Nobel Peace Prize Goes to Micro-Loan Pioneers Stefan Lovgren for National Geographic News
October 13, 2006 They call him the "banker of the poor." Now Muhammad Yunus can add Nobel Peace Prize winner to his resume.
The Bangladeshi economist and his Grameen Bank won the 1.4-million-U.S.-dollar prize on Friday for pioneering a new category of banking known as micro-credit, which grants small loans to poor people who have no collateral and who do not qualify for conventional bank loans. (Related: Nobel winners in medicine, physics, and chemistry.)
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The program has enabled millions of Bangladeshis, almost all women, to buy everything from cows to cell phones in order to start and run their own businesses.
Similar micro-credit projects have helped millions around the world lift themselves out of poverty.
In 1997 fewer than eight million families had been served by micro-credit worldwide, according to the 2005 State of the Microcredit Summit Campaign Report. By the end of 2004 some 3,200 micro-credit institutions reported reaching more than 92 million clients, according to the report.
"Muhammad Yunus is a revolutionary in the best sense of the word," said Sam Daley-Harris, director of the Microcredit Summit Campaign in Washington, D.C. "He has promoted independence, not dependence, among millions of poor people."
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Yunus, 65, founded the Grameen Bank, which means "rural bank" in Bengali, in 1976.
The idea was kindled two years earlier, as the South Asian country was suffering from a famine. (Related photos: Bangladesh's deadly monsoons.)
Working as a young economics professor at Bangladesh's University of Chittagong, Yunus lent the equivalent of U.S. $27 from his own pocket to 42 women in the village of Jobra who had a small business making bamboo furniture (Bangladesh map).
Since then, the bank he founded has made an estimated 5.7 billion dollars in loans to more than six million people in Bangladesh, 96 percent of them women.
Anyone can qualify for the loans, which average about U.S. $200.
Nobel Peace Prize winner Muhammad Yunus was an economics professor in Bangladesh when he launched the Grameen Bank in 1983. Since then, the innovative bank has made small loans to almost 7 million of the poorest people in one of the world's poorest countries.
Grameen's "micro" loans, usually totaling less than $100, go to people with no collateral. Borrowers (almost all are women) use the money to start small village businesses, which often catapult them from squalor to self-respect.
Grameen, which is profitable, has a repayment rate of nearly 99%. Unlike wealthy borrowers, the poor know that if they default on one loan, they'll never get another, Yunus says. The micro credit concept has spread to more than 100 countries, including the USA. Now, Yunus, 66, seeks to rally support for eradicating poverty in this century. Last week, USA TODAY's David J. Lynch interviewed him in Washington.
But, of course, this is probably all too complicated for the average investor to understand.
On October 9th, 2006, Paypro decided to further pursue the expansion in Latin America with the purchase of Ebiz Finance Savings & Loan. This purchase is very interesting for several reasons:
1. Ebiz was said to be the only Panamanian corporation that was allowed to do business online at the time.
2. Ebiz specializes in procuring microloans in a region where small loans can change people's lives (the reason why Muhammad Yunus received the Nobel Peace Prize last year for developing the whole concept, see: http://www.chicagotribune.com/news/nationworld/chi-0610140237oct14,1,3952805.story or http://www.usatoday.com/money/world/2006-11-26-yunus-usat_x.htm ). ***Interestingly, the Nobel Peace Prize for developing the microloan concept was announced four days later on October 13, 2006. And, this is presently one of the bigger banking movements of the past few years because it helps the poor and promises larger returns, similar to sub-prime mortgages, but on a much smaller scale.
3. The concept goes hand in hand with Paypro's business model of issuing funds on debit cards, as they can integrate the two and issue the loan on a debit card.
4. And, the combined concept allows them to expand upon their corporate manifest of bringing banking to poor Pan Americans. With this concept in place, they have the business front and tools by which to issue debit cards that will hold money like a bank account and function like a debit/credit card to individuals who previous could not receive either a bank account or a credit card; and it allows them to issue loans to these same unfortunate people (although, unfortunate for them and fortunate for us, the interest rate on the loan is ~22%).
Now do you understand? BTW...no charge for that 5 minutes worth of DD that was apparently "too complicated for the average investor."
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