In mid-October, Muhammad Yunus was awarded the 2006 Nobel Peace Prize, along with Grameen Bank, for "their efforts to create economic and social development from below." In announcing the award, the Norwegian Nobel Committee said, "Lasting peace cannot 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."
Yunus, a 66-year-old Bangladeshi economist, first discovered that microcredit could make a huge difference to poor people when he lent US$27 in the early 1970s to 42 people from the Bangladeshi village of Jobra. The villagers, who previously had to resort to usurious loans in order to buy the materials for the products they made, could rarely make enough money to support themselves. Yunus went on to found the Grameen Bank in 1976, basing it on an innovative system whereby groups of people apply together for loans, hold each other accountable for repayment, participate in managing the loans, and support each other's efforts to move out of poverty. The Grameen Bank's philosophy turned traditional banking on its head.
An early study of the Grameen Bank, published almost two decades ago by IFPRI, noted that "The bank has succeeded in reaching its target group... The loan repayment performance is excellent... The most direct effect of the Grameen Bank has been on the accumulation of capital by the poor. The amount of working capital employed by members' enterprises increased by an average of three times within a period of 27 months... The Grameen Bank concept of generating self-employment for the poor through credit without collateral should work in other countries with widespread poverty and underemployment."
Today the Bank has 6.61 million borrowers, 97 percent of whom are women. Furthermore, it is owned by the rural poor it serves—borrowers own 90 percent of its shares, and the Bangladeshi government owns the remaining 10 percent. The Bank's success has inspired similar efforts throughout the developing world and even in industrialized nations, including the United States.