A fine, fine choice for the Nobel Peace prize! Mohammed Yunus and the pioneering micro-credit institution he founded, Grameen Bank. More on this as we get time to put together a full post, but here is the Nobel Peace Prize committee press release:
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.
Thats what i was thinking too. What better moment to ENLIGHTEN AMERICA about that good things do happen in other parts of the world, even Muslim parts. Can SM make this post stick at the top for a few days?
Not to brag, but what the heck.
The past few days have been brag worthy for Columbia University, my Alma Mater.
Edmund Phelps (faculty ) won the Nobel for Economics
Orhan Parmuk (visiting fellow) won the Nobel for Literature
Kiran Desai (Alumna and my wife’s class mate) won the Booker Prize
Oh, this prize has been a long time coming for Dr. Yunus. Kudos!
A lot of misinformation above. All data below from Wikipedia and whatever other online material I could find.
Tagore: Born 1861 in Jorasankor. West Bengal, India
Sen: Born 1933 in Santiniketan. West Bengal, India
Yunus: Born 1940 in Chittagong. Bangladesh.
CV Raman: Born 1888 in Tiruchirapalli, Tamil Nadu, India
Chandrashekar: Born 1910 in Lahore, Punjab, Pakistan.
Hargobind Singh Khorana: Born 1922 in Raipur, Punjab, Pakistan
Abdus Salam: Born 1926 in Sahiwal, Punjab, Pakistan
If you want to count VS Naipaul (and I wouldn’t), his ancestral home is in Gorakhpur, UP, India.
None of this matters. Every single Desi Nobel winner was born in British India. Or princely India –I’m not checking that. We should thank Mountbatten, Minto, etc. We are about ten to fifteen years away from a post-partition born Nobel winner, and a generation away from a post-1971 winner.
Chandrashekar: Born 1910 in Lahore, Punjab, Pakistan.
Hargobind Singh Khorana: Born 1922 in Raipur, Punjab, Pakistan
Abdus Salam: Born 1926 in Sahiwal, Punjab, Pakistan
Pakistan was still just an idea at this point, but the point about British India is on target.
Tagore: Born 1861 in Jorasankor. West Bengal, India
I think Bengal was still just one province at this time. It’s partition was one of the topics that outraged Tagore.
tagore was born in what is now west bengal, but i believe some of his famiy estates are in what is now bangladesh and he spent time there.
Manju,
“Creating wealth”? Bro, I doubt any of these women are participating in the stock market or heading for the Forbes 500 anytime soon.
The Nobel Committee is making a point that increasing a sense of agency among individuals is inherent to fostering democracy. Democracies are less likely to fall prey to events like famine (as noted by Amartya Sen). They are less likely to support Kim Jong Illin’ types. And the mitigating effect of empowered women in a society cannot be undermined (Afghanistan vs. Sweden? Bihar vs. Kerala? Lord of the Flies vs. Sweet Valley High?) ~ My Malayali housekeeper is part of a Grameen style panchayat based savings and loan program for women. The vast majority of the participants are married are to unemployed men (who drink) or barely employed men (who drink even more). In her case, her husband works at a local school and makes between Rps 200 – 300 a day. In Kerala, that would be enough for her not to have to work, but that’s not possible because his money ends up in his liver.
So she and her cohorts pool their money and get matching loans to open vegetable shops, run small house-to-house catering operations, rebuild their homes, etc. She has bought 5 cents of land and a pair of glasses (to read the newspaper each morning), her grandchildren no longer sleep under a leaky roof (oh yeah, both of her sons are also alcoholics), and she is reasonably sure that she can put away enough money to keep her grandchildren in school, marry them off and ‘do the needful’ (as they say).
If nothing else, now that she is enrolled in this program she has some shred of peace of mind. There’s a reason why ‘peace’ is a part of that phrase. Who is to say that the Nobel committee wasn’t also thinking along those lines?
I think Mother Teresa won the Nobel Prize as an Indian citizen.
Every single Desi Nobel winner was born in British India.
People who were born in British India were still Indians. They did not have a British passport. You raise an interesting point, perhaps a little academic. It happens just because the Nobel committee take so long to recognize work. Plus, it is almost inevitable that the people of Indian origin who are in the running for the Prize would have naturalized to American (or a different country’s) citizenship by the time the Nobel committee recognizes them.
Kavita (#57)
Tell the truth, sista! Theory and example, material and spiritual meaning — it’s all there. Thanks for sharing. And “Lord of the Flies vs. Sweet Valley High” is the line of the day.
I think Mother Teresa won the Nobel Prize as an Indian citizen.
Yes
People who were born in British India were still Indians. They did not have a British passport.
Yes. A lot of people (especially on blogosphere) tend to make pre-1947 India as something nebulous. It wasn’t. Not only it was governed by Indian taxpayer’s money, it exported raw materials, etc. to the British Empire. Even the princely states in most cases had limited governance and automony (some more, some almost none).
Now to wandering NPs
Often, academics move around, take new residences, and even change nationalities.
Some example: Einstein, Fermi, Bethe, etc.
Some don’t: Amartya Sen, like one of the NP for Bose-Einstein condensate in 1998 is a MIT professor who have been in America for ever but holds German passport.
kavita, “Creating wealth”? Bro, I doubt any of these women are participating in the stock market or heading for the Forbes 500 anytime soon. True. I see this as part of becoming in a very limited way of the larger global market, not nescessarily as anything American.
I don’t believe micro-finance is necessarily going to increase the supply-side of the equation in the short term. Not only is not all the money invested recovered, at least some of the money ends up merely supporting consumption. This is not a traditional “let us provide money so people will invest in businesses and we will get it all back” sort of deal. This is not a pure vindication of capitalism, but we must keep in mind that different places call for different soltions. For its locale, the Grameen Bank concept is a brilliant, brilliant idea.
Why can’t they give a nobel to Dinesh D’Souza? There’s no justice in this world.
“Democracies are less likely to fall prey to events like famine (as noted by Amartya Sen). “
Kavita – Sen has repeatedly been discredited for the above claim by events in post 47, democratic India, which has witnessed mass starvation and death far too many times, owing to famines and crop failures. Indeed, some of the more astute observers on this blog have been too happy to point out such events on many an occassion.
Kavita, respect!! Peace of mind is the greatest peace of all.
No he hasn’t. He draws a distinction between famine and endemic malnutrition. If you agree with the distinction, then he hasn’t been discredited. If you don’t, then he as.
Kritic, Kavita – Sen has repeatedly been discredited for the above claim by events in post 47, democratic India, which has witnessed mass starvation and death far too many times, owing to famines and crop failures. Democracy as compared to what?
Don’t you think that Sen’s is a carefully thought out, carefully formulated position? Discredited is going a bit too far. I think you could say that democracy does not automatically ensure low levels of iniquity, but if you want to take the case of India, isn’t it true that the history of malnutrition under democracy in India is nothing compared to the history of famines under the Raj?
I and Siddhartha just crossed in our posts. Siddhartha says the claim holds, and I believe that is correct.
I agree with Siddhartha.
They have been droughts/ food shortage in India, but never a famine on the scale of Bengal since 1947.
Since Bengal famine was not about food shortage only, as his work showed.
They have been droughts/ food shortage in India, but never a famine on the scale of Bengal since 1947. Exactly. I think you are referring to the Bengal famine of 1943, which can be compared to the Holocaust in the number of deaths. This was merely one in a long series of famines under the Raj.
It is matter of semantics, I guess. Death due to starvation in a democracy of any number of people discredits Sen’s theory, in my opinion. Especially, since India has more than enough (post green revolution) grain stored in govt. run facilities (criminally inept and corrupt, food corp. of india) all over the country. It is a different story, that mismanagement and corruption prevents the delivery of much needed relief in time of emergency.
Kavita, while you make good points I would beg to differ – there are many definitions of creating wealth and these women are creating wealth. If the woman gets microfinance to buy a chicken and simply eats the eggs, she is feeding herself (which is a good thing). But, if she sells the eggs, and then uses that money to feed herself and maybe also buy another chicken, and so on and so on, then she is creating wealth. Actually, the lovely example of your housekeeper is a better one. She is creating wealth in that way, too. Economies can grow bigger: you do not have to divide the same wealth in different ways to acheive a result. As for ‘support’ for Kim Jong Ill’s policies – he is a Stalinist dictator and no microfinance scheme would ever be allowed in that controlled, regulated death camp of a nation. He will hold onto power however he can.
MD, If the woman gets microfinance to buy a chicken and simply eats the eggs, she is feeding herself (which is a good thing). But, if she sells the eggs, and then uses that money to feed herself and maybe also buy another chicken, and so on and so on, then she is creating wealth. In the case of micro-finance systems, production does not always increase.
To be precise, these are not even completely self-sutaining industries.
The repayment rate is 95-98% (google it). They use some unique formulas to determine credit and limit risk. Very imaginative finance that does a lot of good and creates a little wealth, a smaller version of unlike Michael Milken and Drexel.
corrction, that should be:
“a smaller version of Michael Milken and Drexel.”
I meant to compare him to another famous financier who did a lot of good for people who otherwise couldn’t get money.
Manju, The repayment rate is 95-98% (google it). They use some unique formulas to determine credit and limit risk. Very imaginative finance that does a lot of good and creates a little wealth …. I am aware of these numbers. Basically, this is not a traditional capitalist deal where you talk about ROI, and so forth. This is about preventing social iniquity and problems that come out of those, such as terrorism.
Do they charge interest?
Wow, this is neat! My dad has many economist friends, and he met this man (back in Dhaka when I was just a wee kindergartener.)
Manju, Do they charge interest? Yes, but they also have some schemes where they don’t. In theory, you are supposed to be able to recover the money. In practice, there is a really small rate of non-recovery. The important thing is that they give loans without collateral. Also, we should keep in mind that we are talking about people who are in third-world povery. (And for heaven’s sake, I don’t care if they don’t frickin’ repay every last penny 🙂 )
Shankar:
My understanding is that they charge a high interest rate, get a ROI, and have extemely high repayment rates which makes them self-sustainable. I googled around and I haven’t foound anything to contradict this but if you have other info let me know.
As far as the “peace” argument goes, besides “peace of mind” I wouldn’t be surprised if this has some unintended consequnces of making thinks less peaceful. The connection between poverty or inequality and Terrorism is very dubious and there is some evidence that it is social mobility itself that “creates” social unrest.
your 2 sentances contradict. But bottom line, repayment rate is above 95%. One creative thing thay do is lend money to groups, so there is a lot of social pressure among the women who know each other to repay.
Maybe. But they do look at whether the women own animals, have a fixed roof or real floor, etc. It’s like credit card debt.
Great, but moot point. They’re paying it back. and the interest rate is like 20-30%, so thy certainly don’t feel like charity cases and the lender gets a nice return, though after expenses I’m sure it’s much lower.
Not to take away any credit from the Younus and the Grameen Bank, but….
the nobel committee could have done the unthinkable and awarded a Peace Prize to Mahatma Gandhi. Till they ever get around to doing that, it will always leave a bad taste in the mouth.
The Grameen Bank site says : There are four interest rates for loans from Grameen Bank : 20% (declining basis) for income generating loans, 8% for housing loans, 5% for student loans, and 0% (interest-free) loans for Struggling Members (beggars). The interest rates might seem high, but they are not 20-30%. BTW, even though 20% might seem high, it is not that high. In India, the loan rate for farmers is in this ballpark. The problem with farming, for instance, is that it is risky business because it is dependent on the monsoon and so forth.
Maybe. But they do look at whether the women own animals, have a fixed roof or real floor, etc. It’s like credit card debt. That is kinda my point. It is not like credit card debt where there is some sort of collateral. It is based on trust. Check out this.
In other words, the banker’s confidence rests upon the will and capacity of the borrowers to succeed in their undertakings.
I am guilty of fudging a couple of things : Grameen Bank and micro-credit schemes. I didn’t know about Grameen Bank’s finances. I just checked, and it looks like you may be right that they actually turn a profit. However, if you look at the ROE for Grameen Bank for 2002 to 2005, there is wide variance. It varies from 2.93% to 21.22%. But what happens when a flood hits Bangladesh? Obviously ROE really drops. It might even go negative in some years. My point is that, in practice, there are many micro-credit schemes that are not as successful. They end up spending a small amount of money. Which is okay by me.
shankar – even if production is not increased, surely wealth is created at some level? And, at least they get a chance to create wealth, or else, why would they even be interested? If it all stays the same, and there is no net increase to their worth, even if that worth is spent subsisting better than the previous subsistence, then why would it be worth it to these women to even do this? How can it be that there is no creation of wealth at all? I mean, you can say the middle man is cut out and now the money just goes to the woman, but if lots and lots of these schemes take hold, then wouldn’t more wealth be created overall than just having people eke out a subsistence and then giving most of the earnings to the middle-man? Does the amount of wealth, or the production as you are apparently defining it, stay the same if all those workers are owners too, or if they just stay workers only?
Please explain, economic types….I am a mental simpleton so break it down for me.
ROA may also be important to consider which will take into account itÂ’s income generating assets and its income bearing liabilities, which in GrameenÂ’s case are its deposits as most of its funding is from entirely from its deposits. Hence most of the income is the spread between what it pays on its deposits. If you see the two largest components on the 2003 balance sheet are its loans and deposits. There is probably a huge spread on the rates as the general and other reserves have gone up from 30 million to about 136 million. The yield on its gross portfolio is almost 20% and the cost of funds is about 7.4%
I am more interested in the potential social engineering aspects of microcredit for women. I suspect being able to generate some income (in several cases, all or the lion’s share of the household expenses) and not being completely dependent on their husbands for money allows poor women to have more of a role in decision-making (as in deciding not to have more than two children for instance). It would be interesting to see if the recent trends (decreasing) in population growth rates in Bangladesh (yes, I know, some of it is certain to be creative book-keeping) have any significant correlation with microcredit.
Now will there be or is there some form of backlash against this (say by irate husbands and or fundies who miss the good old days when their women were subservient)? Probably (insert cliche about omelettes and breaking eggs), but (insert second cliche about genie once being out of the bottle).
Note also that microcredit borrowers from the Grameen Bank are obliged to affirm that they will ensure that their children complete both primary and secondary schooling, that they will never ask for or give dowry when their children are married off, etc. (I don’t recall offhand if they are expected to practice family planning and limit themselves to two children). Personally, while some commentators have issues with this “abrogation of an individual’s rights,” I am more than fine with this form of social engineering — the prospective borrowers are always free not to ask for a loan.
arZan, I believe the Nobel Committee does not award any of the Prizes posthumously.
Manju, The connection between poverty or inequality and Terrorism is very dubious and there is some evidence that it is social mobility itself that “creates” social unrest. I think you are thinking of the “movements” in Saudi Arabia and other parts of the Middle East wherein social mobility is a contributing factor. However, in the specific context of Bangladesh, it is almost definitely poverty that is causing them to migrate to states such as Maharashtra and cities such as Mumbai and Delhi. These people would be far less likely to migrate if they had opportunities in their own villages. That was the connection, although admittedly it is not an well established one. Plus, there are other groups in the Indian subcontinent, such as the People’s War Group, that explicitly make this linkage of social iniquity and terror.
MD, shankar – even if production is not increased, surely wealth is created at some level? And, at least they get a chance to create wealth, or else, why would they even be interested? Nothing particularly subtle here. Don’t read too much into this. (That is why I added the statement : “To be more precise, …”.) When I said ‘production is not increased’, I am only saying that there is an opportunity cost for that capital which is lent. In a purely capitalist system, capital should go to where it has the highest returns. Compared to that level of production, we have lesser production.
Correct. Though Gandhi was nominated five times. There’s an interesting article on the Nobel prize committee webpage on the issue.
The connection between poverty or inequality and Terrorism is very dubious
Humiliation over real, perceived insults coupled with poverty, inequality, lack of hope can be a fertile ground for the recruitment of new terrorists. You will always have ideological terrorists like Osama etc. but for a mass movement to emerge, it certainly helps to have the above factors in place.
Ayn Rand must be turning in her grave. Micro-credit is a great example of thinking out of box, which doesn’t fit any of the isms(capital/social/communist). SHGs are also much studied and researched stuff. SHGs have led to other benefits like education, malnutrition, local self governance.
In the intrest of balance someone will post their limitations and failures too.
that’s a pretty narrow view about what capitalism, etc. is about… Let me “spin” the Grameen system a different way —
The essential, enabling diffs b/t Grameen loans and traditional bank loans are
1) loan size — traditional banks probably have too much overhead to do a $5 loan, so there’s real “efficiency” being created by the Grameen system…
2) forms of discrimination that are “appropriate” for the local culture but are illegal for traditional banks which operate against more “western” cultural norms. Namely
sexism (loan to women over 95% of the time – imagine going to a bank in the US and they “no” to you but “yes” to your wife; statistical diffs far smaller than that are enough to accuse US banks of “redlining” areas)
individual sovereignty (requiring “cosigners” not just for biz loans but also personal loans – imaging going to buy a car in the US but they’ll only let you buy it if you get 4 of your friends to cosign the loan with you; here that sort of thing is limited to teenagers, etc.)
privacy (in the west, banking privacy is a notoriously strict subject… given the lack of a reliable, apersonal credit scoring system, Grameen is hardcore about using social pressure and knowledge as an alternate means of enforcement; FWIW, i remember reading that back in the Wild / Old West, American banks actually did use forms of public humiliation to get folks to pay up their overdue loans — big signs in your front yard visible the neighbors, signs in the town square, etc. )
The broad ideas are certainly consistent with capitalism — for ex., there’s no overt force being used here. But, it’s probably NOT consistent with classic forms of Western banking which do (for both better and worse) emphasize individual responsibility / autonomy / privacy …
And, of course, that’s before you mention the other effect of helping these women / families participate in & gain the skills to further the economy… But that’s also ultimately pro-capitalist. Presumably, they’ll one day be able to “graduate” into the pros (and cons) of a more formal banking environment…
So I wonder why the muslim world is not celebrating this? No huge demos like we saw after 9/11 Two Muslims have won this year- one in Lit and the other in Peace. Is this beacsue neither is a Koran thumper?
I wanted to add 1 more bullet point to the whole ‘This Nobel laureate was born in the des’ discussion.. Ronald Ross was born in Nepal and he got the Nobel for discovering malaria’s mode of transmission to humans. He did most of the relevant work for the prize in Calcutta. I would call him a honorary desi at the very least.
Perhaps b/c his innovation fundamentally enabled a new class of folks to be subject to usury?
Actually, in 1948, the year of Gandhi’s death, they did not award the Nobel Peace Prize saying that there were “no suitable living candidates”, which some people interpret as the closest Gandhi came to getting the Nobel.
Vinod, that’s a pretty narrow view about what capitalism, etc. is about. True. But do you believe that ROIs on such schemes are always going to be high enough that a free market will make such loans available to the top-level entity, such as Grameen bank in this case? I think states may have to intervene in certain cases to make available such forms of credit since it is quite possible that the underlying businesses are subject to greater risks and lower returns than average.
Perhaps b/c his innovation fundamentally enabled a new class of folks to be subject to usury?
The wikipedia entry indicates the following : The bank’s stellar repayment rate was broken in 1995 by a religious fundamentalist boycott by certain sections of society who objected to the bank’s focus on improving the status of women
As far as I can tell, the magic of Grameen is that there has never been state involvement. It’s been a private entity from the outset…
As far as I can tell, the magic of Grameen is that there has never been state involvement. It’s been a private entity from the outset… Not true. Check out this.