The Grameen Bank and Community Capitalism

Women borrowers returning to pay loan installments.

Muhammad Yunus won the 2006 Nobel Peace prize for founding the Grameen Bank and pioneering the idea of "micro-credit" or what I call "Community Capitalism."

It was Yunus, a professor of economics in Bangladesh, who first suggested that tiny loans to impoverished people, who were otherwise too poor to qualify for traditional bank loans, might make a world of difference.

In fact, Yunis himself got the experiment rolling by giving the first loan out of his own pocket in 1974 -- $27.00 given to 42 women in a village where the woman needed to buy bamboo in order to make bamboo furniture they could sell.

Today the Grameen Bank has issued over $ 6.5 billion to 7.5 million borrowers, 97% of whom are village women (Grameen means village) who have gone on to buy such things as sewing machines to make clothes for sale, seed with which to plant crops for market, and cell phones which become "village phones" which can be rented by the minute.

The Grameen Bank even lends to beggars, encouraging them to move from pure begging to street sales of such low-cost goods as matches.

The Grameen Bank has grown because it makes borrowers members of the bank, charges borrowers an interest rate to cover capital loss from delinquent loans, and because most poor women (well over 90%) end up paying back their loans.

Today, more than 95% of the equity in the Grameen Bank is owned by former borrowers; the government of Bangladesh owns less than a 5% stake.

The Grameen Bank does not just lend money: it also educates rural women in a few simple basic ideas by asking them to recite the Sixteen Decisions (see below) and pledge to follow them in their own lives.

The Sixteen Decisions

1. We shall follow and advance the four principles of Grameen Bank: Discipline, Unity, Courage and Hard work – in all walks of our lives.



2. Prosperity we shall bring to our families.



3. We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest.



4. We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.



5. During the plantation seasons, we shall plant as many seedlings as possible.



6. We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.



7. We shall educate our children and ensure that they can earn to pay for their education.



8. We shall always keep our children and the environment clean.



9. We shall build and use pit-latrines.



10. We shall drink water from tubewells. If it is not available, we shall boil water or use alum.



11. We shall not take any dowry at our sons' weddings, neither shall we give any dowry at our daughter's wedding. We shall keep our centre free from the curse of dowry. We shall not practice child marriage.



12. We shall not inflict any injustice on anyone, neither shall we allow anyone to do so.



13. We shall collectively undertake bigger investments for higher incomes.



14. We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her.



15. If we come to know of any breach of discipline in any centre, we shall all go there and help restore discipline.



16. We shall take part in all social activities collectively.

For the record, Bill Clinton was instrumental in getting the Nobel Committee to focus on the work of Dr. Yunus, noting in a speech given at University of California, Berkeley in 2002, that Yunus was "a man who long ago should have won the Nobel Prize [and] I’ll keep saying that until they finally give it to him."

When they finally did, Dr. Yunus asked that Yusuf (aka Cat Stevens) play the midday Nobel concert as not just a musical voice, but also as a philanthropic one that has helped found schools, fund orphanages, and rebuild houses damaged by hurricane and earthquake in the developing world. Yusuf's Australian tour has just started and is sold out, I am told. >> Take a listen.


Cat Stevens concert at the 2006 Nobel Peace Prize for Muhammad Yunus