Nobel Peace Prize Goes to Micro-Loan Pioneers

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One of the bank's most notable success stories has been its so-called "village phone program."

Women obtain loans to acquire phone systems built from simple handsets and solar chargers, which function as pay phones in rural areas.

The concept of "village phone lady" is now known throughout Bangladesh and has spread to other parts of Asia and Africa.

Repayment is driven by social pressure. Loan recipients are placed in groups of five. Members can only apply for future loans once the group catches up on some of its outstanding debts.

That system encourages social responsibility and has a repayment rate in excess of 98 percent, the bank says.

"No one is more motivated than the poor to get out of poverty," said Alex Counts, who worked with Yunus in Bangladesh for six years and now heads the Grameen Foundation USA in Washington, D.C.

"A hundred dollars in capital may be the only thing that stands between them" and getting out of poverty, he said.

"You give them a fair deal—not a subsidized loan but a market-interest loan—and they're able to put their motivation, skills, and business savvy to work."

Preventing War

Yunus's strategy has been to do the opposite as conventional banks, says Daley-Harris of the Microcredit Summit Campaign.

According to Daley-Harris, Yunus "would say: 'If the banks lent to the rich, I lent to the poor. If banks lent to men, I lent to women. If banks required collateral, my loans were collateral free. If banks required a lot of paperwork, my loans were illiterate friendly. If you had to go to the bank, my bank went to the village."

The bank even runs a project called the Struggling Members Program, which works with up to 80,000 beggars in Bangladesh.

Many people had expected that the Nobel Peace Prize would be awarded to someone involved in peace negotiations.

However, in its citation, the Nobel Peace Prize committee, which is based in Oslo, Norway, said, "Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty."

Daley-Harris agrees, saying achieving peace is about more than stopping war.

"A key part of preventing strife is that people have a stake in their communities and are empowered to care for their children," he said. "This is what micro-credit programs have been able to provide."

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