Friday, October 13, 2006

2006 Nobel Prize for Peace

When I was a lad in high school, one topic of discussion in social studies was the systemic poverty in the developing world and how the World Bank and the International Monetary Fund, with their main focus being stabilization of faltering economies, didn't often care about the effects of budget cuts and interest payments on people in the countries to which they loaned money. Often times, it made things worse. The key is to promote self-sufficiency.

One of the ways to do that, of course, is education; or more accurately the kinds of programs that promote education relevant to local conditions. The other is growing small businesses. The problem is that many people, mostly women, would like to get that kind of start but are often turned away because the amount of money they need loaned to them -- often just a couple of thousand dollars or even less -- is just not worth the bank's time. In fact, merely being able to afford a vacuum cleaner or agricultural implements such as a plowshare would be enough, but a banker often doesn't see the worth. So these people have traditionally been forced to rely on loan sharks. We think they're bad in Canada and the United States. They're much worse on the other side of the world.

However, one idea that was discussed in high school, and which I thought had a lot of merit, was the idea of micro-credit -- actually givng out small loans to empower people, often as little as $50 to $100 US. The expectation is that the money will be paid back, of course, but often it's loaned out in conjuction with other small loans in clusters or groups. The loanees become responsible for each other, and there's peer pressure on each other to succeed and to make sure all the loans are paid back so as not to affect the reting of the group as a whole. Nowadays, these microloans are mostly given to women because they are actually a lower credit risk on average. The odd thing is, this initiative actually works, contrary to conventional wisdom. It may not completely lift people out of poverty all together, but the new small business people become more self-reliant. So much so that even some First World banks have finally caught on and are now trying the same thing in poor urban centres; although of course the loans are somewhat larger.

One of the people at the forefront of this microloan revolution was Muhammad Yunus, one of the pioneers of the concept and the founder of the Grameen Bank. Today, the Norweigan Nobel Committee awarded both the 2006 Nobel Prize for Peace.

It's certainly an unconventional choice but it does make more people aware of the benefits of microcredit and how it gives a continued shot in the arm to feminism, which is under increasing attack around the world. This one definitely gets a thumbs up from me ... and it must be driving the oddmakers in Las Vegas crazy, as Yunus was a longshot, at least 200-1 to win it. (Even better.)

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