DHAKA, Bangladesh--Millionaire banker Muhammad Yunus will never forget the famine that struck Bangladesh in 1974. He was teaching economics at a university near the nation's capital. "Hungry people were everywhere. Often they sat so still that one could not be sure whether they were alive or dead. They all looked alike: men, women, children. Old people looked like children, and children looked like old people," he wrote in Banker to the Poor, a book he coauthored.
As the famine got worse, Yunus remembers, he had a hard time teaching abstract economic theories. "Nothing ... I taught reflected the life around me."
While visiting the village of Jobra, he met a 21-year-old mother of three named Sufia Begum, who was selling bamboo stools she'd woven by hand. She told Yunus she had borrowed the equivalent of 9 cents from a village moneylender to buy the materials for each stool. But the moneylender charged such a high interest rate, she made only 2 cents per stool after she paid back the loan. (Interest is a charge for a loan, usually a percentage of the amount borrowed.)
Yunus learned that many of the women in the village owed the same moneylender a total of $27. Yunus gave them the money out of his own pocket. By eliminating the money-lender and high interest fees, the women made more money and repaid their loan to Yunus in full.
Yunus then realized that poor people can be as creditworthy as the rich. And he wanted to do more. In 1983, he founded Grameen Bank to make small loans to poor villagers. Since his loan to the women of Jobra, Yunus and Grameen have made $5.72 billion in small loans to more than 6.6 million Bangladeshis, most of them women.
For their work, Yunus and Grameen Bank recently won the prestigious Nobel Peace Prize. Half of the $1.4 million prize will go to Yunus; the other half will go to Grameen Bank.
The Nobel Prize committee says it honored Yunus because "lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty."
Poverty is rampant in Bangladesh. Half of the country's approximately 150 million people earn less than $1 a day. Most of the Grameen loans are tiny--some as little as $12. Though the loans are small, they aren't easy to get. Because borrowers have no collateral to borrow against, they must pledge to follow a strict set of rules, including a vow never to be late with a payment. Loans are made only to groups of five or more people. If one person doesn't make a payment, the entire group loses its credit rating--and cannot get another loan. Payments are small but frequent.
Ahmena Khatoon used her loan to buy two rickshaws (transportation vehicles). She rents them to villagers who pay a small fee. "I had a baby to feed, no job, no income. So I joined a unit of 41 other women who took out loans from Grameen," she told the Chicago Tribune. "We all have our own businesses. One bought chickens, another a cow, and someone else breeds fish."
Though the terms of the loans are strict, Khatoon thinks they help the Grameen system work. "If the bank was not so tough, all of us would have defaulted a long time ago. Then we would all be poor again," she says.
Khatoon says having her own business gives her a sense of pride and confidence. The majority of Grameen loans go to women because Yunus set out to help women thrive in the extremely male-dominated society. He has found that women in Bangladesh are more likely than men to use their earnings to help their families and pay back their loans.
Since its founding, Grameen Bank has inspired similar loan programs in 100 countries and has been copied by thousands of institutions.
Yunus hopes that his winning the Nobel Peace Prize will call attention to the problem of poverty. He says he wants people to "start believing we can create a poverty-free world."
Yunus told London's Independent that one day "our grandchildren will go to museums to see what poverty was like."
Critical Thinking ... What are some other ways to help eradicate poverty around the world?
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