Bangladesh banker wins Nobel Peace Prize

[rioters bloc]

any thoughts?

http://www.guardian.co.uk/international/st...1921749,00.html (http://www.guardian.co.uk/international/story/0,,1921749,00.html)

A Bangladeshi economist yesterday won the Nobel peace prize for helping to lift millions out of poverty by lending tiny amounts of money directly to the neediest people on the planet.

Muhammad Yunus, the microcredit pioneer, and the bank he founded in Bangladesh, Grameen, were presented with the award and the 10m kronor cheque (£800,000) for his work in creating a nation of entrepreneurs.

The Nobel committee said their efforts showed how working to eliminate poverty could result in peaceful development.

"Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty," it said in its citation. "Microcredit is one such means. Development from below also serves to advance democracy and human rights."

Mr Yunus became the first Bangladeshi to win the Nobel peace prize and was immediately feted in his home country, where he is already a national hero.

Bangladesh's prime minister Khaleda Zia, a childhood friend and schoolmate, thanked him for the "selfless service that you have rendered to the poorest of the poor bringing hope to the hopeless and giving them a cause of life".

Although not a household name in the west, Mr Yunus is a familiar name on the international development circuit where he is known as "banker to the world's poor". Such was his reputation that in1987 , when Bill Clinton was the governor of Arkansas, he approached Mr Yunus to help them replicate its model in his state.

Mr Yunus's insight was to recognise that the surest route out of destitution was to help the poor to help themselves. As a professor of economics in 1974 he was astonished to learn that women in a nearby village making bamboo stools could not make money because they were being charged extortionate rates of interest. The outstanding loan, which ensured a life of penury, was just $27 (£15).

Instead Mr Yunus lent the villagers the money to buy their own materials and cut out the middleman. They all paid him back, day by day, over a year, and his impulsive gesture slowly became a fully fledged business with the founding of Grameen Bank in1983 . "In showing that poor people could be productive and make money he broke with the old mindset that all aid should be about providing services like education and health," said Kevin Watkins, director of the UN human development report office.

Since then Grameen has lent $5.7bn, in a country where almost half the country's 140 million people live in poverty.

Today Mr Yunus' bank has 6.5million borrowers in Bangladesh, 97% of whom are women.

Many say this alone has changed the fabric of the Islamic nation. "This is a significant change empowering women. I think Grameen is powering a social revolution in our country. We have seen evidence of this in sharply increasing primary school enrolment rates," said Debrapriya Bhattacharya, director of Policy Exchange, a thinktank in Dhaka.

Mr Yunus has recently pointed out that Bangladesh has been reducing poverty by2 % a year since the turn of the millennium. If sustained this rate of poverty reduction will see the country halve the number of poor people by2015 .

Mahfuz Anam, editor of Bangladesh's Daily Star, said: "He passionately believes that, like freedom of speech, credit is a fundamental human right and everybody should have access to it. Without access to money how can you live is his view."

But Mr Yunus' hard-nosed approach extends to a refusal to respond to beggars. "I feel bad - sometimes I feel terrible - that I'm denying the person," Mr Yunus told Reuters in a 2004 interview.

"I would rather try to solve the problem than just give them a hand and take care of them for the day."

How it works

Microfinance is lending to poor, often illiterate, people who have no collateral, no business experience and who therefore cannot normally borrow from the banks.

In the developing world the poor often work at home with raw materials bought with borrowed money.

The finished wares have to be sold back to the moneylenders, leaving scarcely enough, after repaying the loan with interest, to feed the family. So to make the next batch of goods poor people have to return to the moneylenders.

A failure to repay a debt ends up with people paying by working. The result is bonded labour, often with the children bearing the burden of unpaid debts.

Microfinance banks break the cycle by lending to the poor to buy raw materials. This means the workers can sell at a fair price on the open market, a price which means enough to service the debt, feed the family and make a profit.

To ensure that debts are paid, money is lent to groups, often women, who appear to respond better to financial terms.

Less than a dozen clients guarantee each other's loans and a default by one could result in the entire group being penalised.

The resulting peer pressure means repayment rates exceed 95%.

The idea has spread across the globe. More than10 , 000microfinance institutions are in existence with a loan portfolio exceeding $7bn (about £3.8bn).

Most of them are very small, with a client base of less than 2,500.

[Conghaileach]

Originally posted by Mahfuz [email protected] editor of Bangladesh's Daily Star
"He passionately believes that, like freedom of speech, credit is a fundamental human right and everybody should have access to it."
Is anyone else disturbed by this statement?

The one question that kept running through my head as I read this article was, 'How much interest is charged on these "microcredit" loans?' It's never actually addressed in the piece.

[rouchambeau]

any thoughts?
Are you serious?

[Demogorgon]

Originally posted by Conghaileach+Oct 14 2006, 07:46 PM--> (Conghaileach @ Oct 14 2006, 07:46 PM)
Mahfuz [email protected] editor of Bangladesh's Daily Star
"He passionately believes that, like freedom of speech, credit is a fundamental human right and everybody should have access to it."
Is anyone else disturbed by this statement?

The one question that kept running through my head as I read this article was, 'How much interest is charged on these "microcredit" loans?' It's never actually addressed in the piece. [/b]
Aye, that leapt to my attention as well.

This makes me uneasy. I am far from being against giving somebody the ability to work for themselves rather than simply relying on aid (that proofs counter productive in the long run).

But this looks like just another way of exploiting the poor, albeit not nearly as bad as the other loan sharks in the region.

[rioters bloc]

Originally posted by [email protected] 15 2006, 07:42 AM

any thoughts?
Are you serious?
yes.


of course this isn't any kind of solution to the problem of poverty, and of course i don't "support" it. but i come from bangladesh, and my entire family apart from my parents live there, and i go there every coupla years to spend time with them. and the majority of people who live there are dirt fucking poor. this scheme has been running for 5 or 6 years now and having spoken to many women who have borrowed money through the grameen bank and then used it to set up small shops, it has actually benefitted them in a very real way and gotten them out of the vicious cycle of charity upon which they were reliant.

it's really easy to sit on a pedestal and denounce the scheme (not to say that you shouldn't) but despite there being a strong left in bangladesh there's very little change that has actually been brought about by them.. and people are starving while we wax theoretical. which is why i asked that question.

[rioters bloc]

The Micro-Credit Cult
Jeffrey Tucker

In the story of Rumpelstiltskin, an evil dwarf saves the life of a
king's bride by spinning flax into gold. But the price is high for
performing this seeming miracle. She must give the dwarf her
first-born child. Grameen Bank's ideal customers

The story could be an allegory for the "micro-credit" movement, the
current enthusiasm of the political left here and abroad. It promises
credit for poor people with no savings or collateral. A closer look,
however, shows the movement to be financially dangerous, subtly
coercive, and, in its most famous case, an enemy to children and
families.

The micro-credit movement got a big boost at the summer 1995 UN world
conference on women. The person who received the largest round of
applause was not Hillary Clinton or Bella Abzug. It was a banker, and
a man no less: Bangladesh economist Muhammad Yunus.

"Capital does not need to be the handmaiden only of the rich," Yunus
announced in Beijing. "Access to credit should be a human right
irrespective of economic situation." In July this year, the House
Committee on International Relations sat in awe as Yunus made similar
promises to politicians who should know better.

Yunus runs Bangladesh's Grameen Bank, the most politically correct
bank in the world. The literature on him is hagiographic in the
extreme. Academic journals and books tout Yunus and Grameen in dozens
of studies. All major newspapers, including the Wall Street Journal,
have run glowing profiles. "McNeil-Lehrer Newshour" did a full
segment. The Economist magazine has been taken in. He has been
nominated for the Nobel peace prize!

Meanwhile, governments are urging their bankers to replicate Yunus's
alleged successes. Next year, Washington, D.C., will host a world
summit on the micro-credit movement, with the enthusiastic support of
the Clinton administration and many Republicans in Congress.
Conventional commercial bankers should prepare for some bitter attacks
on their lending policies.

In the fairy-tale version of events, Yunus founded the Grameen Bank in
1976to give credit to the poor and save them from the usurious
interest rates of greedy commercial banking. Now the bank loans more
than $ 400million per year to people--mostly women--with no assets and
no credit history. He has profitably granted two million loans from
1, 000branches, and an astounding98 % of them are repaid. If we come
to know of any breach of discipline in any centre, we shall all go
there and help restore discipline

It sounds so wonderful. Yunus has spun flax into gold. "Someone had to
demonstrate that it really works," says this alchemist.

The adulation has a political subtext. If Grameen can give loans to
poor women without assets, why can't Citicorp? Why are Western bankers
keeping money from the poor? It must be greed, cultural barriers, bad
training, or racism. Lack of collateral is but an excuse for hatred of
the poor.

But if Grameen were really profitable, Western bankers wouldn't need
to be cajoled and harangued into copying it. They would rush to try
his gold-spinning machine. Bankers would love to discover that the
poor are98 % credit worthy. They would long ago have tossed out
cumbersome formalities like credit ratings and collateral.

It turns out, however, there's more to Yunus's banking scheme than
meets the eye. Grameen is not a bank at all. Deposits from individuals
and firms account for a mere3 % of its assets. The bank actually
functions as a conduit for huge grants from governments and
international agencies. That aid is then used as the basis of a credit
pyramiding scheme that not only provides micro-loans but also funds a
creepy form of feminist social engineering that wars against children
and marriage.

Contrary to legend, Yunus wasn't an independent entrepreneur when he
started his bank. He used his personal wealth and high-level
connections to arrange special privileges and millions in subsidies.
Before the Grameen Bank lent one Taka, he had government backing for
fully60 % of its operations.

The UN International Fund for Agricultural Development provided
Grameen with its first major loan of $3. 4million. That Fund has
consistently pumped money in ever since. In addition, Grameen receives
grants and subsidized loans from the governments of Norway, Sweden,
Canada, Germany, and even the Ford Foundation in the U.S., not to
mention the IMF and World Bank.

If the funds aren't given as gifts to Grameen, they are lent at
below-market rates, usually2 %. Grameen Bank then deposits that money
in fixed-term and short-term accounts in commercial banks that pay
higher rates. Grameen makes a killing by pocketing the difference.

The bank says this is merely arbitrage, but if private citizens did
this with government funds, it would be called graft. These ill-gotten
profits are then used to pay12 , 000staffers and subsidize the loan
operations that everyone claims work so well.

Grameen charges its customers20 % interest, below the market in a
country with high inflation and virtually no savings. At this rate,
the reinvestment scheme subsidizes its loans by39 %. The bank is
forever forecasting future profits. Somehow that day never
arrives--which doesn't mean that its managers and top employees are
doing charity work.

The98 % repayment figure does not reflect the behavior of actual
individual borrowers. Grameen relies on the "peer group" method of
repayment. Borrowers are lumped into cells of five. Any future
loans--which offer80 % more money than the first one--depend on
repayment by the entire cell.

If one person doesn't pay, others in the cell "lean" on them to fork
over the cash, or pay it themselves. The person in the cell who wants
another loan has the incentive to get all the money one way or
another. In this way, Grameen does get paid. But the98 % repayment
rate records final payments grouped by cells, and only on first-time
loans. We shall collectively undertake bigger investments for higher
incomes

The bank claims the system is "self policing." But observers note that
its employees (many of them Western ne'er-do-wells in search of
foreign utopias) engage in weekly, door-to-door monitoring of all
borrowers. Even then, the payback rate for second-time borrowers is
much lower.

"Confidentiality breeds lies," says Yunus, and that rule applies to
more than finances. The bank's ideological mission requires that when
you borrow, you turn over your private life to the bank's staff.
Borrowers must take vows to "keep our families small," to "build and
use pit-latrines" and to "plant as many seedlings as possible during
the planting seasons."

It gets stranger. The bank requires borrowers to attend weekly
physical-training exercises. They must participate in parades where
they repeatedly chant the "Sixteen Decisions," a narrative summing up
the bank's worldview. Among the choruses is this: "We shall take part
in all social activities collectively."

Yunus was cheered at the UN conference because93 % of Grameen's
borrowers are women. But this fact too is a function of its social
agenda. Yunus--and the international organizations that fund him--have
concluded that population and marriage are the primary causes of
Bangladesh's poverty. Women drawn into the Grameen orbit "emancipate"
themselves from family and biology and enslave themselves to Grameen
instead.

Consider the treatment of dowries, a traditional transfer of property
between families on the occasion of a marriage. For many countries,
prohibiting them would be the equivalent of criminalizing the diamond
engagement ring. But Grameen's "Sixteen Decisions" calls the dowry "a
curse" and makes borrowers swear "we shall not take any dowry in our
sons' weddings, neither shall we give any dowry in our daughters'
weddings."

Borrowers with children are strongly "encouraged" to send them to one
of18 , 000"feeder schools" from a very young age. There they are
taught with Grameen textbooks that promote the Sixteen Decisions.
People who work for the bank must also demonstrate loyalty to the
Sixteen Decisions.

All this suggests the Grameen Bank is more of a cult than a financial
institution. But let's consider its financial claims more carefully.
It claims to be privately owned. But that's because borrowers are
forced to buy at least one share in the bank. Currently about88 % of
the bank's ownership is spread between1 . 5million borrowers, while
the government still owns the other12 %. Borrowers cannot sell the
shares they "own," however, and each borrower also pays a5 %
"contribution" to a "cell group fund," plus1 % to a savings fund that
pays no interest.

So let's say you're a borrower in Bangladesh. You, along with the four
others in your credit cell, are approved for a loan of $75. After all
mandatory payments are extracted, you end up with $69. 50in hand,
which you must spend immediately, and an obligation to pay $ 90to
Grameen in one year. If all other members of the cell default, your
liability zooms to $450. To make sure that doesn't happen, you have to
spy on the other members (or worse) and tolerate being spied upon (or
worse). You own one stock in Grameen Bank, but you can't sell it and
neither does it earn dividends.

Meanwhile, your private life is gone. The Grameen staff is in charge
of your family size and the workings of your latrines. Your friends
must be Grameenites. You chant the Sixteen Decisions ad nauseum and
attend tedious exercise sessions and parades. If you're single, the
prohibition on dowries limits your marital prospects. If you're
married with children, your children are farmed out to Grameen Day
Care. You can't have any more if you want to. Plus, you must
periodically abandon your primary occupation to dig around in the dirt
planting tree seedlings to please international agencies.

Like the king's bride, these borrowers might regret that they ever
made the original deal with Yunus. But Bangladesh's legendary poverty
makes it appear that our Rumpelstiltskin offers the only way out of a
desperate situation.

Agree or disagree with Grameen's femino-socio-financial engineering,
there's no economic miracle worth copying in the Grameen model. At
best, its operations are wasteful and Ponzi-like; at worst, they are
parasitical, usurious, and communistic. This bank would not be viable
apart from the government subsidies and financial trickery, facts
which prove that its grandiose claims are false. The Grameen Bank's
fame is a consequence of its far-leftist social agenda, not its
economic successes.

Thanks to its benefactors, Grameen isn't going away soon. So what's
next on its agenda? In Rumpelstiltskin, the king's bride has forgotten
her promise to give up her baby until the dwarf comes to claim him. In
the real life version, Yunus is now opening health clinics to "help"
the beneficiaries of his gold-spinning talents. The clinics will be
"self financing" and, he hopes, bring about "zero-population growth."
What ghoulish financial, medical, and social plans are in store for
these poor women under Professor Yunus's medical care we can only
shudder to think.

_______________________________

Jeffrey Tucker edits The Free Market.

http://mises.org/freemarket_detail.asp?con...der=articledate

[Conghaileach]

Originally posted by rioters [email protected] 15 2006, 12:48 AM
Jeffrey Tucker edits The Free Market.
How trustworthy a source can The Free Market be? Isn't it a laissez faire economic magazine?

[rioters bloc]

Originally posted by Conghaileach+Oct 15 2006, 10:23 AM--> (Conghaileach @ Oct 15 2006, 10:23 AM)
rioters [email protected] 15 2006, 12:48 AM
Jeffrey Tucker edits The Free Market.
How trustworthy a source can The Free Market be? Isn't it a laissez faire economic magazine? [/b]
oh i wasn't posting it as a 'reliable source'. just as another view.

[Janus]

It's basically a more charitable and "kinder" business but a business nevertheless.

[Red October]

OSLO, Norway (AP) -- Bangladeshi economist Muhammad Yunus accepted the Nobel Peace Prize on Sunday, saying he hoped the award would inspire "bold initiatives" to fight poverty and eradicate the root causes of terrorism.

Yunus, 66, shared the award with his Grameen Bank for helping people rise above poverty by giving them microcredit -- small, usually unsecured loans.

"I firmly believe that we can create a poverty free world if we collectively believe in it," Yunus said after accepting the prize at City Hall in Oslo, Norway. "The only place you would be able to see poverty is in a poverty museum." (Watch Muhammad Yunus accept peace prize to standing ovation Video)

The Nobel Prizes, announced in October, are always presented in Oslo and Stockholm, Sweden, on December 10 to mark the anniversary of the 1896 death of their creator, Alfred Nobel, a Swedish industrialist who invented dynamite and stipulated the dual ceremonies in his will.

The winners for literature, medicine, physics and economics will receive their awards later Sunday at a royal ceremony in Stockholm's blue-hued concert hall. Each award carries a purse of $1.4 million, a diploma and a gold medal. The first prizes were handed out in 1901.

This year's laureates include a novelist who explored Turkey's clash of cultures and American scientists who helped cement the big-bang theory of the universe and broke new ground in genetic research.

Yunus said ending poverty was the best way to fight terrorism.

"We must address the root causes of terrorism to end it for all time," he said. "I believe putting resources into improving the lives of poor people is a better strategy than spending it on guns." (Watch Yunus deliver acceptance speech Video)

Grameen Bank, set up in 1983, was the first lender to provide microcredit, giving very small loans to poor Bangladeshis who did not qualify for loans from conventional banks. No collateral is needed, and repayment is based on an honor system, with a nearly 100 percent repayment rate.

Yunus said the idea has spread around the world, with similar programs in almost every country.

Clad in a traditional Bangladeshi sleeveless jacket, Yunus accepted his half of the $1.4 million prize from awards committee chairman Ole Danbolt Mjoes.

Board member Mosammat Taslima Begum, wearing a traditional dress in red with a green shawl, accepted the other half of the award on behalf of Grameen bank, saying she dedicated it to all Bangladeshis.

Mjoes said the award was an outstretched hand to the Islamic world in an era where Muslims are often demonized because of terrorism.

"The peace prize to Yunus and Grameen Bank is also support for the Muslim country of Bangladesh, and for the Muslim environments in the world that are working for dialogue and collaboration," Mjoes said

Turkish writer Orhan Pamuk won the literature prize for a body of work that illustrates the struggle to find a balance between East and West.

U.S. researchers have long dominated the science awards, and swept them all this year for the first time since 1983.

The Nobel Prize in medicine went to Andrew Z. Fire and Craig C. Mello for discovering a powerful way to turn off the effect of specific genes. John C. Mather and George F. Smoot won the physics prize for work that helped cement the big-bang theory of how the universe was created.

Roger D. Kornberg won the prize in chemistry for his studies of how cells take information from genes to produce proteins, a process that could provide insight into defeating cancer and advancing stem cell research.

Economics winner Edmund S. Phelps was cited for research into the relationship between inflation and unemployment, giving governments better tools to formulate economic policy. The economics award is not an original Nobel Prize, but was created by the Bank of Sweden in 1968.

Pamuk, whose trial last year for "insulting Turkishness" made headlines worldwide, was honored for exploring "new symbols for the clash and interlacing of cultures." His novels include "Snow" and "My Name Is Red." The charges against Pamuk were eventually dropped.

what are your thoughts on this?

[Morag]

The idea of microcredit is an interesting one because the small sums borrowed are usually lent to allow people to produce things. Grameen Bank has been criticised for having high interest rates (I think about 18%), but it has been proven to encourage people to pay their loans off quickly and also it ensures that those who take loans are dedicated to making them work. Also, and I'm very pleased with this, when the bank started in the 80s, only gave loans to collective groups of women. If someone defaults, the entire group is responsible for paying the loan back. Women, apparently, are a safer bet in loan repayment then men for some reason I can't recall. Because of its women-oriented policy, the bank has been credited for helping women gain a stronger position in Bangladeshi society, and for encouraging education for women and family planning practices. Unless I'm mistaken, Yunus has been threatened several times since setting up the bank.