The Nobel Peace Prize has taken a financial twist this year. For the first time this prestigious award has recognised the role of the financial community in achieving world peace. Muhammad Yunus, the founder and pioneer of microfinance, and his Bangladesh-based Grameen Bank were awarded the prestigious prize for “their efforts to create economic and social development from below”.
Lasting peace cannot be achieved unless large population groups find ways to break out of poverty. Speaking after the announcement of the award, Muhammad Yunus said: “People can change their own lives, provided they have the right kind of institutional support. They are not asking for charity; charity is no solution to poverty. Reducing poverty is the creation of opportunities like everybody else has, so people can change their lives. We didn’t do anything special – all we did was lend to the poor people and that makes the trick. That makes the change.”
Mr Yunus, who was born in Bangladesh in 1940 and obtained a doctorate in economics from Vanderbilt University in the US in 1969, became involved in fighting poverty during a 1974 famine in Bangladesh, where he discovered that small loans could make a disproportionate difference to a poor person. In 1976, Yunus founded Grameen Bank (Grameen means ‘of rural area’) to make loans to poor Bangladeshis and in the past 30 years Grameen Bank has issued more than $5.1bn in loans to 5.3 million borrowers.
His microfinance model has been emulated in 23 countries and has been extended to offer education loans and housing loans as well as financing for fisheries and irrigation projects, venture capital, textiles and other activities. Grameen has 2226 branches and provides services in 71,371 villages in Bangladesh while achieving a reported return on equity last year of 21%.
Mr Yunus’ idea and focus have built microfinance into a global concept where even large international banks such as Citigroup and ABN AMRO can participate. His core belief is that poverty is an artificial creation and can be changed. “The only thing we have to do is to redesign our institutions and policies and there will be no people who will be suffering from poverty.” As a banker Mr Yunus’ vision has defied gravity, created a new financial model and helped people believe that a poverty-free world can be created. He and Grameen are truly worthy of the Nobel Prize.
