[Muhammad Yunus] Nobel banker worthy of credit for easing poverty

from The Australian

Gabriel Rozenberg

NEVER underestimate the power of an economist to change the world.

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. Professor Yunus started lending money in the form of "micro-loans" and in 1976 the Grameen Bank Project was born.

At the weekend, the Bangladeshi Nobel Peace Prize-winning economist and the bank he founded were hailed in his country. "Yunus makes nation proud," said a headline in Dhaka's Daily Star. A front-page editorial in the newspaper called him a "great social reformer".

The bank now covers almost 70,000 villages and makes small loans to more than six million customers. Almost all of its borrowers are women, and the loan recovery rate is an extraordinary 98.5 per cent.

Professor Yunus and the Grameen Bank were awarded the prize last week for success in lifting the poor out of penury across Bangladesh, and for providing the model for a global revolution of micro-credit. To award a peace prize for an anti-poverty initiative is striking, but that is only half the story.

Rich Western capitals have a thriving "international development community": well-meaning people in charities, pressure groups and Whitehall who came together last year at Live 8 and led to the 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 frequently fails miserably. They call for good governance, but any attempt to cut off cash to bad governments ties them in moral knots.

The Grameen Bank was not dreamt up by a faraway Western aid agency. It is tried and tested; it is a business solution that comes from the grassroots.

The Grameen Bank that Professor Yunus founded amid the Bangladesh famine of 1974 lends minute sums, enough to buy a cow, chickens or straw for making stools - stepping stones to economic independence.

Almost all Grameen loans are to illiterate, landless and often even homeless women, the most disadvantaged of the absolutely poor in an impoverished and conservative Muslim country. They have no collateral, they sign no loan agreement and they are the people most vulnerable to natural disasters.

For Bangladesh, Grameen has been a cultural revolution, developing into a $US5.72 billion ($7.6 billion) business with 6.6 million customers, contributing more than 1 per cent to the GDP of Bangladesh, and, above all, proving that poor women are more "bankable" than many a middle-class male borrower.

Grameen women have fewer children, are less likely to be divorced and more likely to vote.

Banks based on the Grameen model now reach more than 17 million people, not only in Asia and Africa but among the shifting poor of tough neighbourhoods from Naples to Chicago.

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.