Nobel Peace & Civil Society:
The following is an opinion piece by Naim A. Sherbiny, Senior Representative of Ibn Khaldun Center for Development- US.
Nobel Peace & Civil Society:
The Importance of Being Unimportant
Naiem A. Sherbiny
In announcing the Peace Prize for 2006 to Grameen Bank and its founder Mohammad Yunus, the Nobel Committee distinguished itself for fair-mindedness and vision, underlining the importance of micro credit to poverty reduction in the world, and for linking social development to peace. The Committee cited the recipients for creating economic and social development from below.
Yunus’ ideas of trusting the poor and lending them ran counter intuitive to bankers’ conventional wisdom. Banks lend to the well-to-do because they offer ‘collateral’ and can repay; they do not lend to the poor who have neither collateral nor capacity to repay. Yunus ended up standing that principle on its head, by intelligently using human dignity of the poor as their collateral. What earned him and his brain-child the Nobel Peace prize are a mix of humanitarianism and financial savvy, an uncommon combination. He was able to translate his vision into a successful operational mode, patiently and consistently over more than 30 years.
Recognizing an acute need for financial resources in one of the world’s poorest nations (Bangladesh) is one thing; many recognize that. Doing something about it, especially out of own pocket is commendable, though not uncommon, especially in Muslim cultures where giving alms (Zakat) is a fundamental tenet of Islam. Yet that does not transform lives of the poor. For many reasons, numerous good-will schemes to benefit the poor flounder and eventually frizzle out.
Not in the case of Yunus and his village bank, where he started from the premise that it is better to teach someone to catch fish than to hand him one. So he set out to teach the poor how to invest and change their lives, one day at a time, year in and year out. The most responsive segment to micro credit opportunities (loans of $100-500) turned out to be women not men, especially the most vulnerable among them: the widowed and divorced. By working with small groups of poor women at a time as a collective borrowing unit, Yunus trained them to watch for each other relying on positive peer pressure, both in producing tangible results with borrowed money and in paying off the micro credit the bank provides. The secret formula was two-fold: (a) dispensing expert investment advice to the poor along with disbursing money; and (b) the end-of-loan requirement to save as much as was initially borrowed. If a poor woman borrows $150 and produces $500 worth of product, she would be required thereafter to pay off the loan and start a saving account in her name with Grameen for $150. The formula worked.
Thirty years ago, who could have imagined that $27 out of a university lecturer’s pocket to a group of village fishermen could start a widespread social change using savvy financial management? Though the initial modest sums came from Yunus himself, the rest of the money came first from the poor and later from international donors. As borrowers performed, they were eligible for repeat loans, and were able to expand their savings at the bank. By demonstrating the credit worthiness of the poor, the bank’s membership and pool of lending funds expanded significantly. From 20 fishermen when Yunus started in 1976, membership is now estimated at 6.6 million, 97% of which is women. The bank’s total assets were estimated at $680 millions. Cumulative funds lent to members reached $5.7 billion this year. That by itself is a miracle; a social innovation that gave genuine hopes to millions: hard work, creativity and integrity inspire the poor to climb out of the poverty pit. This is the ‘audacity of hope’, in the words of a rising African-American senator from Illinois.
Though the innovation came from a poor Muslim nation, it spread to the rest of the world in the last 20 years, even to rich countries including the US. As nothing succeeds like success, micro credit institutions (modeled along Grameen) reportedly exceed 10,000 serving the poor in many countries. This success must be humbling for many large banks whose performing loans do not exceed 95%. Grameen’s is above 98%. The Wall Street Journal (WSJ), that famous icon of Western capitalism, recently invited Yunus to write an opinion piece on the relevance of his experience to the American South, following the devastation caused by hurricane Katrina. The entire US was shocked by the extent of poverty in Louisiana. Yunus reminded WSJ readers that Bangladesh is frequently visited by nature’s fury, yet that has not stopped its poor from going forward to climb out of poverty.
If the contribution Yunus made is micro-economic, how come it ends up earning a Nobel Peace Prize? That is the importance of being unimportant. The correlation between poverty and socio-political instability, including violence, is well established. By providing hope through micro credit, the poor realize they have a stake in making things work, in guarding the stability of their environment, and in avoiding violence as a means of resolving poverty-driven conflicts.
What Yunus and his bank have done is a fete of human tenacity and faith. He earned his place as a social reformer at the world stage. Nothing less could be more worthy of a Nobel Peace Prize.
Nobel Peace & Civil Society:
The Importance of Being Unimportant
Naiem A. Sherbiny
In announcing the Peace Prize for 2006 to Grameen Bank and its founder Mohammad Yunus, the Nobel Committee distinguished itself for fair-mindedness and vision, underlining the importance of micro credit to poverty reduction in the world, and for linking social development to peace. The Committee cited the recipients for creating economic and social development from below.
Yunus’ ideas of trusting the poor and lending them ran counter intuitive to bankers’ conventional wisdom. Banks lend to the well-to-do because they offer ‘collateral’ and can repay; they do not lend to the poor who have neither collateral nor capacity to repay. Yunus ended up standing that principle on its head, by intelligently using human dignity of the poor as their collateral. What earned him and his brain-child the Nobel Peace prize are a mix of humanitarianism and financial savvy, an uncommon combination. He was able to translate his vision into a successful operational mode, patiently and consistently over more than 30 years.
Recognizing an acute need for financial resources in one of the world’s poorest nations (Bangladesh) is one thing; many recognize that. Doing something about it, especially out of own pocket is commendable, though not uncommon, especially in Muslim cultures where giving alms (Zakat) is a fundamental tenet of Islam. Yet that does not transform lives of the poor. For many reasons, numerous good-will schemes to benefit the poor flounder and eventually frizzle out.
Not in the case of Yunus and his village bank, where he started from the premise that it is better to teach someone to catch fish than to hand him one. So he set out to teach the poor how to invest and change their lives, one day at a time, year in and year out. The most responsive segment to micro credit opportunities (loans of $100-500) turned out to be women not men, especially the most vulnerable among them: the widowed and divorced. By working with small groups of poor women at a time as a collective borrowing unit, Yunus trained them to watch for each other relying on positive peer pressure, both in producing tangible results with borrowed money and in paying off the micro credit the bank provides. The secret formula was two-fold: (a) dispensing expert investment advice to the poor along with disbursing money; and (b) the end-of-loan requirement to save as much as was initially borrowed. If a poor woman borrows $150 and produces $500 worth of product, she would be required thereafter to pay off the loan and start a saving account in her name with Grameen for $150. The formula worked.
Thirty years ago, who could have imagined that $27 out of a university lecturer’s pocket to a group of village fishermen could start a widespread social change using savvy financial management? Though the initial modest sums came from Yunus himself, the rest of the money came first from the poor and later from international donors. As borrowers performed, they were eligible for repeat loans, and were able to expand their savings at the bank. By demonstrating the credit worthiness of the poor, the bank’s membership and pool of lending funds expanded significantly. From 20 fishermen when Yunus started in 1976, membership is now estimated at 6.6 million, 97% of which is women. The bank’s total assets were estimated at $680 millions. Cumulative funds lent to members reached $5.7 billion this year. That by itself is a miracle; a social innovation that gave genuine hopes to millions: hard work, creativity and integrity inspire the poor to climb out of the poverty pit. This is the ‘audacity of hope’, in the words of a rising African-American senator from Illinois.
Though the innovation came from a poor Muslim nation, it spread to the rest of the world in the last 20 years, even to rich countries including the US. As nothing succeeds like success, micro credit institutions (modeled along Grameen) reportedly exceed 10,000 serving the poor in many countries. This success must be humbling for many large banks whose performing loans do not exceed 95%. Grameen’s is above 98%. The Wall Street Journal (WSJ), that famous icon of Western capitalism, recently invited Yunus to write an opinion piece on the relevance of his experience to the American South, following the devastation caused by hurricane Katrina. The entire US was shocked by the extent of poverty in Louisiana. Yunus reminded WSJ readers that Bangladesh is frequently visited by nature’s fury, yet that has not stopped its poor from going forward to climb out of poverty.
If the contribution Yunus made is micro-economic, how come it ends up earning a Nobel Peace Prize? That is the importance of being unimportant. The correlation between poverty and socio-political instability, including violence, is well established. By providing hope through micro credit, the poor realize they have a stake in making things work, in guarding the stability of their environment, and in avoiding violence as a means of resolving poverty-driven conflicts.
What Yunus and his bank have done is a fete of human tenacity and faith. He earned his place as a social reformer at the world stage. Nothing less could be more worthy of a Nobel Peace Prize.
posted by Anonymous @ 10/19/2006 11:07:00 AM
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