Comment: a truly inspiring choice for Nobel Peace Prize By Gabriel Rozenberg, Economics Reporter for The Times
In 1974 Muhammad Yunus led his students at Chittagong University on a field trip to a poor Bangladeshi village. They met a woman who made bamboo stools, but whose profits were eaten up by the extortionate rates of local lenders. Yunus started lending money himself in the form of "micro-loans" and in 1976 the Grameen Bank Project was born.
The bank now covers nearly 70,000 villages and makes small loans to more than 6 million customers. It is remarkable in many ways: almost all of its borrowers are women, and the loan recovery rate is above 98 per cent, an astonishingly high number.
For its success in lifting the impoverished out of penury across Bangladesh, and for providing the model for a worldwide revolution of micro-credit, Yunus and the Grameen Bank were today awarded the Nobel Peace Prize.
In the past, the Norwegian committee which hands out humanity's greatest accolade have often struck a discordant note. Some people see Henry Kissinger (joint winner, 1973) as a warmonger; others see Yasser Arafat (joint winner, 1994) as a terrorist. There is almost no one who believes that the Nobel Committee got it right both of those times. Other choices are uncreative - the United Nations, the International Labour Organisation - or tediously predictable. This award was neither.
To award a Peace Prize for an anti-poverty inititative is striking enough, but that is only half the story.
In rich Western capitals like London there is today a thriving "international development community": well-meaning, thoughtful people in charities, pressure groups and Whitehall who came together last year at Live 8 and led to the world's wealthiest nations doubling their aid budgets.
But probe beneath the surface and you will find confusion. The charities praise aid in public; yet they quietly admit that simply handing over cash to often-corrupt governments has frequently failed miserably. They call for good governance, the latest buzzword, but any attempt to cut off cash to bad governments ties them in moral knots.
Grandiose schemes are the order of the day: the UN's flagship anti-poverty Millennium Project has, as the economist William Easterly has pointed out, a bewildering 449 proposals to meet 54 different goals in a 3,800-page plan that leaves no one accountable for anything.
The Grameen Bank presents a totally different approach. It was not dreamt up by a faraway Western aid agency. It is tried and tested; it is a business solution which comes from the grassroots.
Grameen shows us the poor and the destitute not as pitiable charity cases condemned to their lot, but as thwarted entrepreneurs who just lack the means to improve their families' lives. It is a profoundly optimistic view of human nature. With this inspired choice the Nobel Committee has lit a path that could lead to the eradication of poverty in our time.
LinkCredit where it's dueGeoff Mulgan
October 13, 2006 03:14 PM
LinkMuhammad Yunus is an excellent recipient of the Nobel peace prize. He's been feted in some circles for many years but he's still largely unknown amongst the wider public. What makes him special is that he is such a perfect example of how social innovation happens - and how the best social change often comes from people addressing problems themselves rather than waiting for others to do so.
Yunus' moment of truth came in the early 1970s when, as an economics professor in Chittagong he took a group of students on a field trip to a poor village. Interviewing women there he learned that they were forced to borrow money at exorbitant rates - sometimes as much as 10% each week. Not surprisingly few were able to escape from poverty.
Yunus started lending them money himself (initially about £17 to 42 basket weavers) and then evolved the basic principle of Grameen, which allows groups of people to monitor each other's credit needs and credit worthiness. This mutual approach has helped keep recovery rates very high and transaction costs very low. The borrowers - over 90% women - turned out to be far better placed to assess who needed money and who could repay it than distant financial institutions. The methods used were very similar to the mutual and cooperative finance models developed in poor communities in Britain and elsewhere in the 19th century - but they had fallen out of favour as big banks and big development had taken over.
Since then Grameen has spread - globally where its ideas have been adopted in dozens of countries (and where organisations like Fair Finance in the East End are directly inspired by Grameen), and within Bangladesh where it has set up a network of related organisations, from telecoms companies to a university.
Yunus is a controversial figure and his award will focus attention on some of the complexities - as well as the many virtues - of his approach. In Bangladesh Grameen has increasingly been pulled into the political fray, which has brought difficult tensions. Meanwhile although the development field has enthusiastically adopted the principles of microfinance there is continuing, and healthy, argument about exactly what works where and why, and over the last decade it's become clear that microfinance isn't quite the panacea that it once looked. His success is also an interesting twist in the parallel histories of Grameen and Bangladesh's other microfinance provider - BRAC. Under the leadership of Faisal Abed BRAC has pursued a much lower key approach. He's much less of a global celebrity than Yunus but is seen by some as having achieved more and across more fronts in recent years
The most important point, however, and the reason that Yunus deserves this prize is that his basic insight has proven sound. Like Wangara Maathai and unlike the many political leaders who have won in the past he is someone who has addressed human needs from the bottom up not the top down. He also stands out as a rare visionary who connected the formal knowledge he had gained as a privileged academic with the informal knowledge in the heads of millions of poor people both in Bangladesh and around the world.
His great dream now is a social investment market - a network of stock exchanges that can connect the vast wealth of the north to social needs on the ground, not just through charity and initiatives like Make Poverty History, but through providing capital for people to find their own ways out of poverty. Winning this prize will undoubtedly help him on his way.
For Britain he is significant as a reminder of an older traditions of mutual self-help that were largely crushed in the 20th century but may be returning; as a reminder that the traffic in ideas will increasingly be from south to north rather than the other way around; and as an exemplar of how people can put their talents and energy in the service of the poor.
By coincidence we at the Young Foundation are next week publishing an overview of social innovation you can download it here - which uses Grameen as one of many examples of how people around the world have found innovative solutions to their needs. It's one of the inputs for two conferences in China happening next week - which are signs of a new vitality where innovation, social enterprise and development overlap, and of China's appetite to learn from and share with the rest of the world as it tries to balance accelerated growth with more equitable social development. Yunus' award will hopefully focus the world's attention on how innovation isn't just about new drugs or iPods. The most important innovators often don't need any technologies - just imagination and acute sensitivity to people's needs.
