EWING, New Jersey— Nobel Peace Laureate, Muhammad Yunus has helped empower millions in Bangladesh and across the world to lift themselves out of poverty with his banking organization Grameen Bank. This innovative bank, based in Bangladesh, works around the idea that credit is a universal right, and that giving the poor access to both bank credit and loans will help them rise out of their poverty. It has been an incredibly successful approach in the fight against poverty.
Grameen Bank works by targeting the poor, especially poor women, with small loans aimed to help them develop their own businesses and become self-reliant entrepreneurs. The banks’ procedures go against conventional bank logic as the poor are generally considered not “credit worthy” enough to procure a loan.
Furthermore, the loans given out are not enforced by either legal contracts or collateral; rather, they are based on trust. And it is this basis in trust and mutual accountability that has lead the bank to have a 97 percent recovery rate for loans, one of the highest recovery rates for loans for banks worldwide.
Born in 1940 in Chittagong, Bangladesh, Yunus eventually went on to study at Dhaka University. On a Fulbright scholarship, he studied at Vanderbilt University in the United States, receiving a subsequent PhD in economics from the institution in 1969.
Yunus returned to Bangladesh where he headed the economic department of Chittagong University. However, partly as a result of a famine that afflicted Bangladesh in 1974, he began to be increasingly disillusioned with the contemporary economic theories he taught and professed to his students. In his book Banker to the Poor he writes , “But then skeleton-like people began showing up at the capitol, Dharka… Hungry people were everywhere.” He later goes on to state, “Nothing in the economics theories I taught reflected the life around me: I needed to run away from these theories and from my textbooks and discover the real life economics of a poor person’s existence.”
It was from this disillusionment and the desire to help improve the economics of the impoverished that would spawn the creation of the Grameen Bank.
Established in 1983, Grameen Bank’s roots stretch back to 1976 when Yunus, as Head of the Rural Economics Program at the University of Chittagong, created an, as Grameen Bank’s website states, “action research project to examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor.” Known as the Grameen Bank Project, it had several clear objectives, most notably: to extend loans and credit to poor men and women who would otherwise be unable to receive any; to curb the exploitation of the poor by money lenders; to help those disadvantaged by society, especially women, to contribute more directly to the economy and to help foster self-employment among the ranks of the unemployed rural poor.
After first starting in a village near the university, the project was met with so much success that it soon spread to districts across the country. And eventually in 1983, this success culminated in the establishment of the Grameen Bank as an independent bank in Bangladesh.
The bank is owned almost entirely by the poor it helps finance: 10 percent of the shares owned by the government and the remaining 90 percent owned by those who borrow from the bank.
In Bangladesh Grameen currently has “2,564 branches, with 19,800 staff serving 8.29 million borrowers in 81,367 villages” according to the bank’s official website. On any working day, Grameen Bank collects an average of $1.5 million in pay back installments. The vast majority of the borrowers, 97 percent, are women.
In 2005, PBS reported that the Grameen Bank had, then, “provided $4.7 million dollars to 4.4 million families in rural Bangladesh and that “more than 250 institutions in nearly 100 countries operate micro-credit programs based on the Grameen Bank model.”
This is a bank then that has helped millions in Bangladesh, and millions internationally as well, as it serves as a source of continual inspiration and emulation for programs across the world.
Due to the bank’s high success rate and influence, as well as the various humanitarian endeavors of Yunus (he has served on the Global Commission of Women’s Health, the Advisory Council for Sustainable Economic Development, and the U.N. Expert Group on Women and Finance), Yunus has received a multitude of awards honoring his work. Most notably, Yunus won the Nobel Peace Prize in 2006 for his actions in reducing global poverty.
Other recent awards for him have included the “Global Humanitarians Awards 2008″ by the Tech Museum in San Jose, California, the Presidential Medal of Freedom given to him in 2009 by U.S. President Barack Obama, and the SolarWorld Einstein Award in 2010. This last award was in recognition of his recent work in creating a non-profit company in 1996, called Grameen Shakti, which works to energize the rural regions of Bangladesh. It provides micro loans to recipients so that they can obtain tiny solar power plants. These provide energy in an environmentally sustainable and safe manner, and also help avoid the health risks associated with the kerosene lamps predominantly used in the rural regions.
Since the 1970s when the seeds of the Grameen Bank were sown, Muhammad Yunus has proved a constant source of innovation in the fight against poverty, and his work has helped, and continues to help, millions worldwide.
– Albert Cavallaro
Sources: Muhammad Yunus, Nobel Prize, Grameen, Grameen 2, Grameen 3, PBS, Youth for Human Rights
Photo: Huffington Post