Sometimes a little goes a long way
Joanna Boddens-HosangLast Friday, the Nobel Peace Prize for 2006 went to the Bangladeshi Grameen Bank and its founder, Dr Muhammad Yunus.
“A very welcome surprise and excellent choice of the Nobel Committee”, says Noragric’s head of department, Professor Ruth Haug.
Some may ask: how does a bank, lending money to the poor, warrant the world’s most respected prize for “Peace”? A similar question was raised two years ago when Dr Wangari Maathai received the prize for her efforts in the Green Belt Movement, a grass-roots environmental non-governmental organisation. The underlying reason is the same, says Professor Haug, “Peace building includes improving the quality of life for poor people. Poverty itself does not necessarily lead to conflict, but poverty increases as a result of conflict.” Indeed, in the Nobel Committee’s statement on Friday, reference was made to “development from below serving to advance democracy and human rights”.
The formula behind the Grameen Bank’s success is to extend small loans to entrepreneurs who are too poor to qualify for traditional bank loans. The borrowers, 97% of whom are women, join a group of borrowers and invest the money into income-generating businesses as well as improved housing for the poor. According to the Grameen website (www.grameen-info.org) by May, 2006, the Bank had some 6.61 million borrowers and provided services in 71, 371 villages in Bangladesh, covering more than 100 percent of the total villages in Bangladesh. The principle has spread to some 43 countries around the world.
Micro-credit is a powerful tool towards poverty reduction. The fact that micro-credit benefits many poor, rural women directly contributes to Millennium Development Goal number 3 which promotes gender equality and empowering women. By extending loans to women, a marginalised group in society, opportunities are given to increase their livelihoods and participation in the economy. Women are often left out from the political and economic processes.
Norway, through NORAD, has supported the Grameen Bank since 1985. According to an evaluation report of the Grameen Bank’s activities (available on the NORAD website), “21% of Grameen Bank borrowers manage to work themselves out of poverty within a little over four years of membership. The poverty reduction impact therefore is seen to be continuous and cumulative, and hence seems sustainable.” The report in question goes as far as saying that “the Grameen Bank is perhaps the single most successful "development project" in the world”
Is this a fair claim? Is micro-credit the solution to poverty alleviation? According to Dr Nurul Shekh, associate professor at the Centre for Multicultural and International Studies at the Oslo University College and guest lecturer at Noragric’s Bachelor programme in Development Studies, “Loans need to be paid back. A default on a loan can be costly. Those who have taken out a micro-finance loan sometimes need to lend additional money in order to be able to pay the interest on the loan if the rate of return on their investment is low. It is also important to look at other development cooperation tools. A loan on its own is often not enough”.
Nevertheless, the Nobel Peace prize has once again been awarded to an individual and an organisation that contribute to the ongoing fight against poverty. There may be many ways to address poverty-related problems, and there are indeed many different underlying reasons for these problems, but the Nobel Peace prize brings the world’s attention to efforts in giving some of the 1.5 billion people on this earth living on less than 1 USD a day the opportunity to rise above the acute poverty level.
Updated: 20.10.06
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Noragric, Norwegian University of Life Sciences
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Universitetstunet 1 (Tivoli)
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Phone: +47 64 96 52 00
Fax: +47 64 96 52 01
E-mail: noragric@umb.no
Postal address:
Noragric, Norwegian University of Life Sciences
P.O. Box 5003
NO-1432 Aas
Norway
Visiting/delivery address:
Universitetstunet 1 (Tivoli)
NO-1432 Ås