess of 98 percent.

News resports describe Yunus/Grameen as a surprising choice for the Peace Prize, but I think it is an enlightened choice. As noted in the Nobel press release:

Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights.

...

Micro-credit has proved to be an important liberating force in societies where women in particular have to struggle against repressive social and economic conditions. Economic growth and political democracy can not achieve their full potential unless the female half of humanity participates on an equal footing with the male.

Yunus's long-term vision is to eliminate poverty in the world. That vision can not be realised by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part.

Nice work by the Norwegian Nobel Committee.

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