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By Philippe Legrain ADD COMMENTS

It might seem odd that the Nobel Peace Prize has been awarded to a
banker, but Muhammad Yunus, who set up the Grameen Bank, is no ordinary financier. 

Back in the 1970s, when it was conventional wisdom that the best way to
help the poor was through huge loans to developing-country governments,
the Grameen Bank pioneered a different approach. It offered the rural
poor in Bangladesh small loans at affordable rates without requiring
collateral, and thus empowered them to improve their lives. The bank
now has 6.5m borrowers, 97% of them women, an average
loan size of almost $130 and a 99% loan repayment rate. It has
played a vital role in reducing Bangladesh’s poverty rate. Such is its
success that similar "microfinance" schemes have sprung up around the

As Yunus has highlighted, access to financial services is not a luxury for the rich, it is a necessity for the poor too. It can mean the difference between scraping by day by day and investing for the future: setting up a business, keeping one’s children in school, buying essential medecines. It can help empower women in particular. The ability to save, borrow and invest reduces poor people’s vulnerability to the hazards of life – illness, the theft of a market trader’s stock, a farmer’s poor harvest – that might otherwise leave them and their family destitute; and it gives them the opportunity to improve their standard of living. For the economy as a whole, a loosening of credit constraints can raise the rate of investment – and hence, if the funds are invested wisely, the pace at which the economy can sustainably grow. 

said on Friday that eradicating poverty “can give you real peace. There
is no self-respect and status when you are burdened with poverty." He richly deserves his Nobel prize.

Posted 14 Oct 2006 in Blog

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