Nobel winner to use prize to help poor

POSTED: 10:48 a.m. EDT, October 13, 2006

Muhammad Yunus

Yunus and the Grameen Bank he founded won the award for advancing economic and social opportunities for the poor, especially women, through their pioneering microcredit work.

The 65-year-old economist said he would use part of his share of the 10 million kronor ($1.4 million) award money to create a company that would make low-cost, high-nutrition food for the poor. The rest of his share would go toward setting up an eye hospital for the poor in Bangladesh, he told reporters. (Bankers to poor win peace Nobel)

The food company, to be known as Social Business Enterprise, will sell food for a nominal price and be a "no loss, no dividend" firm, he said, without elaborating.

Yunus is the first Nobel Peace Prize winner from Bangladesh, a poverty-stricken nation of about 141 million people located on the Bay on Bengal.

"I am so so happy, it's really a great news for the whole nation," Yunus told The Associated Press when reached by telephone at his Dhaka home shortly after the prize was announced.

"This award will encourage me further to dedicate myself to improving the lives of the poor," Yunus said later in comments to reporters. "It will be a great source of inspiration for me in my days ahead."

Mobbed by admirers and his staff, a smiling Yunus said, "There is a link between peace and poverty."

One of his aides, Dipal Barua, said the award was an "honor for millions of poor women who have made this possible, it's a great achievement. It's a marvelous recognition."

Bangladesh Prime Minister Khaleda Zia congratulated Yunus and said he had "brought great honor for his country."

Yunus' Grameen Bank was the first lender to hand out microcredit, giving very small loans to poor Bangladeshis, most of them women, who did not qualify for loans from conventional banks. No collateral is needed and repayment is based on an honor system.

Loans average about $200 and go toward buying items such as cows to start a dairy, chickens for an egg business, or cell phones to start businesses where villagers who have no access to phones pay a small fee to make calls.

According to the bank, interest ranges from zero percent for loans to beggars to 5 percent for student loans, 8 percent for home loans and 20 percent for loans to businesses that generate income.

Anyone can qualify for a loan, but recipients are put in groups of five and once two members of the group have borrowed money, the other three must wait for the funds to be repaid before they get a loan.

Grameen, which means rural in the Bengali language, says the method encourages social responsibility. The results are hard to argue with -- the bank says it has a 99 percent repayment rate.

The Bangladeshi government owns 6 percent of the bank, while Grameen's customers own the rest.

Since Yunus gave out his first loans in 1974, microcredit schemes have spread throughout the developing world and are now considered a key approach to alleviating poverty and spurring development.

Yunus told The Associated Press in a 2004 interview that his "eureka moment" came while chatting to a shy woman weaving bamboo stools with calloused fingers.

Sufia Begum was a 21-year-old villager and a mother of three when the economics professor met her in 1974 and asked her how much she earned. She replied that she borrowed 5 taka (about $0.09) from a middleman for the bamboo for each stool.

All but $0.02 cents of that went back to the lender.

"I thought to myself, my God, for five takas she has become a slave," Yunus said in the interview.

"I couldn't understand how she could be so poor when she was making such beautiful things," he said.

The following day, he and his students did a survey in the woman's village, Jobra, and discovered that 43 of the villagers owed a total of 856 taka (about $27).

"I couldn't take it anymore. I put the $27 out there and told them they could liberate themselves," he said, and pay him back whenever they could. The idea was to buy their own materials and cut out the middleman.

They all paid him back, day by day, over a year, and his momentary generosity grew into a full-fledged concept that came to fruition in 1976 when he began to set up experimental microfinance projects in rural parts of Bangladesh. Grameen Bank was formally founded in 1983.

In the year's since, the bank says it has loaned 290.03 billion taka ($5.72 billion) to more than 6 million Bangladeshis.

Worldwide, microcredit financing is estimated to have helped some 17 million people