This year’s Nobel Peace Prize has gone to Muhammad Yunus and his Grameen Bank. The 87th naming of the award was announced yesterday in Oslo. Yunus and the bank won the award for their work in advancing economic and social opportunities for the poor, particularly women. The committee cited their efforts to help “create economic and social development from below”.
The prize is shared between Yunus and the bank. Yunus is a Bangladeshi economist who has been praised for his novel method of “microcredit” which has helped poor women advance their lives and escape from poverty. Microcredit is the extension of small loans typically from $60 to $140 to entrepreneurs too poor to qualify for traditional bank loans. He founded the Grameen Bank with a charter to help the “poorest of the poor” living without any capital in crowded rural Bangladesh. It has 6.6 million borrowers, 97% of which are women. It provides services in 70,000 villages across the country.
Yunus and the bank will share the prize of 10 million Norwegian kronor (approx $2 million) as well as the gold medal and associated diploma. Yunus told the Nobel Foundation by phone: “I’m absolutely delighted. I cannot believe it has really happened. Everyone was telling me that I would get the prize but it came as a surprise. It is fantastic news for the people that have supported us”.
Yunus won it ahead of this year’s favourite Finnish president Martii Ahtisaari who was heavily backed following his efforts to secure a 2005 peace deal between Indonesia and its separatist Sumatran province Aceh. The five member committee would not comment on who else was considered for the award except to state it received 191 nominations for the award. The committee chair Ole Danbolt Mjoes said Yunus’s efforts had clear results. He said “we are saying microcredit is an important contribution that cannot fix everything, but is a big help.” He went on to compliment Yunus saying he was creative and “his head is in the right place”.
The 65 year old economist was born in the rural part of Chittagong province. In his school years he was an active boy scout and travelled abroad to scout jamborees. He completed an MA in economics in Dhaka University in 1961 and went to Vanderbilt University in Nashville, Tennessee to gain his doctorate. He stayed on there to be an assistant professor of economics at Middle Tennessee State University before returning home to newly independent Bangladesh to become a full professor of economics at Chittagong University. The country underwent an extreme famine in 1974 in which thousands died. "We tried to ignore it," Yunus told PBS, "But then skeleton-like people began showing up in the capital, Dhaka. Nothing in the economic theories I taught reflected the life around me. How could I go on telling my students make believe stories in the name of economics? I needed to run away from these theories and from my textbooks and discover the real-life economics of a poor person's existence." Yunus moved to the village of Jobra to study the poor. Yunus found that very small loans could make a significant difference in a poor person's ability to survive. He established a rural economic program as a research project. His first loan consisted of $27 of his own money, which he lent to women in a village near Chittagong to make bamboo furniture.
In 1976, Yunus founded the Grameen Bank (which means "of rural area" in Bengali). The bank uses a system of "solidarity groups" to ensure repayment. These groups apply together for loans and its members act as co-guarantors of repayment. With the sponsorship of the central bank of the country and support of the nationalised commercial bank, the bank grew to service other areas around the country. In addition to microcredit, it offers housing loans as well as financing for fisheries and irrigation projects, venture capital, textiles as well as traditional bank services. The Grameen microcredit model has spread to 23 countries. Many micro financing projects follow Yunus’s emphasis on lending specifically to women. Grameen’s stated goal is to reverse the age-old vicious circle of "low income, low saving & low investment", into the cycle of "low income, injection of credit, investment, more income, more savings, more investment, more income". In 1983, the project was transformed into an independent bank by government legislation. Now Grameen is owned by the rural poor whom it serves. Bank borrowers own 90% of its shares, while the remaining 10% is owned by the government.