The 2006 Nobel Peace Prize was awarded on 13 October 2006 to Professor Muhammad Yunus and Grameen Bank, both from Bangladesh for their efforts to create economic and social development.
| Interview with Professor Muhammad Yunus |
| Grameen Bank |
| Ten Indicators of Poverty by Muhammad Yunnus |
| Grameen Microcredit & How to End Poverty from the Roots Up by Paul Sinclair |
Professor Muhammad Yunus
The Nobel Peace Prize for 2006
The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006, divided into two equal parts, to Muhammad Yunus and Grameen Bank for their efforts to create economic and social development from below. Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights.
Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.
Every single individual on earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development.
Micro-credit has proved to be an important liberating force in societies where women in particular have to struggle against repressive social and economic conditions. Economic growth and political democracy can not achieve their full potential unless the female half of humanity participates on an equal footing with the male.
Yunus's long-term vision is to eliminate poverty in the world. That vision can not be realised by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part.(Oslo, 13 October 2006)
Telephone Interview with Professor Yunus
Here is what Muhammad Yunus said in a Telephone interview immediately following the announcement of the 2006 Nobel Peace Prize, October 13, 2006. The interviewer is Adam Smith, Editor-in-Chief of Nobelprize.org.
Adam Smith: Is there any particular message you would like to use the opportunity to get across?
Muhammad Yunus: The one message that we are trying to promote all the time, that poverty in the world is an artificial creation. It doesn't belong to human civilization, and we can change that, we can make people come out of poverty and have the real state of affairs. So 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. So I would hope that this award will make this message heard many times, and in a kind of forceful way, so that people start believing that we can create a poverty-free world. That's what I would like to do.
Adam Smith: Does your work with the Grameen Bank over the last three decades make you more hopeful that this is possible?
Muhammad Yunus: Oh yes, very much, we see the demonstration of it every day. People come out of poverty every day. So it's right in front of us what happens and it can be done globally, it can be done more forcefully, we can organize more things to go with it, so this is something not theoretical issue, it's a very real issue. People can change their own lives, provided they have the right kind of institutional support. They're not asking for charity, charity is no solution to poverty. Poverty is the creation of opportunities like everybody else has, not the poor people, so bring them to the poor people, so that they can change their lives. That's all we are doing. We didn't do anything special; lend money to the people so – but they never lent it to the poor people – all we did was we lent it to the poor people, and that makes the trick. That makes the change.
Grameen Bank
Grameen Bank Project was created in the village of Jobra, Bangladesh, in 1976. In 1983 it was transformed into a formal bank under a special law passed for its creation. It is owned by the poor borrowers of the bank who are mostly women. It works exclusively for them. Borrowers of Grameen Bank at present own 94 per cent of the total equity of the bank. Remaining 6 percent is owned by the government.
No Collateral, No Legal Instrument, No Group-Guarantee or Joint Liability
Grameen Bank
does not require any collateral against its micro-loans. Since the bank does not
wish to take any borrower to the court of law in case of non-repayment, it does
not require the borrowers to sign any legal instrument.
Although each borrower must belong to a five-member group, the group is not
required to give any guarantee for a loan to its member. Repayment
responsibility solely rests on the individual borrower, while the group and the
centre oversee that everyone behaves in a responsible way and none gets into
repayment problem. There is no form of joint liability, i.e. group members are
not responsible to pay on behalf of a defaulting member.
97 per cent Women
Total number of borrowers is 6.61 million, 97 per cent of them are women.
Branches
Grameen Bank has 2,226 branches. It works in 71,371 villages. Total staff is 18,795.
Over Tk 290 billion Disbursed
Total amount of loan disbursed by Grameen Bank, since inception, is Tk 290.03 billion (US$ 5.72 billion). Out of this, Tk 258.16 billion (US$ 5.07 billion) has been repaid. Current amount of outstanding loans stands at TK 31.87 billion (US$ 457.52 million). During the past 12 months (from September’05 to August’06) Grameen Bank disbursed Tk. 47.79 billion (US $ 706.48 million). Monthly average loan disbursement over the past 12 month was Tk 3.98 billion (US $ 58.87 million).
Projected disbursement for 2006 is Tk 54.00 billion (US $ 821 million), i.e. monthly disbursement of Tk 4.50 billion (US $ 68.40 million). End of the year outstanding loan is projected to be at Tk 38.50 billion (US $ 585 million).
Recovery Rate 99 per cent
Loan recovery rate is 98.85 per cent.
Ten Indicators of Poverty by Professor Muhammad Yunnus
Grameen Bank evaluates poverty level of the borrowers using ten indicators.
A member is considered to have moved out of poverty if her family fulfils the following criteria:
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1. |
The family lives in a house worth at least Tk. 25,000 (twenty five thousand) or a house with a tin roof, and each member of the family is able to sleep on bed instead of on the floor. |
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2. |
Family members drink pure water of tube-wells, boiled water or water purified by using alum, arsenic-free, purifying tablets or pitcher filters. |
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3. |
All children in the family over six years of age are all going to school or finished primary school. |
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4. |
Minimum weekly loan installment of the borrower is Tk. 200 or more. |
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5. |
Family uses sanitary latrine. |
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6. |
Family members have adequate clothing for every day use, warm clothing for winter, such as shawls, sweaters, blankets, etc, and mosquito-nets to protect themselves from mosquitoes. |
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7. |
Family has sources of additional income, such as vegetable garden, fruit-bearing trees, etc, so that they are able to fall back on these sources of income when they need additional money. |
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8. |
The borrower maintains an average annual balance of Tk. 5,000 in her savings accounts. |
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9. |
Family experiences no difficulty in having three square meals a day throughout the year, i. e. no member of the family goes hungry any time of the year. |
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10. |
Family can take care of the health. If any member of the family falls ill, family can afford to take all necessary steps to seek adequate healthcare. |
What is Microcredit by Professor Yunus, August 2006
The word "microcredit" did not exist before the seventies. Now it has become a buzz-word among the development practitioners. In the process, the word has been imputed to mean everything to everybody. No one now gets shocked if somebody uses the term "microcredit" to mean agricultural credit, or rural credit, or cooperative credit, or consumer credit, credit from the savings and loan associations, or from credit unions, or from money lenders. When someone claims microcredit has a thousand year history, or a hundred year history, nobody finds it as an exciting piece of historical information.
I think this is creating a lot of misunderstanding and confusion in the discussion about microcredit. We really don't know who is talking about what. I am proposing that we put labels to various types of microcredit so that we can clarify at the beginning of our discussion which microcredit we are talking about. This is very important for arriving at clear conclusions, formulating right policies, designing appropriate institutions and methodologies. Instead of just saying "microcredit" we should specify which category of microcredit.
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Let me suggest a broad classification of microcredit : |
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A) |
Traditional informal microcredit (such as, moneylender's credit, pawn shops, loans from friends and relatives, consumer credit in informal market, etc.) |
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B) |
Microcredit based on traditional informal groups (such as, tontin, su su, ROSCA, etc.) |
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C) |
Activity-based microcredit through conventional or specialised banks (such as, agricultural credit, livestock credit, fisheries credit, handloom credit, etc.) |
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D) |
Rural credit through specialised banks. |
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E) |
Cooperative microcredit (cooperative credit, credit union, savings and loan associations, savings banks, etc.) |
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F) |
Consumer microcredit. |
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G) |
Bank-NGO partnership based microcredit. |
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H) |
Grameen type microcredit or Grameencredit. |
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I) |
Other types of NGO microcredit. |
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J) |
Other types of non-NGO non-collateralized microcredit. |
This is a very quick attempt at classification of microcredit just to make a point. The point is ¾ every time we use the word "microcredit" we should make it clear which type (or cluster of types) of microcredit we are talking about. Otherwise we'll continue to create endless confusion in our discussion. Needless to say that the classification I have suggested is only tentative. We can refine this to allow better understanding and better policy decisions. Classification can also be made in the context of the issue under discussion. I am arguing that we must discontinue using the term "microcredit" or "microfinance" without identifying its category.
Microcredit data are compiled and published by different organizations. We find them useful. I propose that while publishing these data we identify the category or categories of microcredit each organization provides. Then we can prepare another set of important information ¾ number of poor borrowers, and their gender composition, loan disbursed, loan outstanding, balance of savings, etc. under each of these categories, countrywise, regionwise, and globally.
These sets of information will tell us which category of microcredit is serving how many poor borrowers, their gender break-up, their growth during a year or a period, loans disbursed, loans outstanding, savings, etc. The categories which are doing better, more support can go in their direction. The categories which are doing poorly may be helped to improve their performance. For policy-maters this will be enormously helpful. For analysis purpose this will make a world of difference.
I urge Microcredit Summit Campaign secretariat to present the information that they already collect on number of clients, number of the poorest among them, number of poorest clients that are women, number of clients that have crossed the poverty line ¾ broken down for each of the categories of microcredit. This will help donors to select the categories they would like to support. This sorting out is very important for the donors, as well as the policymakers.
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General features of Grameencredit are : |
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a) |
It promotes credit as a human right. |
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b) |
Its mission is to help the poor families to help themselves to overcome poverty. It is targeted to the poor, particularly poor women. |
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c) |
Most distinctive feature of Grameencredit is that it is not based on any collateral, or legally enforceable contracts. It is based on "trust", not on legal procedures and system. |
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It is offered for creating self-employment for income-generating activities and housing for the poor, as opposed to consumption. |
| e) |
It was initiated as a
challenge to the conventional banking which rejected the poor by
classifying them to be "not creditworthy". As a result it
rejected the basic methodology of the conventional banking and created
its own methodology.
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| f) |
It provides service at the door-step of the poor based on the principle that the people should not go to the bank, bank should go to the people. |
| g) |
In order to obtain loans a borrower must join a group of borrowers. |
| h) |
Loans can be received in a continuous sequence. New loan becomes available to a borrower if her previous loan is repaid. |
| i) |
All loans are to be paid back in instalments (weekly, or bi-weekly). |
| j) |
Simultaneously more than one loan can be received by a borrower. |
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It comes with both obligatory and voluntary savings programmes for the borrowers. |
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Generally these loans are given through non-profit organizations or through institutions owned primarily by the borrowers. If it is done through for-profit institutions not owned by the borrowers, efforts are made to keep the interest rate at a level which is close to a level commensurate with sustainability of the programme rather than bringing attractive return for the investors. Grameencredit's thumb-rule is to keep the interest rate as close to the market rate, prevailing in the commercial banking sector, as possible, without sacrificing sustain-ability. In fixing the interest rate market interest rate is taken as the reference rate, rather than the moneylenders' rate. Reaching the poor is its non-negotiable mission. Reaching sustainability is a directional goal. It must reach sustainability as soon as possible, so that it can expand its outreach without fund constraints. |
| m) |
Grameencredit gives high priority on building social capital. It is promoted through formation of groups and centres, developing leadership quality through annual election of group and centre leaders, electing board members when the institution is owned by the borrowers. To develop a social agenda owned by the borrowers, something similar to the "sixteen decisions", it undertakes a process of intensive discussion among the borrowers, and encourage them to take these decisions seriously and implement them. It gives special emphasis on the formation of human capital and concern for protecting environment. It monitors children's education, provides scholarships and student loans for higher education. For formation of human capital it makes efforts to bring technology, like mobile phones, solar power, and promote mechanical power to replace manual power. |
The above information and more about Grameen Bank is at http://www.grameen-info.org/