At first glance, it seems odd that the Nobel Peace Prize should be awarded to the inventor of a new form of banking. But Mohammad Yunus is no ordinary financier, and the Grameen Bank — the institution that he founded almost 30 years ago, and with which it was announced last week that he is to share this year's prize — is no ordinary bank.

The Grameen Bank has pioneered the concept of 'microcredit'. It offers relatively small loans to individuals in developing countries who have no security to offer and no credit history. Such loans are used to set up small businesses, allowing people to earn their way out of poverty.

The award of the Nobel Peace Prize for this work is welcome recognition that economic growth can promote peace by encouraging social stability. It is a particularly fitting reminder today, when too much focus is being placed on attempted military solutions, from Afghanistan to Darfur.

Vision of Technological Skills


The work that Yunus and the Grameen Bank have pioneered is not only about economic development. It is also embedded in a vision of grass roots democracy with a powerful message about how poor people can use new technological skills and their imagination to escape from poverty.

The Grameen Bank has pioneered the concept of 'microcredit,' offering relatively small loans to individuals in developing countries while allowing people to earn their way out of poverty.

In the mid-1990s, the Grameen Bank successfully applied for a license to operate a telephone network in Bangladesh. At the time, the move raised many eyebrows because the mobile telephone was seen primarily as an expensive gadget used by the middle classes.

Yunus explained his strategy at a meeting in Harvard University two years ago. "We wanted to change the image of the mobile telephone, and put it in the hands of poor women," he said. "Our idea was that these women could sell telephone services in rural areas where there are often no fixed telephone lines."

"Our prediction was correct," Yunus told the Harvard meeting. "Shortly after we launched Grameen Telephone, I visited many villages and could not believe how enthusiastic people were about our initiative."

In less than ten years, there were about 30,000 women using Grameen Telephone in Bangladesh, earning between US$50 and US$500 a month in a country where the average annual wage is about US$200. This confirms Yunus's conviction that "in the right circumstances, the poor have the imagination to use modern technology to make great achievements".

Meeting the Needs of the Poor


Yunus uses his experience with mobile telephones — and the broader concept of microcredit — to argue that, given the right tools and environment, people can dig their way out of poverty. But often they do not have the opportunity to do so, partly because government policies and regulatory frameworks prevent them from exploiting these tools.

Yunus uses his experience with mobile telephones — and the broader concept of microcredit — to argue that, given the right tools and environment, people can dig their way out of poverty.

"Information technology provides an unprecedented opportunity to overcome these [limitations]," he said. "The first requirement is for products that meet the needs of the poor." He proposed, for example, what he described as an electronic Aladdin's lamp. "When the lamp is rubbed, a digital genie would come out and ask me what I want to do. If I said that I wanted to sell some eggs, it would tell me where I should go to get the best price. Or if I told the genie that I had a medical problem, it would tell me what I should do about it."

Yunus argued that "the poor are poor because they don't have [access to] the answers to these questions". But this dilemma can be solved if information technology is brought to bear on it.

He also pointed out that it is also important to create a supportive social and economic environment that allows people to exploit the potential of such products.

Empowerment is the Key


At the root of Yunus's achievements is a philosophy of empowerment. Too often, poor people are disenfranchised as much by powerful institutions (such as banks) as they are by the political process. But Yunus and his colleagues have shown that information technology and appropriate economic support can help reverse this trend.

"Frequently poor people are not able to improve their situation because society does not provide a base for them to grow from. If you take the seed of a small tree and plant it in a flowerpot, it will grow into a miniature version of what it could be if you planted it in open ground."

Yunus argued that while too often poor people are disenfranchised as much by powerful institutions (such as banks) as they are by the political process, information technology can help reverse this trend.

This same analysis applies to information about science. Too often, the flow of such information is controlled by experts at institutions like universities or research centres, who for the most part do not effectively communicate or contextualise scientific information. One of the great promises of modern communications technology, such as the Internet, is that, by providing mass access to information, these limitations no longer exist.

"It is clear that information technology is going to change the world dramatically in the years ahead," Yunus told his Harvard audience. "The challenge we face is in making sure that poor people share in the benefits of this revolution."




Contributed by David Dickson, director of SciDev.Net. Reprinted with permission from SciDev.Net.

To read another Global Envision article about microfinance and Mohammad Yunus, see Microcredit Wins the Nobel Peace Prize.








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