"For their efforts to create economic and social development from below"

October 13, 2006 3:55 AM

In 1976, a young Bangladeshi economics professor named Muhammad Yunus founded Grameen Bank to implement microcredit — lending small sums to the very poorest members of society. Today, he and his bank share the Nobel Peace prize. Grameen, a profit-making company with social objectives, has lent $5.3bn to 6.4m people. 97% of borrowers are women, as Yunus believes [video] "men will do whatever they could to enjoy for themselves personally [but] women looked at it for the children, for the family and for the future."
posted by matthewr (23 comments total)

Good on him. Congratulations Mr. Yunus for the well-deserved recognition.
posted by Meatbomb at 4:12 AM on October 13, 2006

Congratulations indeed.
posted by dirtynumbangelboy at 4:46 AM on October 13, 2006

Very well deserved. Surprised he didn't get it sooner.
posted by laz-e-boy at 4:59 AM on October 13, 2006

Great person. Great story.
posted by bardic at 5:01 AM on October 13, 2006

This piece in the Economist newspaper suggests that the prize ought to have been withheld this year. It's not quite up to the Economist's usual standards; I expect they'll develop the argument further in next Thursday's issue.
posted by matthewr at 5:05 AM on October 13, 2006

Micro-lending for profit is an awful long way from promoting peace. A wonderful progressive business model yes but Nobel Peace Prize worthy? Is there even any evidence it promotes peace?
posted by srboisvert at 5:59 AM on October 13, 2006

I guess the theory is probably that poverty is the greatest recruiting factor for terrorism and civil unrest, so anything that reduces poverty is a great idea. Even if it didn't do anything for world peace, reducing poverty is still a great idea.
posted by talitha at 6:11 AM on October 13, 2006

The same argument [Economist, w/login] applies to last year's Laureate, Wangari Maathai, whose contribution to world peace appears to be planting lots of trees, while claiming that AIDS is a Western-engineered weapon designed to punish blacks.

I think that microcredit is an successful application of economic theory to poverty-reduction, and the fact that the bank charges interest and makes profit ought not to count against it &mdash lending is not a zero-sum game, and growing the business is essential to spreading microcredit. It's great that the profile of microcredit will be raised by this, and it will become more credible and hopefully spread to many more underdeveloped countries.

However, the contribution that this makes to the cause of world peace is indirect — a Nobel Poverty prize seems more appropriate for this sort of thing.
posted by matthewr at 6:23 AM on October 13, 2006

Micro-lending for profit is an awful long way from promoting peace. A wonderful progressive business model yes but Nobel Peace Prize worthy? Is there even any evidence it promotes peace?

I spent four years studying different ways of promoting international stability, and this was the only one that didn't have significant opponents. It's good for everyone involved. It promotes the kind of lasting peace that you can't really point to with evidence. It's not ending a war; it's putting people in a position where they have no reason to start a war in the first place.
posted by scottreynen at 6:25 AM on October 13, 2006 [1 favorite]

I remember back in 1992 people making fun of Clinton because he was the hick governor who wanted to copy the damn Bangladeshi hurf durf lmao

assholes

good for Yunus, he's a brave man
posted by matteo at 6:49 AM on October 13, 2006 [1 favorite]

It's not ending a war; it's putting people in a position where they have no reason to start a war in the first place.

Well said.

Grameen Bank is a good example of a corporation that works for the social good.
posted by storybored at 7:01 AM on October 13, 2006

Like scottreynen, I also spent a lot of time researching how to best help the world - micro-loans was by far the best. It's impacts can't be over-estimated. Most of the loan recipients are women - this empowers them to become self-sufficient - which empowers them to have control over their reproduction choices - which reduces population growth. It enables them to educate their children, which leads to an upward mobility and the formation of a middle class - all of these things then have major "knock on" effects like reducing environmental problems, destruction of wild life, political stabilization, etc.. if there was any long-term "charity" type thing that is sustainable, which has the biggest bang for the least buck, micro-loans is certainly at the top of the list.
posted by stbalbach at 7:21 AM on October 13, 2006

If your interested in donating to a micro-loan charity I recommend FINCA International based in Wash DC.
posted by stbalbach at 7:23 AM on October 13, 2006

Another is Grameen Foundation [Charity Navigator], which supports microfinance institutions like Grameen Bank all around the world. (Disclosure: A family member works for Grameen Foundation.)
posted by whatnotever at 7:49 AM on October 13, 2006

matthewr, I strongly suspect the Nobel Peace Prise considers itself to be the Nobel Poverty Prise.
posted by jeffburdges at 8:06 AM on October 13, 2006

Micro-credit isn't perfect. The failure rates you see with any lending are still there. And there has to be proper application of the loans by banks. Bank of America isn't going to step in and do micro-credit because the numbers are small, the failure rate is high, and there's usually no collateral.

There have been complaints about the interest rates micro-credit lenders charge -- sometimes as high as 20% -- but their defense is that local banks can charge twice that.

But, more often than not, micro-credit is working, building small businesses in 2/3rds World countries, many of which are women-owned. And economic empowerment brings peace through trade and a lack of a desire to kill a good thing. I think it's the one thing holding China back from invading Taiwan -- they don't want to kill the economic power they have in the name of crushing Taipei.
posted by dw at 8:20 AM on October 13, 2006

Is "micro loan" the web 2.0 name for "payday loans" ?

Not exactly. The return on investment with microlending is drastically higher than that of payday loans. Payday loans are giving people small amounts that account for a very small fraction of their net worth, e.g. $100 to someone who makes maybe $20,000 in a year and owns maybe $10,000 in assets.

Microlending is giving people small amounts that account for a very large portion of their net worth, e.g. $100 to someone who makes maybe $200 in a year and owns maybe $100 in assets. That kind of (relatively) huge leap in their capital allows them to make income that wouldn't be possible otherwise (e.g. by buying a cow and selling milk). Whereas a payday loan typically has the opposite effect: enabling someone to lose money they wouldn't be able to lose otherwise (e.g. buying a new stereo).
posted by scottreynen at 9:29 AM on October 13, 2006 [1 favorite]

Sexist S.O.B
posted by matkline at 9:38 AM on October 13, 2006

Payday loans also frequently have incredibly high interest rates that take advantage of either the naivete or short-term greediness of the borrower. They are generally found in lower-income sections of cities.
posted by jfwlucy at 9:42 AM on October 13, 2006

The quote, "men will do whatever they could to enjoy for themselves personally [but] women looked at it for the children, for the family and for the future," reminds me of something I read in Anatomy of a Refugee Camp (CBC News): "Aid workers try to give the food to women instead of men. Workers find the food is more likely to get to older people and children that way because women are the ones who cook the food. Men are more likely to sell the rations for money to buy something else."
posted by bentley at 10:12 AM on October 13, 2006

What is not mentioned in this report is that Grameen groups are made up of (mainly) women all from the same immediate area. The group meets weekly or bi-weekly or monthly, and the participants are educated about the loan structures and basic business practices. They have access to mentors in the form of the loan officer and via the greater infrastructure of the lending institution. But the single biggest factor to which the 98% repayment success rate is attributed is the social pressure the members of the group exert on one another; often they are relatives or have been neighbours for generations. In 'traditional' societies social mobility is low and so village hierarchies and relationships are the glue of the culture. The women may be more likely to think in longer terms or for the good of their families when expending the money, but they also suffer disproportionately if they squander the funds and don't repay - their default affects the credit rating of the entire group, but more importantly one's reputation is totally shot for the rest of one's life - branded "that asshole who didn't repay her chicken loan", etc. for all time. Hence the social pressure to be incredibly careful and to repay on time.

Furthermore, the Grameen model allows for a rotating system of loans - the group meets and decides together who will get the first round of loans. When the first borrowers pay back the loans the next round of lending can begin. Hence new borrowing is contingent on the repayment of loans by the first recipients, and so on. Thus even stronger social pressure to repay: "Hey you, better hurry up and repay that money or I can't do my project", etc.

It's an excellent system that harnesses iron-clad social forces, and it has been successfully replicated around the world, notably by the Aga Khan constellation of programs worldwide.
posted by Mrs Hilksom at 10:12 AM on October 13, 2006

This is awesome. One of my parents' best friends (in fact, my first visitor when I came home from the hospital after being born!) has worked with them as a consultant since the late '70s, and every time I've seen him over the years he's had just amazing, inspiring stories of how these microloans have improved the lives not just of individuals and even their families, but of whole villages and communities. They do amazing, valuable work.
posted by scody at 11:10 AM on October 13, 2006

"Poverty is the worst form of violence."

-Mohandas Gandhi
posted by homunculus at 6:32 PM on October 13, 2006 [1 favorite]