Muhammad Yunus celebrates in Dhaka, Bangladesh, after winning the Nobel Peace Prize. (Pavel Rahman/Associated Press)

Economist Muhammad Yunus did what others who are in a comfortable financial position do from time to time: Give to those in need. His first notable donation was $27 US for villagers in his native Bangladesh that could help "liberate" them from debt. But then, he turned his sights on turning convention — about banking, about fighting poverty, about helping the poor — on its head.

Some 30 years later, after creating a bank that has loaned more than $5 billion to the poorest, he and his Grameen Bank won the $1.4 million Nobel Peace Prize in October 2006 for championing "economic and social development from below."

It's from the bottom, where the poorest people live, the beggars roam, where Yunus focused his energies of loaning, not giving, small amounts of money, called microcredits.

Excerpt from peace prize citation

The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006, divided into two equal parts, to Muhammad Yunus and Grameen Bank for their efforts to create economic and social development from below. Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights. Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world. Every single individual on Earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development.

Each loan does not add up to much — the average amount borrowed is $160. His efforts have spawned a movement that helps the poor fend for themselves and in the process picked up his impoverished nation. His bank now has a client base of about 6.6 million borrowers, 97 per cent of whom are women.

The bottom up

"All of Bangladesh has changed if you look from the bottom up," Yunus said in 2005.

Yunus had the advantages that many of his country of 141 million did not have. He was born in Chittagong in 1940, and his education gave him two degrees from Dhaka University. He later attended Vanderbilt University in Tennessee in the late 1960s and received a PhD in economics. He returned home and started teaching economics at Chittagong University.

It was there where he saw the disparity between the ideas he was teaching and what he saw outside his classroom. Why, he thought, was he talking about how countries needed billions of dollars in development when he looked outside and saw a different picture, a different need?

He met a bamboo furniture maker who was only able to make pennies a day because she had to borrow the money to make her pieces and in the process lost most of her earnings from repaying the debt. The need, from her view, was to escape the moneylenders so she could get a fair market value for her products. He found more than 40 people who could be helped by cutting out the middlemen.

What was enlightening for him was that they only needed "a tiny amount" of money.

'Not charity'

"I couldn't take it anymore," he told the Associated Press in 2004. "I put the $27 out there and told them they could liberate themselves."

They paid him back and the idea for the microcredits was born.

"This is not charity. This is business, business with a social objective, which is to help people get out of poverty," Yunus told the Nightly Business Report in 2005.

His bank operates on the belief that more than half of the world's population would not qualify for a loan, would not be creditworthy. So his bank is modelled to reverse banking rules or, in his words, "the less you have, the higher priority you have."

In recent years, the microcredit industry has exploded, stemming from the model Yunus set through Grameen Bank. As of 2005, some 3,200 microcredit programs reportedly reached 92 million "clients" compared with 13.5 million in 1995. Of the poorest clients, 83.5 per cent are women, according to the 2005 State of the Microcredit Summit Campaign Report.

Microcredit institutions worldwide

Year	# of clients	# of institutions
2004	92.2 million	3164
2003	80.8 million	2931
2002	67.6 million	2186
2001	54.9 million	1567
2000	30.6 million	1065
From 2005 State of the Microcredit Summit Campaign Report

How Grameen works

Grameen Bank has 19,000 staff and 6.6 million borrowers. Most of its loans average at about $160 and borrowers repay in small weekly instalments. There is no collateral, and the money is used for people for self-employment or to generate income.

In some cases, a person seeking a loan must join a small group of borrowers. Only a few are given money to start out with, and as loans are repaid, other members get a chance to get loans.

The bank does not take legal attempts to get money back "unlike in the conventional system," Yunus said. Grameen says it will never charge interest if total interest charges exceed the amount that was loaned. For example, someone who takes a $10 loan will not pay more than $10 in interest. In addition, Grameen says it asks borrowers to adhere to social goals, such as educating their children, keeping a sanitary lifestyle and eating right.

But does it make money? The bank says it loaned out $610 million in 2005, a year in which it said it made more than $15 million. Grameen said its repayment rate is 99 per cent.

The money is being used for women to build businesses, from selling merchandise to offering cellphone services to villages that don't even have land lines.

The bank also has a program for beggars (it had faced criticism for not going after the poorest of the poor) who exist on a subsistence lifestyle. The program typically gives $8 to a beggar with no collateral and no demands for interest. Now, the program has reached 55,000 people with a cost of about $500,000.

With his half share of the $1.4 million winnings, Yunus said he would create a company that will provide nutritional food for the poor and to set up an eye hospital.

When asked about how he sees the future, Yunus has said he sees credit as a human right, and that giving everyone an opportunity will lead to a world free from poverty.

Or, as the Nobel committee sees its, "Every single individual on Earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development."

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