Recognition could only be delayed, never denied

However, as we all know, the Nobel Peace Prize does not usually go to a banker or a money-lender, but Bangladesh's Muhammad Yunus is a money-lender with a difference, and so is his Grameen Bank.

The idea that professor pioneered three decades ago -- that the poor are creditworthy even though they have no collateral to offer, that they will repay loans especially if backed by group guarantee, and that innovative banking solutions will meet a dire financing need at the bottom of the pyramid -- is now well on its way to becoming mainstream.

His drive against the curse of poverty is now a proven success. Peace is required for democracy; and democracy requires a hunger-free nation to flourish since hunger only facilitates corruption and backwardness. The professor thinks that access to credit by the poor is not only a necessity, but also one of their fundamental rights. He also thinks that no peace is possible in the world when two-thirds of its population live below the poverty line and hence his role as a banker to the poor and a goodwill ambassador for peace.

We now have hundreds of companies that have been set up to undertake micro-finance activities. The government and development partners have recognized micro-credit a long time back through supporting various micro-finance institutions. The big and even foreign banks have sensed an opportunity, and early movers and others have worked out a way of profiting from this new movement.

Direct lending involves unsustainable costs, so they are busy re-financing those who lend micro-credit. International development finance agencies are supporting micro-finance institutions by offering guarantees and various local currency fund raising solutions. Credit enhancement in this sector is also supported by several commercial banks. Even the venture capitalists have moved in to fund them in some of the countries. The capital market is also expected to be open for them soon. A regulatory framework is also being firmed up for this sector.

Micro-finance has been making a difference in Bangladesh since long. Many individuals, families and even communities have been brought out of poverty through the incidence of micro-finance, out of those many have graduated to micro-entrepreneurs. Professor Yunus's Grameen Bank has even ventured into taking the "beggars" out of begging through the system of micro-credit. The story has gone way beyond Bangladesh, of course.

The UN declared 2005 the year of micro-finance. The G-8 has issued a statement in support, and the IMF and World Bank are talking of financial inclusion. Citigroup has instituted an award for micro-entrepreneurs, and it is not the only one.

Shamima Khatun from Noabeki village in Satkhira went to the closing ceremony of UN year of micro-credit at New York and shared her success stories of access to finance, better utilization of money, and coming out of poverty with Chelsea Clinton and Jennifer Lopez.

This year Nilufar Yasmin, from village Binna in Perojpur, is going to the global micro-credit summit in Halifax, Canada, representing Prof Yunus with success stories of financial intermediation through micro-finance. European royalty now shows interest in the subject, and the Bill and Melinda Gates Foundation has decided to get into the field, as have some other big charity bodies overseas including Bill Clinton's Global Initiative.

When all are jumping onto the same bandwagon, and the Nobel committee has blessed the creator of the concept, it is important to recall how the idea started. A professor of economics who saw poor people in his university's neighbourhood needing credit and not getting it, tried to get the local commercial banks, where this writer belongs, to lend to them. He got the predictable response, so he took out the money himself and lent to people who were poor, usually illiterate and mostly women, ignoring dire warnings that it would be the last he saw of the money.

The experiment worked. Learning from this and encouraged by the early success, the professor then set up the Grameen Bank a quarter of a century ago; this extended from one centre to the whole district, and then the whole country, and now has agencies and support groups around the world.

The Grameen Bank now has over two thousand branches and 5 million borrowers, almost 10 million beneficiaries, for lending money that comes with around 20 per cent interest rate, a short repayment period (this is usually trade credit, after all), and has a loan recovery rate of 97 per cent.

Borrowers have to save some money on a mandatory basis, and perhaps as a result of this, half of those who have borrowed from the bank for a decade have crossed the poverty line. It is not the story of an economics professor or his created institution getting recognized, it is the recognition of a concept, respect for a model, tribute to many success stories of coming out of poverty or winning a war against poverty, not only in Bangladesh, India, Indonesia, China, Philippines, Kenya, Mexico, in many countries now and almost in all developing countries in the near future.

Micro-credit has become a proven tool for attacking poverty by creating synergy at the bottom of the pyramid. We salute the banker, a banker to the poor, Professor Muhammad Yunus who gave birth to this concept and nourished it amidst all odds and brought it to its fruition. The recognition was due when his book Banker To The Poor came out, if not before. We are happy that the efforts of this great conqueror in the war against poverty has at last been recognized, because for any good work recognition can only be delayed, never denied.

Mamun Rashid is a banker.