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Bangladeshi Economist Awarded Nobel Peace Prize for Micro-credit Lending Schemes

October 13, 2006 at 6:20 PM EDT

JIM LEHRER: But first, the winner of the Nobel Peace Prize.

In 2001, we profiled economist Muhammad Yunus and the pioneering bank he created in Bangladesh. NewsHour correspondent Fred de Sam Lazaro of Twin Cities Public Television has our encore report.

FRED DE SAM LAZARO, Correspondent, Twin Cities Public Television: Nurul Islam has an unusual routine for a bank loan officer. Once a week, he comes to this shack to meet with his small business clients and to collect their loan installments.

Unusual doesn’t start to describe the borrowers: Most are female, illiterate, and, before they joined this group, very poor, not exactly a lucrative group to most bankers, especially since their typical loan is about $100. But these are preferred customers of the Grameen Bank; 2.4 million of them have made Grameen one of the most prosperous financial institutions in the developing world.

MUHAMMAD YUNUS, Grameen Bank: I didn’t have a blueprint of any kind. I was not looking for a destination. All I was trying to do was to be helpful for today.

FRED DE SAM LAZARO: Muhammad Yunus was a young economics professor in 1974, when the idea of offering banking services to poor people — an idea that came to be called micro-lending — occurred to him. It was in the midst of one of this country’s legendary natural disasters.

MUHAMMAD YUNUS: We had a famine in 1974, people were dying of hunger. And I found myself in a very strange situation: teaching elegant theories of economics, telling all my students that every economic problem has beautiful solutions. And I walk out of the classroom. Those elegant theories have no use for people who were dying.

FRED DE SAM LAZARO: Yunus wanted to apply some of his economic theories to the real world he saw. So he surveyed 42 small business owners — fruit vendors, artisans, rickshaw pullers — and found that just $27 would free the whole group from debts to local money lenders, debt that kept them in almost lifelong bonded labor. Yunus decided to bankroll the group himself, after failing to sell local bankers on the idea.

MUHAMMAD YUNUS: I soon found out that people are paying back, and they paid back every penny without any hitch. So I got very excited. So I thought I should have my own bank. So I went to the government with a proposal that I should be allowed to set up a bank.

Lending to women

FRED DE SAM LAZARO: Yunus began perhaps the first-ever bank in which collateral was a bad word, the poorer a borrower, the more creditworthy. And there was no shortage of customers in this nation where 130 million people inhabit a land area the size of Wisconsin, an area on the Asian subcontinent that's also constantly battered by storms and floods.

Despite the continuing poverty, Grameen has had an enormous economic and social impact. Its loans have allowed some 2.4 million rural Bangladeshis to start small businesses. And it's given women new power in a traditional, male-dominated society.

MUHAMMAD YUNUS: Women are very cautious with the use of the money, but the men were impatient; they wanted to enjoy right away. They will entertain friends, they will go to the movies, they will do whatever they could to enjoy for themselves personally. But women didn't look at it personally. Women looked at it for the children, for the family and the so on, and for future.

FRED DE SAM LAZARO: Dilwara Begum became a Grameen borrower 11 years ago. She began with just one milk cow. Then, about four years ago, another loan helped build a poultry barn, a productive enterprise that takes the whole family to manage. The weekly yield of about 7,000 eggs is picked up every other day and taken to the capital, Dhaka, about three hours away.

Over the years, Dilwara Begum says, life has changed in basic yet dramatic ways.

DILWARA BEGUM, Grameen Borrower (through translator): In the past, we used to eat nothing more than rice and some vegetables. Today in each meal there is egg, meat, or fish, at least one of them. Also, in the past we used to grow enough rice for about six months of the year; the rest we had to buy. Sometimes we had to borrow money to buy the rice. Today we grow enough rice for the whole year.

FRED DE SAM LAZARO: Dilwara and husband Nazim Uddin also raise their own fish and poultry to meet much of their food needs. After all the expenses, they save about $100 each month, an impressive sum in Bangladesh. Even though 98 percent pay back their loans, only about a half of Grameen borrowers succeed in staying out of poverty. Still, Grameen and other micro-lending programs have brought significant overall improvement, notably in food production, according to Hussain Zillur Rahman, a scholar who has tracked poverty here.

HUSSAIN ZILLUR RAHMAN, Scholar: I can bet my little savings that a famine in Bangladesh is not likely to occur, will not occur, actually. The threat of famine has been defeated; that's a fantastic achievement, actually.

FRED DE SAM LAZARO: For his part, Muhammad Yunus is now looking well beyond agriculture based enterprises. Already, Grameen is the largest cell phone company in Bangladesh, vaulting a country barely wired for telephones into the age of the wireless.

MAN: Hello?

The effect on future generations

FRED DE SAM LAZARO: The phone rings often at the home of Dharani and Shamoli Sarkar. Theirs is the only phone in their village, financed by Grameen and rented out as a pay phone to a poultry farmer trying to reach a veterinarian in the city, for example, or expatriates, like this one, calling from the Persian Gulf oil fields to relatives back home.

"Call back in 10 minutes," Sarkar instructed the caller as he set off to alert the family. He said the job of walking phone booth is mostly his, even though his wife, Shamoli, actually holds title to the Grameen loan and to the phone.

Indeed, the traditional domestic routine for most Grameen borrowers hasn't changed much. Still, Grameen officials say, as the family's meal ticket, women increase their leverage in family decision-making, and this improves their sense of confidence.

SHAMOLI SARKAR, Grameen Borrower (through translator): I am given respect. We are offering a very good service to the village, and people are very thankful for our phone business.

FRED DE SAM LAZARO: The bank also wants to change the future face of Bangladesh. It asks borrowers to have fewer children and to educate them.

Poultry entrepreneurs Dilwara Begum and Nazim Uddin between them had just four years of formal education. But their son, Nasir, who is 20, will finish college in two years and plans to start his own poultry business. At 16, his sister, Nasrin, would traditionally be married. Instead, she will go to college and hopes to become a journalist. Education has become a top priority in the Grameen group.

MUHAMMAD YUNUS: I would say it's about 100 percent enrollment from Grameen families today and many of them are in colleges, universities coming all the way. So that is very different.

So having those children going to school, the second generation that is coming from out of these 2.4 million families of Grameen, at least they are not becoming the kind that you would expect to grow up in an illiterate family where illiteracy ran for generations.

FRED DE SAM LAZARO: Impressive as these successes are, illiteracy and poverty remain in daunting proportion in this nation, where per capita income is about $300 a year. Yunus blames the slow progress on the sluggish Bangladesh economy, whose major financial institutions, ironically, hold billions of dollars in bad debts to large businesses.

JIM LEHRER: Jeffrey Brown has more on this story.

The growth of micro-finance schemes

JEFFREY BROWN: And for some thoughts on Muhammad Yunus and his work in Bangladesh and beyond, I'm joined by Maria Otero, the president and CEO of Accion International, a leading global microfinance institution.

Welcome to you.

MARIA OTERO, Accion International: Thank you.

JEFFREY BROWN: You know Muhammad Yunus. You know this movement. What is it about him that he was able to take this simple idea and make it so big and important?

MARIA OTERO: Well, it's a fantastic moment for everybody that works in microfinance. And it isn't surprising to us that Muhammad Yunus is the one that won this award, because he had the ability to really take a very small thing, which is the $27 that he made available himself to very poor people in his own country, and really put a vision behind that and see that it could really change the lives of poor people in Bangladesh, as we at Accion and at other organizations see the same thing around the world.

Muhammad Yunus was educated in this country, as you pointed out. And I think he understood how he could also relay the messages of poverty in the developing world around the world, and then be able to give this story this sort of life and the sort of message that it needed.

JEFFREY BROWN: Now, when Fred de Sam Lazaro did that piece that we just saw in 2001, the number of borrowers in Bangladesh was about 2.4 million. Today I was reading it is over six million. So the number of people has expanded. What about the number of institutions involved in this kind of work?

MARIA OTERO: Well, there's no question that around the world microfinance has grown really in almost every country. Accion International works in 23 countries around the world with 30 partners. And our numbers have also grown the same way, as we are right now reaching over two million people around the world.

So I think we are an example of how you can take very small loans and put them in the hands of very poor people and demonstrate that they cannot only use them, but that they can pay them back. And that was the message that Muhammad Yunus is now making part of sort of household knowledge, that poor people, if given an opportunity, can really make a difference in their own lives.

Improving the future

JEFFREY BROWN: Is the focus worldwide still on women, just as we heard him talk about?

MARIA OTERO: It is still much on women, but it isn't exclusively on women. And it depends a lot in the country that you're working in. I think, certainly in Bangladesh, being able to lift up women, who are really at the bottom of the ladder and who have been given such low status, it's enormously important.

We see this around the world. Accion reaches about 70 percent women, but we also reach men. And, you know, the men pay back, too.

JEFFREY BROWN: What about the next generation? We heard Muhammad Yunus talk about the sons and daughters of the people who are borrowing going onto education now. Is there any way of quantifying that?

MARIA OTERO: Well, it's the same experience I have had in working with Accion, as I go country to country in Latin America and in Africa. Every time you talk to a micro-entrepreneur, you know that when they make income from their enterprise, the first thing they do is educate their children.

So we are seeing -- and it's still somewhat you could say anecdotal, but I have never visited a microfinanced micro-enterprise -- and I've visited hundreds and hundreds -- where the children are not studying and where women, who have had first-grade or second-grade education, are not dreaming that what they will do is send their children so they can finish high school and finish college, which is really all of our dream. It's, you know, to be able to make the world a better place for our children and to enable them to have a good life.

JEFFREY BROWN: Some people have wondered about the Peace Prize going for this kind of work, an economist starting a bank and lending to people. Now, what is the link between peace and poverty work?

MARIA OTERO: You know, I understand Yunus. I myself am from Bolivia. And I understand that poverty is about well-being; it's about enabling people to leave the despair of poverty that can grab people.

Once you do that, once you have people be able to have some well-being, have shelter, have food, their dignity, their hope, their sense of self, their capacity to think about the future improves. And that makes them part of what can be a peaceful process, rather than one that would turn to violence in order to look for a better life.

JEFFREY BROWN: All right. Maria Otero on the work of Muhammad Yunus and many others, thank you very much.

MARIA OTERO: Thank you.