By Molly Moore
Washington Post Foreign Service
Saturday, October 14, 2006; A01
PARIS, Oct. 13 -- Bangladeshi economist Muhammad Yunus and the Grameen Bank he created won the Nobel Peace Prize on Friday for leveraging small loans into major social change for impoverished families.
The Grameen Bank's pioneering use of micro-credit has been duplicated across the globe since Yunus started the project in his home village three decades ago. Loans as low as $9 have helped beggars start small businesses and poor women buy cellular phones and basket-weaving materials.
"Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty," the Norwegian Nobel Committee said in its citation released Friday in Oslo. "Micro-credit is one such means."
The committee praised Yunus, 66, as "a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh but across cultures and civilizations."
In a telephone interview, Yunus said he was overcome by the excitement of winning the prize after several years of being nominated.
"I was trying to find people to tell, and the phone kept buzzing, so I could hardly tell anybody," said Yunus, speaking from his home in Dhaka, the capital of Bangladesh. "Then people started coming and bringing flowers. It's fantastic."
Still exuberant after hours of telephone calls and hundreds of visitors pouring into his house, Yunus said: "This prize is so overwhelming, it will affect our work tremendously. It will bring the issues I'm raising to the attention of people who can make a difference in the world.
"From this day on, micro-credit will become part of the financial center, it can't be kept as some kind of subsector," he said. "As a bank you have to reach the poor people. That's a big change, and banking will not be the same."
Yunus said he believes the Nobel committee endorsed his view that bridging the gap between rich and poor countries in an age of increasing globalization is critical to reducing conflict around the world.
"You cannot go on having absurd amounts of wealth when other people have problems of survival," he said. "If you can bring an end to poverty, at least from an economic point of view, you can have a more livable situation between very rich people and very poor people, very rich countries and very poor countries. That's our basic ingredient for peace."
Bangladesh's first Nobel Prize exhilarated a poor nation more accustomed to news of natural disasters, disease and political upheaval. A massive public assembly was planned for Saturday in Dhaka to honor Yunus and the Grameen Bank, according to bank officials who said their offices were besieged Friday by customers, citizens and politicians offering congratulations.
Yunus and the bank were surprise winners among the 191 nominees for the most prestigious of the Nobel awards. Speculation in recent days had focused on diplomats and officials who brokered last year's Aceh peace accord, which ended 29 years of fighting in the Indonesian province, and on global celebrities that included Bono, the U2 lead singer and anti-poverty campaigner.
The $1.4 million prize will be split between the Grameen Bank and Yunus, the bank's managing director. Yunus said he would use his share to set up a company to make low-cost, nutritious food for the poor and to establish an eye hospital for poor Bangladeshis.
Yunus and the Grameen Bank are hardly household names outside of Bangladesh, but Yunus has been one of the world's most prominent and renowned leaders of poverty alleviation. The Grameen Bank model has been duplicated in more than 100 countries, from Uganda to Malaysia to Chicago's South Side.
The Bill and Melinda Gates Foundation recognized the bank's efforts in August, providing a $1.5 million grant to expand its work worldwide through the Grameen Foundation.
A gentle, soft-spoken man who has been feted by kings and presidents for his groundbreaking and tireless efforts to improve the lives of poor families, Yunus nonetheless has remained most at ease in the steamy Bangladeshi villages where the bank's clients -- mostly sari-clad women -- line up at makeshift tables to repay their loans.
Yunus launched the idea of the Grameen Bank after he returned to Bangladesh from the United States to take a teaching job in the economics department at Chittagong University.
Alarmed at the poverty created by ongoing famine, he and his students started an experimental project giving women $27 loans to buy straw to make stools.
The bank they created -- Grameen means "village" in the Bengali language -- not only defied conventional lending rules by making loans to the poorest of the poor, but challenged cultural taboos by giving most of the loans to women in a Muslim-dominated society where rural women at the time were seldom allowed to touch money or work outside of their homes. The bank issues most of its loans to women because Yunus discovered that they spent their money more carefully and paid back the loans in far high percentages than did men.
Today, the bank has 6.61 million borrowers and 2,226 branches. The bank reports that it has lent $5.72 billion over the past 30 years and claims a 98 percent repayment rate.
"Micro-credit has proved to be an important liberating force in societies where women in particular have to struggle against repressive social and economic conditions," the Nobel Prize committee said in its citation Friday.
Three years ago, the bank started a program to give beggars -- or "struggling members" -- lines of credit of about $9 to purchase small items such as bread, candy, pickles and toys. Recipients of the loans then resell the goods "to supplement their begging," according to the bank's description of the program, which is intended not only to empower beggars, but to boost their morale and dignity.
"Yunus's long-term vision is to eliminate poverty in the world," the Nobel Prize committee said. "That vision cannot be realized by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part."