Loan, Bank Work Bring Nobel Prize to Bangladeshi

Michele Norris talks to Dr. Muhammad Yunus, winner of this year's Nobel Peace Prize. Yunus shares the prize with the Grameen Bank, which he founded during more than 30 years of work in granting microcredit to poor people in Bangladesh. The idea has spread around the world, affecting millions of lives.

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Unidentified Man: The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006 to Muhammad Yunus and Grameen Bank for their efforts to create economic and social development from below.

ROBERT SIEGEL, host:

That was the announcement in Oslo this morning. This year's Peace Prize goes to Muhammad Yunus and his bank. Yunus is a pioneer of what's known as micro lending - small loans made to people, often women, who wouldn't have access to capital otherwise. We reached him today at home in Bangladesh.

MICHELE NORRIS, host:

Dr. Yunus, we should begin by saying congratulations to you.

Dr. MUHAMMAD YUNUS (Winner, 2006 Nobel Peace Prize): Oh, thank you very much.

NORRIS: You are known as the father of this concept, micro lending. What do you think it means for all the people who are now involved in this kind of lending?

Dr. YUNUS: It's a fantastic thing for me because I started with no idea of what I'm going. I never thought I would become a banker. I never thought I'll continue with this. So it's amazing. It was such a tiny little thing we began. At that time, it was just in one village, a few people. And now it grew and grew and grew all over Bangladesh. It's everywhere. In the whole of Bangladesh, there'll be more than 16 million families who have received micro credits. And globally, it's over 100 million families. So it's amazing that we grew, but at the same time I feel that it would have been done much better if you could organize is a better way - policy decisions who have taken it the right places.

NORRIS: Well, you're saying it could be done much better. You've got the ear of the world now. What needs to be done?

Dr. YUNUS: Several things. One, we need to create new laws so that the micro credit can function as a banking proposition, and also to allow deposit taking so that you can take the local deposit, wherever in the village or wherever in the suburbs or wherever you work and lend money to the local poor people and built up the local economy. This is an extremely good way to build up local economy.

NORRIS: Sir, can I take you back to 1976, when you first came up with this idea? I guess, if I understand this right, you got started with just $27 of your own money.

Dr. YUNUS: Yeah. I was teaching in the university, and we had a big famine in 1974, and I saw how people suffered for not having a small amount of money. They had to go to the moneylenders to find the money, and moneylenders took advantage of the situation. So I thought maybe I can do something. I went around and took a survey of the people, and the total money, all of them together, needed was $27. I said my God, I can solve this problem.

So I gave this money from my pocket and said you return this money to your moneylender and be a free person. And they got so excited, so I thought maybe I should continue with this. I went to the bank to organize loans for these people. Banks said no, we cannot give loans to the poor people. They are not creditworthy.

And so I said my God, I don't have to go through the banks. Why I don't create a separate bank for the poor people? And I started lending money through the bank, and it worked very well. Now the idea has spread globally. That's what it's all about.

NORRIS: You know, in many financial institutions around the world, they tend to be very paternalistic. Men usually run the systems, and men are usually involved in the systems on the other side, as those who use the system. You focused on women, though. Why was that important to you?

Dr. YUNUS: Because of what you just said. Because that was the question I was raising. Look at your banks. I said not even one percent of your borrowers are women. How crazy the bank is not only to reject poor people - I understand what you said, that they are not creditworthy, whatever that means - but then why do you reject women?

So I said when I begin my work, I want to make sure that 50 percent of the borrowers are women, which I did. It took me a long time to make that happen, but then we saw money going to the family, to women, and you can see it very visibly because when women earn money, they take care of the children, they take care of the household and they have a longer vision. They want to work together. They take care of the loan amount. But men were not that cautious.

So we said if you have so much difference in the impact of the same amount of money, why don't you just change it? So we started changing it. The last time I changed it, I feel very strongly that poor people are as good human beings, as enterprising human beings, as creative human beings as anybody anywhere in the world.

NORRIS: Well Dr. Yunus, congratulations. Thank you for your time.

Dr. YUNUS: Thank you.

NORRIS: That was Muhammad Yunus, this year's winner of the Nobel Peace Prize.

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Microcredit Pioneers Win Nobel Peace Prize

Muhammad Yunus

hide captionMuhammad Yunus and Grameen Bank share the 2006 Peace Prize.

P. Rahman/Scanpix

How Microcredit Works

Microfinance, sometimes called "banking for the poor" usually means providing poor families with very small loans to help them start and grow businesses. The loans are typically less than 200 US dollars. Very poor people use these small loans along with support from local organizations called microfinance institutions. Grameen Bank of Bangladesh is an example of an MFI. Click to learn more.

Bangladeshi economist Muhammad Yunus and his Grameen Bank are awarded the Nobel Peace Prize for their pioneering use of microcredit — tiny loans — to spur development among the poor. Bangladesh is a poverty-stricken nation of about 141 million people. The Grameen microcredit model has been exported to poor nations around the world.

Through Yunus's efforts and those of the bank he founded, poor people around the world, especially women, have been able to buy cows, a few chickens or the cell phone they desperately needed to get ahead.

The 65-year-old economist said he would use part of his share of the $1.4 million award money to create a company to make low-cost, high-nutrition food for the poor. The rest would go toward setting up an eye hospital for the poor in Bangladesh, he said.

The food company, to be known as Social Business Enterprise, will sell food for a nominal price, he said.

"Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty," the Nobel Committee said in its citation. "Microcredit is one such means. Development from below also serves to advance democracy and human rights."

Yunus is the first Nobel Prize winner from Bangladesh, a poverty-stricken nation of about 141 million people located on the Bay on Bengal.

"I am so, so happy, it's really a great news for the whole nation," Yunus told The Associated Press shortly after the prize was announced. He was reached by telephone at his home in the Bangladeshi capital Dhaka.

Grameen Bank was the first lender to hand out microcredit, giving very small loans to poor Bangladeshis who did not qualify for loans from conventional banks. No collateral is needed and repayment is based on an honor system.

Anyone can qualify for a loan - the average is about $200 - but recipients are put in groups of five. Once two members of the group have borrowed money, the other three must wait for the funds to be repaid before they get a loan.

Grameen, which means rural in the Bengali language, says the method encourages social responsibility. The results are hard to argue with - the bank says it has a 99 percent repayment rate.

Since Yunus gave out his first loans in 1974, microcredit schemes have spread throughout the developing world and are now considered a key to alleviating poverty and spurring development.

The Associated Press contributed material to this report.

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