Champion of the Poorest of the Poor Wins NOBEL PEACE PRIZE

Champion of the Poorest of the Poor Wins NOBEL PEACE PRIZE

 

By

Sean Maroney

Professor Muhammad Yunus
2006 Nobel Peace Prize Winner

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Read here about Grameen Bank and here and here

Read here about Micro Credit for the Poor and HERE

This year's Nobel Peace Prize winners, Muhammad Yunus and his Bangladesh bank, have lifted millions of people out of poverty with microfinancing.

This concept of giving small loans to those too poor to qualify for traditional credit has the international community expressing its support.

Muhammad Yunus, known as the "banker to the poor," has received the top Nobel honor for handing out small loans to help those in desperate poverty begin income-generating projects. In Friday's press conference, a United Nations spokesman expressed Secretary-General Kofi Annan's support for Yunus and his bank's policies.

"They have provided a powerful weapon to help the world reach the Millennium Development Goals, by helping people change their lives for the better, especially those who need it most," he said.

The eight Millennium Development Goals range from cutting extreme poverty in half to halting the spread of HIV/AIDS all by 2015. Yunus' foundation has a network of partners in 22 countries in order to help assist the poor in Africa, the Americas and in the Middle East.

World Bank Director Elizabeth Littlefield is the CEO of SE-GAP, a global organization for the microfinance industry.

She says Yunus and his bank's work has a direct connection to world peace. "Promoting social inclusion as part of a conflict prevention strategy, means making sure that all poor people have opportunities for gainful employment, are hopeful about their future and have reasons to be comfortable that they're able to take care of their families."

In awarding Friday's Nobel Peace Prize, the Nobel Foundation is shining a bright light on an increasingly powerful tool helping to eradicate poverty, micro-credit.

The banking program extends small loans and other financial services to poverty stricken people around the world. With reasonable interest rates, the loans help the poor, especially women, create income-generating activities and build adequate housing.

This year's peace prize winner, Muhammad Yunus, says the most distinctive feature of the program is that the loan is based on trust. He says that due to a system of peer support and pressure, many programs have shown that poor people have strong repayment records.

Yunus says the poor have skills that are under used or not used at all. He says unleashing the energy and creativity allowed by micro-credit is the world's answer to poverty.

In 1998, YSP Thorat, then a chief general manager of the rural credit and planning department (RPCD) of the Reserve Bank of India (RBI) met Professor Muhammad Yunus at Dinuabari, a village in Bangladesh.

Thorat was looking for the key to the success of poverty alleviation plans. Yunus showed him some huts in Dinuabari and told him that the only way to succeed was to work for poverty alleviation and not talk about it.

That was not Thorat’s first meeting with Yunus, the founder of the Grameen movement in Bangladesh.

A year back, Thorat, then on a sabbatical and researching on rural financial markets in Kolapur in western Maharashtra, had written to Yunus, seeking his guidance. He did not receive any response.

A year later, when Thorat was working for the World Bank’s Consultative Group on Alleviation of Poverty (CAGP) in Washington, Yunus met him. A breakfast meeting at a Washington Hotel, slated for 10 minutes, lasted more than an hour.

“While others talk, he acts. Prof Yunus has proved that poverty can be conquered,” says Thorat, chairman of the National Bank for Agriculture and Rural Development.

The banking community in India salutes Yunus because he has proved that the poor can organise themselves; save and, most important, are bankable.

“Before he started the movement, nobody could have imagined that financial intermediaries can lend to the poor profitably,” says a banker.

Nachiket Mor, deputy managing director of ICICI Bank and a believer in micro-finance, says Yunus has proved that even market-based institutions can have a positive impact on social issues.

“This is possibly the first instance of a Nobel Peace prize going to a person who runs an organisation that makes profit,” Mor says. This is because despite high interest rates, micro-finance is beneficial to the poor.

Bankers feel that Yunus’s recognition will dramatically change the business of micro-finance in India.

“Often people do not understand the philosophy behind micro-finance. They fail to appreciate the fact that neo-money lenders can change the face of rural India. Now they will be seen in a different light,” says the CEO of a foreign bank which has been experimenting with micro-finance.

The Grameen Bank runs 1,092 branches in 36,000 Bangladesh villages, providing credit to over two million of the country’s poorest people. Since its inception, it has extended loans worth more than $2 billion.

It provides unsecured credit to the poorest of the poor. Beginning as an action-research project at Chittagong University, it grew into a full-fledged bank. Most of Grameen Bank’s patrons (94 per cent) are women who have an unparalleled repayment rate of 98 per cent.

Yunus has proved that for the rural poor, accessibility of credit is more important than the cost of credit. This is a valuable lesson that the RBI and the finance ministry must learn while pushing banks to serve the un-banked.

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