This is great news! Kudos to Yunus and his whole team. This should have been awarded to them years ago!

Just FYI. I posted a story with Vikram Akula—Founder and CEO, SKS Microfinance in the News Tab.

The Nobel Prize did well by choosing the Turkish novelist Orhan Pamuk yesterday and the banker amd social visionary Mohammed Younis today.

Kudos. The Banglas have cornered the brown Nobels!

So Bangladesh has its second Nobel Winner! First Amartya Sen, now Mohd. Yunus....

Kudos!

Congratulations! Substance trumps style.

I read this article and it brought tears to my eyes. I love the whole idea of microcredit: to help the individual acquire tools to develop their own economic life and interests and to, hopefully, enjoy the fruits of that hard labor. This man is truly worthy of such an honor. What a wonderful choice.

Bravo! Finally...the Nobel has been awarded to a man deserving of the honor.
Peace through Prosperity.

btw, amartya sen, while having been born in pre partition Bengal, is an Indian citizen.

Interestingly, the vast majority of borrowers are women. Men tend to drink away the loans, explained one microlender (I forgot who, but i think it was Vinod Khosla). This may put a dent in plans to bring microfinance to the west, where noticing the obvious is considered bigotry.

Anyway, the empowerment of women is one reason, some have theorized, why Islamic fascists have targeted the bank; which makes sense, since the bank hasn't invaded iraq or supported israel as far as I know.

Kudos. The Banglas have cornered the brown Nobels!

V.S. Naipaul won for literature, and is a non-Bengali brown. Ditto for Subramanyan Chandrasekhar.

V.S. Naipaul won for literature, and is a non-Bengali brown. Ditto for Subramanyan Chandrasekhar.

Minor figures ;)

Noticed that you have listed this post under "Economics".
Freudian slip? I hope.

What a wonderful piece of news!

what's really depressing is that after watching CNN for two hours, not once have they mentioned the peace prize or its winner. but they have mentioned bono and his efforts and are planning to show a piece on him and his red initiative shortly. kudos to him, don't want to take anything away, but the media really has tunnel vision. if bono or geldof had won the peace prize, as many suggested, it would be the lead story.

update: well they just mentioned it, but its been relegated to a soundbite, that too on CNN International's noon news show.

Noticed that you have listed this post under "Economics". Freudian slip? I hope.

How is microcredit not related to economics? And what's Freud gotta do with it?

RIGHT ON!!!

While on the topic of Nobels, do you guys think there will be other Brown Nobels in the near future? Who?

While on the topic of Nobels, do you guys think there will be other Brown Nobels in the near future? Who?

My money's on Abhi.

Siddhartha - I just finished the Mimic Men and it reminded me how vital V.S. Naipaul's writing is...it's just brutally honest. The whole scene on the beach with the swimmers who don't make it back and the fishermen who watch over the whole thing? Shivers down spine....

twas a joke, darling MD...

(in friendly mood as we all seem to be united in giving props to Yunus)

Oh, sorry, I know, I was just blog-conversing ( I caught the ;) )

I was joking. I assumed that you, like me, considered him an Economist more than a peace activist. Thus the Freudian Slip.

So Bangladesh has its second Nobel Winner! First Amartya Sen, now Mohd. Yunus....

claiming amartya sen as bangaldeshi is like claiming pervez musharaf as indian

V.S. Naipaul won for literature, and is a non-Bengali brown. Ditto for Subramanyan Chandrasekhar.

You forgot C.V. Raman.

I assumed that you, like me, considered him an Economist more than a peace activist.

Yeah, it really doesn't have much to so with peace. It's tempting to make a correlation between poverty and social unrest/terrorism/violence/crime/etc but some of the wealthiest countries have the highest crime rates.

I understand the more mobile and less static or class-oriented a society is, the more likely it is to have social unrest. People know their place in the old world so things are rather peaceful as Marx lamented (opiate of the masses) but the new world created greed and envy as even the lowest classes think they can be president, as montesquieu observed. These are broad theories and i'll try to dig up some razib-like data to support it later.

So, by creating hope, greed, envy, and lack of contentness; it's possible mircofinace can lead to less peace and more social unrest.

Abdus-Salam won in 79 for physics. Born in Sahiwal, Punjab, he is one of two Punjabis to win the prize. The other, Khorana (68, medicine) also went to Punjab university in the 40s.

Chandrashekhar (Physics, 1983) was born in Lahore, but was obviously not Punjabi.

That's three Bengalis (Tagore, Sen, Yunus), two Punjabis (Abdus Salam, Khorana) and two Tamils (CV Raman and his nephew Chandrashekhar).

(I'm not counting Mother Teresa)

Men tend to drink away the loans, explained one microlender (I forgot who, but i think it was Vinod Khosla). This may put a dent in plans to bring microfinance to the west, where noticing the obvious is considered bigotry.

Iterations of microfinance for women are already among us.

There's a San Francisco based desi (disclaimer: she's also my friend) named Farhana Huq with Bangla-Pak roots who has modified the microcredit idea in order to employ it with immigrant women in the U.S. She's built it up from nothing in less than 6 years - I think they operate at $500,000+ a year these days (but don't quote me on it) and she's gotten props from the likes of Isabel Allende and the Ashoka Foundation.

More on her gig at the CEOWomen (Creating Economic Opportunities for Women) site.

So, by creating hope, greed, envy, and lack of contentness; it's possible mircofinace can lead to less peace and more social unrest.

yes. probably. i have a cousin who is a development economist in bangladesh and corruption at many of the lending institutions is rife and results in BMWs for the new middle class. i might blog the topic this weekend...i went to bangladesh in 1989 and 2004, big changes.

btw, sen, unlike musharraf, seems to be more positive toward the land of his familial origin, so i think the claim is very stretched, but it isn't as ludicrous. also, tagore had family lands in east bengal.

So, by creating hope, greed, envy, and lack of contentness; it's possible mircofinace can lead to less peace and more social unrest.

What?? Some of you people are just heartless and ridiculous. A small loan to take someone out of indentured servitude, and the best you can say is that it could lead to "lack of contentness"? You think extreme poverty is more peaceful?

For shame.

ikram, thanks for the rundown. brown people should represent :) we're 1/6th of the worldz pop, we need to catch up. hehe.

Kobayashi:

I'm all for microfinance, I just don't think it has much to do with peace. Creating wealth? Yes. I'm all for wealth at the expense of stability. creative destruction and all that jazz. I'm an american and it's nice to see the subcontinent become americanized.

Re: counting Sen as Bangladeshi, yes, its quite reasonable, he has on numerous occassions spoken about his fondness towards his janam-bhumi. Here is a description of his visit to Bangladesh:

Sen was granted honorary citizenship of Bangladesh. Prime Minister Sheikh Hasina handed over the certificate of honorary citizenship and a Bangladesh passport to Amartya Sen at a ceremony in Ganobhabhan, the Prime Minister's official residence.

http://www.hinduonnet.com/fline/fl1601/16011340.htm

They are not being hard-harded Mr. Kobayashi. They are trying to discuss the possible outcomes of a particular action: it will definitely help the deserving individual who receives the microloan but it may also cause some societal tensions, as well. Chaning a woman's status in society will be problematic: it won't go smoothly all the time. Personally, I don't see how bringing a nation out of poverty can help but dislocate and cause tensions. As the US increased it's prosperity in the last century, there were many populations dislocations, including from rural to urban, the changing status of women and minorities. These were undeniably good things, but the change was often difficult and caused tensions.....

MD, you want a weird illustration of 'dislocation'? my uncle had to drive 100 miles north of dhaka to find a 'decent maid.' the reason? all the 'eligible girls' are working in textile factories now and so aren't available as drudges for the upper middle class (and honestly, my uncle is more than upper middle class, so it is a sign of how many young women are now employed in the industry that he had to go searching).

While on the topic of Nobels, do you guys think there will be other Brown Nobels in the near future? Who?

Rushdie, especially if the discourse on Islamism grows more vociferous.

An environmental activist in peace, especially as the clowd above India goes darker, and they start blaming the Third World emerging economies for the coming global ruin :-) Maybe Sunita Narain.

Science I have no competence to judge. There are lots of desi academics in the US, but there's usually a twenty year lag in selecting.

Re: counting Sen as Bangladeshi, yes, its quite reasonable, he has on numerous occassions spoken about his fondness towards his janam-bhumi.

Yes, he does. Even in his NP acceptance speech he talked of Bangladesh, and his work with economists there with lot of respect and affection. However, pre-partition Bengal was 100% India, and that technicalilty should not twisted.

So did Abdus Salam who visited India (as he was born and grew in pre-partition India) often and seeked out his old teachers. In fact, his institute @ Trieste has done lot for developing countries sciece.

Whose God is it anyways -

Prof.Bhagwati's ( who, btw, deserves the Nobel for Economics more than Phelps)wrote this charming piece on the Bono-Geldof misguided express.

Dear Bono,

Having worked in development for almost 50 years, and on foreign aid for almost as long, I confess to a slight sense of déjà vu regarding your collaboration with Bob Geldof to increase aid flows to reduce poverty, especially in Africa. After all, one may ask, which big policy figure in the developmental field in the postwar years has not worked towards the elimination of poverty and demanded that aid flows be increased to that end? Yet, I do not agree with those who write cynically that the poor have done more for the rock stars than the rock stars have done for the poor. Your dedication certainly lends an extra edge to the efforts made by many over the years in this great cause.

But I am afraid your energies have been misdirected when they are used to advance an agenda that is based on two obsolete and counter-productive premises: first, that aid for Africa must be spent in Africa rather than outside it; and, second, that we must work to increase aid flows to a target of 0.7 per cent of gross national product.

The key problem in much of Africa is what has long been called the "absorptive capacity" problem: will aid be used productively or will it be wasted? This issue was understood by the pioneering development economists Paul Rosenstein-Rodan and Gunnar Myrdal. The former estimated aid requirements in the 1960s by reference to this notion. He calculated how much investment was required to help accelerate the growth rate of an aid recipient, based on an assessment of that country's ability to manage such growth. Foreign aid would then be given to finance the investment, provided that the recipient made a matching effort to increase domestic savings as well.

But many economists became sceptical. They argued, with substantial empirical evidence, that when aid was provided, the recipients were likely to reduce, rather than increase, their own savings efforts. This was an early recognition of the "aid curse" that afflicts some aid recipients. Uncritical proponents of aid deny this effect even as they talk of the "oil curse"; as if largesse from the windfall of oil earnings is somehow more corrupting than largesse that comes from aid donors.

The large amounts of aid given to Africa and the small results that have generally accrued from them require us to look at the absorptive capacity question with a critical eye. We should disregard the hysterical charge that everyone who questions the effectiveness of a sudden and substantial increase in aid flows is a heartless reactionary. The increase in the number of democratic governments in Africa, and some bold initiatives by the African Union in places such as Darfur, have increased the absorptive capacity of a growing number of African nations. But that justifies a graduated increase on spending in Africa rather than a substantial and sudden one.

In addition, absorptive capacity is far less of a problem if increased aid for Africa is spent outside the country. Spending can be increased in the rich countries to develop vaccines and cures for diseases that severely afflict Africa, such as Aids and malaria. Research on cures for diseases such as yellow fever and sleeping sickness should be well financed. Since much of Africa suffers from huge skills shortages for virtually every developmental problem, education and training of African students in western universities could be vastly increased. They will mostly stay abroad. But then the west should develop and pay handsomely for programmes where they can contribute in other ways, such as short-term visits to train others, for instance. Until these shortages ease years from now (as they did in the 1990s in India; the "brain drain" was a big issue there in the 1950s) as more nationals are trained and find return attractive, surely we could send out more of our own. I have advocated programmes such as a Grey Peace Corps that would find our aged and retired doctors, engineers and other professionals jobs in Botswana, Zambia and other African nations.

But, if you have erred in allying yourself with the development experts who wrongly focus exclusively on aid spending in Africa itself, a greater folly is to have tied your initiative to the aid target of 0.7 per cent of GNP. This target goes back to 1969 and has not been met except by a tiny fraction of donors, essentially the Scandinavian countries. The problem is that thetarget relates to government spending. Fiscal spending is subject to what economists call "hard budget constraints". There are always many demands on the government. The US, for instance, has just had a colossal increase in spending on the Iraq war and on Hurricane Katrina relief and reconstruction. Even Paul Martin, the progressive former prime minister of Canada, was most reluctant to sign on to this target last year at the United Nations.

Richard Manning, the head of the development assistance committee at the Organisation for Economic Co-operation and Development, recently expressed concern that the main European Union donors would fail to fulfil even proposed aid increases, way short of 0.7 per cent of GNP, pledged for 2010. With all the good intentions in the world, developmental aid will take the back seat against politically more pressing needs.

How, then, are we to translate the enthusiastic altruism that you have generated, dear Bono, into larger, sustained flows of aid? Surely the answer is to go after personal, rather than governmental, flows. Personal spending on aid typically runs into softer budget constraints. With all the charitable spending I do, I could always forego a dinner at Maxim's and eat at McDonald's instead, pledging another $100 to the Geldof-Bono aid fund. So, if you take seriously the estimated audience for Live8 concerts at 2bn, halve it for those who were there for a lark or are impoverished themselves, and halve it again for those who attended the concerts twice, you would have half a billion who could sign up for an average pledge of $50 a head as a supplement to their normal giving, yielding a net sum of $25bn outright. The money would be worth almost twice that amount in actual aid, since they would be grants whereas most aid consists of loans that must be repaid.

This would mean abandoning some of your current allies. But you can do nothing less if your efforts are to yield results. In a recent interview, you said that you expected your music would endure forever but poverty would have ended in a hundred years. I wish you good luck on your music. But not even a hundred years would suffice to end poverty if you fail to correct your course.

Jagdish Bhagwati is an adjunct fellow at AEI.

For the third year in a row, Bangladesh is THE most corrupt nation on Earth, according to Transparency International:

http://www.infoplease.com/ipa/A0781359.html

Its remarkable that in such a corrupt society Mohammad Yunus is able to stay clean. A well-deserved honor.

So Bangladesh has its second Nobel Winner! First Amartya Sen, now Mohd. Yunus....

http://nobelprize.org/nobel_prizes/economics/laureates/1998/

look at the official website for nobelprize - counrty for sen is noted as India

:-)

On the matter of browns winning Nobels, it is confusing to try to identify many of their backgrounds. Amartya Sen seems to identify himself with whatever country sings his praises. My grandparents had roots in East Bengal too, but they never considered themselves anything but Indian.

Abdus Salam, who won in 1979 for Physics, was teaching in Italy at the time, and was born in 1926, before Pakistan even existed. But he chose to identify himself as a Pakistani teaching in Italy.

Khoran is a bit more straightforward - a Punjabi born in India in 1922, but won the prize while teaching at UW Madison.

Naipaul - well, the Trinis and other Caribbeans don't much care for him. And while Indians may take some pride in his winning in 2001, he chooses to live in the UK.

I guess you could say that the brown diaspora can take some pride in their achievments, but I'm willing to bet that Indian Bengalis will place more emphasis on Sen and Tagore, while Bangladeshis highlight Yunus. It's all good.

"While on the topic of Nobels, do you guys think there will be other Brown Nobels in the near future? Who?"
in order of preference. my preference

Jagdish Bhagwati

Sunita Narain

Nandita Das (since this my list)

Some of you people are just heartless and ridiculous

A Ha!!! I finally got you Kobayashi. You are oppressing me and I feel unsafe. Go marry Pardesi Gori.

Hmmm, so no bengali has won in the sciences. Only punjabis and Tamils.

but I'm willing to bet that Indian Bengalis will place more emphasis on Sen and Tagore, while Bangladeshis highlight Yunus.

bangladeshis who aren't goat-bearded fanatics are pretty high on tagore actually (e.g., 3/4 of bangladeshis). he died before partition so he has less strong of an association with post-1941 states.

Hmmm, so no bengali has won in the sciences. Only punjabis and Tamils.

True, but CV Raman won for his work at Calcutta University.

some say bose (our own saheli's great-uncle!) should have won.

bangladeshis who aren't goat-bearded fanatics are pretty high on tagore actually

In Himalaya, Michael Palin's travel show, he ends his multi-nation trip in Bangladesh, with visist to Sylhet and Dhaka. The last scene is him on a ferry alongside a Bangladeshi singer whose specialty was Tagore songs.

Hmmm, so no bengali has won in the sciences. Only punjabis and Tamils.

People like Satyen Bose should have won it.

with post-1941 states.

It is post-1947.

Most of the people see pre-1947 as a collective past.

Isn't the Bangladesh national anthem a Tagore composition?

yes. kush, i checked tagore's year of death, '41. is why i typed that by mistake :)

I am still waiting for a Urdu speaker to win the big one. Maybe they will give one to Mushie if he captures Bin Laden.

what's really depressing is that after watching CNN for two hours, not once have they mentioned the peace prize or its winner.

Thats what i was thinking too. What better moment to ENLIGHTEN AMERICA about that good things do happen in other parts of the world, even Muslim parts. Can SM make this post stick at the top for a few days?

Not to brag, but what the heck.

The past few days have been brag worthy for Columbia University, my Alma Mater.

Edmund Phelps (faculty ) won the Nobel for Economics

Orhan Parmuk (visiting fellow) won the Nobel for Literature

Kiran Desai (Alumna and my wife's class mate) won the Booker Prize

Oh, this prize has been a long time coming for Dr. Yunus. Kudos!

A lot of misinformation above. All data below from Wikipedia and whatever other online material I could find.

Tagore: Born 1861 in Jorasankor. West Bengal, India

Sen: Born 1933 in Santiniketan. West Bengal, India

Yunus: Born 1940 in Chittagong. Bangladesh.

CV Raman: Born 1888 in Tiruchirapalli, Tamil Nadu, India

Chandrashekar: Born 1910 in Lahore, Punjab, Pakistan.

Hargobind Singh Khorana: Born 1922 in Raipur, Punjab, Pakistan

Abdus Salam: Born 1926 in Sahiwal, Punjab, Pakistan

If you want to count VS Naipaul (and I wouldn't), his ancestral home is in Gorakhpur, UP, India.

None of this matters. Every single Desi Nobel winner was born in British India. Or princely India --I'm not checking that. We should thank Mountbatten, Minto, etc. We are about ten to fifteen years away from a post-partition born Nobel winner, and a generation away from a post-1971 winner.

Chandrashekar: Born 1910 in Lahore, Punjab, Pakistan.

Hargobind Singh Khorana: Born 1922 in Raipur, Punjab, Pakistan

Abdus Salam: Born 1926 in Sahiwal, Punjab, Pakistan

Pakistan was still just an idea at this point, but the point about British India is on target.

Tagore: Born 1861 in Jorasankor. West Bengal, India

I think Bengal was still just one province at this time. It's partition was one of the topics that outraged Tagore.

tagore was born in what is now west bengal, but i believe some of his famiy estates are in what is now bangladesh and he spent time there.

Manju,

"Creating wealth"? Bro, I doubt any of these women are participating in the stock market or heading for the Forbes 500 anytime soon.

The Nobel Committee is making a point that increasing a sense of agency among individuals is inherent to fostering democracy. Democracies are less likely to fall prey to events like famine (as noted by Amartya Sen). They are less likely to support Kim Jong Illin' types. And the mitigating effect of empowered women in a society cannot be undermined (Afghanistan vs. Sweden? Bihar vs. Kerala? Lord of the Flies vs. Sweet Valley High?)
~
My Malayali housekeeper is part of a Grameen style panchayat based savings and loan program for women. The vast majority of the participants are married are to unemployed men (who drink) or barely employed men (who drink even more). In her case, her husband works at a local school and makes between Rps 200 - 300 a day. In Kerala, that would be enough for her not to have to work, but that's not possible because his money ends up in his liver.

So she and her cohorts pool their money and get matching loans to open vegetable shops, run small house-to-house catering operations, rebuild their homes, etc. She has bought 5 cents of land and a pair of glasses (to read the newspaper each morning), her grandchildren no longer sleep under a leaky roof (oh yeah, both of her sons are also alcoholics), and she is reasonably sure that she can put away enough money to keep her grandchildren in school, marry them off and 'do the needful' (as they say).

If nothing else, now that she is enrolled in this program she has some shred of peace of mind. There's a reason why 'peace' is a part of that phrase. Who is to say that the Nobel committee wasn't also thinking along those lines?

I think Mother Teresa won the Nobel Prize as an Indian citizen.

Every single Desi Nobel winner was born in British India.

People who were born in British India were still Indians. They did not have a British passport. You raise an interesting point, perhaps a little academic. It happens just because the Nobel committee take so long to recognize work. Plus, it is almost inevitable that the people of Indian origin who are in the running for the Prize would have naturalized to American (or a different country's) citizenship by the time the Nobel committee recognizes them.

Kavita (#57)

Tell the truth, sista! Theory and example, material and spiritual meaning -- it's all there. Thanks for sharing. And "Lord of the Flies vs. Sweet Valley High" is the line of the day.

I think Mother Teresa won the Nobel Prize as an Indian citizen.

Yes

People who were born in British India were still Indians. They did not have a British passport.

Yes. A lot of people (especially on blogosphere) tend to make pre-1947 India as something nebulous. It wasn't. Not only it was governed by Indian taxpayer's money, it exported raw materials, etc. to the British Empire. Even the princely states in most cases had limited governance and automony (some more, some almost none).

Now to wandering NPs

Often, academics move around, take new residences, and even change nationalities.

Some example: Einstein, Fermi, Bethe, etc.

Some don't: Amartya Sen, like one of the NP for Bose-Einstein condensate in 1998 is a MIT professor who have been in America for ever but holds German passport.

kavita,
"Creating wealth"? Bro, I doubt any of these women are participating in the stock market or heading for the Forbes 500 anytime soon.
True. I see this as part of becoming in a very limited way of the larger global market, not nescessarily as anything American.

I don't believe micro-finance is necessarily going to increase the supply-side of the equation in the short term. Not only is not all the money invested recovered, at least some of the money ends up merely supporting consumption. This is not a traditional "let us provide money so people will invest in businesses and we will get it all back" sort of deal. This is not a pure vindication of capitalism, but we must keep in mind that different places call for different soltions. For its locale, the Grameen Bank concept is a brilliant, brilliant idea.

Why can't they give a nobel to Dinesh D'Souza?
There's no justice in this world.

"Democracies are less likely to fall prey to events like famine (as noted by Amartya Sen). "

Kavita - Sen has repeatedly been discredited for the above claim by events in post 47, democratic India, which has witnessed mass starvation and death far too many times, owing to famines and crop failures.
Indeed, some of the more astute observers on this blog have been too happy to point out such events on many an occassion.

Kavita, respect!! Peace of mind is the greatest peace of all.

Kavita - Sen has repeatedly been discredited for the above claim

No he hasn't. He draws a distinction between famine and endemic malnutrition. If you agree with the distinction, then he hasn't been discredited. If you don't, then he as.

Kritic,
Kavita - Sen has repeatedly been discredited for the above claim by events in post 47, democratic India, which has witnessed mass starvation and death far too many times, owing to famines and crop failures.
Democracy as compared to what?

Don't you think that Sen's is a carefully thought out, carefully formulated position? Discredited is going a bit too far. I think you could say that democracy does not automatically ensure low levels of iniquity, but if you want to take the case of India, isn't it true that the history of malnutrition under democracy in India is nothing compared to the history of famines under the Raj?

I and Siddhartha just crossed in our posts. Siddhartha says the claim holds, and I believe that is correct.

I agree with Siddhartha.

They have been droughts/ food shortage in India, but never a famine on the scale of Bengal since 1947.

Since Bengal famine was not about food shortage only, as his work showed.

They have been droughts/ food shortage in India, but never a famine on the scale of Bengal since 1947.
Exactly. I think you are referring to the Bengal famine of 1943, which can be compared to the Holocaust in the number of deaths. This was merely one in a long series of famines under the Raj.

It is matter of semantics, I guess.
Death due to starvation in a democracy of any number of people discredits Sen's theory, in my opinion.
Especially, since India has more than enough (post green revolution) grain stored in govt. run facilities (criminally inept and corrupt, food corp. of india) all over the country. It is a different story, that mismanagement and corruption prevents the delivery of much needed relief in time of emergency.

Kavita, while you make good points I would beg to differ - there are many definitions of creating wealth and these women are creating wealth. If the woman gets microfinance to buy a chicken and simply eats the eggs, she is feeding herself (which is a good thing). But, if she sells the eggs, and then uses that money to feed herself and maybe also buy another chicken, and so on and so on, then she is creating wealth. Actually, the lovely example of your housekeeper is a better one. She is creating wealth in that way, too. Economies can grow bigger: you do not have to divide the same wealth in different ways to acheive a result. As for 'support' for Kim Jong Ill's policies - he is a Stalinist dictator and no microfinance scheme would ever be allowed in that controlled, regulated death camp of a nation. He will hold onto power however he can.

MD,
If the woman gets microfinance to buy a chicken and simply eats the eggs, she is feeding herself (which is a good thing). But, if she sells the eggs, and then uses that money to feed herself and maybe also buy another chicken, and so on and so on, then she is creating wealth.
In the case of micro-finance systems, production does not always increase.

To be precise, these are not even completely self-sutaining industries.

Not only is not all the money invested recovered, at least some of the money ends up merely supporting consumption.

The repayment rate is 95-98% (google it). They use some unique formulas to determine credit and limit risk. Very imaginative finance that does a lot of good and creates a little wealth, a smaller version of unlike Michael Milken and Drexel.

corrction, that should be:

"a smaller version of Michael Milken and Drexel."

I meant to compare him to another famous financier who did a lot of good for people who otherwise couldn't get money.

Manju,
The repayment rate is 95-98% (google it). They use some unique formulas to determine credit and limit risk. Very imaginative finance that does a lot of good and creates a little wealth ....
I am aware of these numbers. Basically, this is not a traditional capitalist deal where you talk about ROI, and so forth. This is about preventing social iniquity and problems that come out of those, such as terrorism.

I am aware of these numbers. Basically, this is not a traditional capitalist deal where you talk about ROI, and so forth. This is about preventing social iniquity and problems that come out of those, such as terrorism.

Do they charge interest?

Wow, this is neat! My dad has many economist friends, and he met this man (back in Dhaka when I was just a wee kindergartener.)

Manju,
Do they charge interest?
Yes, but they also have some schemes where they don't. In theory, you are supposed to be able to recover the money. In practice, there is a really small rate of non-recovery. The important thing is that they give loans without collateral. Also, we should keep in mind that we are talking about people who are in third-world povery. (And for heaven's sake, I don't care if they don't frickin' repay every last penny :) )

To be precise, these are not even completely self-sutaining industries

This is about preventing social iniquity and problems that come out of those, such as terrorism.

Shankar:

My understanding is that they charge a high interest rate, get a ROI, and have extemely high repayment rates which makes them self-sustainable. I googled around and I haven't foound anything to contradict this but if you have other info let me know.

As far as the "peace" argument goes, besides "peace of mind" I wouldn't be surprised if this has some unintended consequnces of making thinks less peaceful. The connection between poverty or inequality and Terrorism is very dubious and there is some evidence that it is social mobility itself that "creates" social unrest.

In theory, you are supposed to be able to recover the money. In practice, there is a really small rate of non-recovery

your 2 sentances contradict. But bottom line, repayment rate is above 95%. One creative thing thay do is lend money to groups, so there is a lot of social pressure among the women who know each other to repay.

The important thing is that they give loans without collateral.

Maybe. But they do look at whether the women own animals, have a fixed roof or real floor, etc. It's like credit card debt.

Also, we should keep in mind that we are talking about people who are in third-world povery. (And for heaven's sake, I don't care if they don't frickin' repay every last penny :) )

Great, but moot point. They're paying it back. and the interest rate is like 20-30%, so thy certainly don't feel like charity cases and the lender gets a nice return, though after expenses I'm sure it's much lower.

Not to take away any credit from the Younus and the Grameen Bank, but....

the nobel committee could have done the unthinkable and awarded a Peace Prize to Mahatma Gandhi. Till they ever get around to doing that, it will always leave a bad taste in the mouth.

The Grameen Bank site says :
There are four interest rates for loans from Grameen Bank : 20% (declining basis) for income generating loans, 8% for housing loans, 5% for student loans, and 0% (interest-free) loans for Struggling Members (beggars).
The interest rates might seem high, but they are not 20-30%. BTW, even though 20% might seem high, it is not that high. In India, the loan rate for farmers is in this ballpark. The problem with farming, for instance, is that it is risky business because it is dependent on the monsoon and so forth.

Maybe. But they do look at whether the women own animals, have a fixed roof or real floor, etc. It's like credit card debt.
That is kinda my point. It is *not* like credit card debt where there is some sort of collateral. It is based on trust. Check out this.

In other words, the banker's confidence rests upon the will and capacity of the borrowers to succeed in their undertakings.

I am guilty of fudging a couple of things : Grameen Bank and micro-credit schemes. I didn't know about Grameen Bank's finances. I just checked, and it looks like you may be right that they actually turn a profit. However, if you look at the ROE for Grameen Bank for 2002 to 2005, there is wide variance. It varies from 2.93% to 21.22%. But what happens when a flood hits Bangladesh? Obviously ROE really drops. It might even go negative in some years. My point is that, in practice, there are many micro-credit schemes that are not as successful. They end up spending a small amount of money. Which is okay by me.

shankar - even if production is not increased, surely wealth is created at some level? And, at least they get a chance to create wealth, or else, why would they even be interested? If it all stays the same, and there is no net increase to their worth, even if that worth is spent subsisting better than the previous subsistence, then why would it be worth it to these women to even do this? How can it be that there is no creation of wealth at all? I mean, you can say the middle man is cut out and now the money just goes to the woman, but if lots and lots of these schemes take hold, then wouldn't more wealth be created overall than just having people eke out a subsistence and then giving most of the earnings to the middle-man? Does the amount of wealth, or the production as you are apparently defining it, stay the same if all those workers are owners too, or if they just stay workers only?

Please explain, economic types....I am a mental simpleton so break it down for me.

ROA may also be important to consider which will take into account it’s income generating assets and its income bearing liabilities, which in Grameen’s case are its deposits as most of its funding is from entirely from its deposits. Hence most of the income is the spread between what it pays on its deposits. If you see the two largest components on the 2003 balance sheet are its loans and deposits. There is probably a huge spread on the rates as the general and other reserves have gone up from 30 million to about 136 million. The yield on its gross portfolio is almost 20% and the cost of funds is about 7.4%

I am more interested in the potential social engineering aspects of microcredit for women. I suspect being able to generate some income (in several cases, all or the lion's share of the household expenses) and not being completely dependent on their husbands for money allows poor women to have more of a role in decision-making (as in deciding not to have more than two children for instance). It would be interesting to see if the recent trends (decreasing) in population growth rates in Bangladesh (yes, I know, some of it is certain to be creative book-keeping) have any significant correlation with microcredit.

Now will there be or is there some form of backlash against this (say by irate husbands and or fundies who miss the good old days when their women were subservient)? Probably (insert cliche about omelettes and breaking eggs), but (insert second cliche about genie once being out of the bottle).

Note also that microcredit borrowers from the Grameen Bank are obliged to affirm that they will ensure that their children complete both primary and secondary schooling, that they will never ask for or give dowry when their children are married off, etc. (I don't recall offhand if they are expected to practice family planning and limit themselves to two children). Personally, while some commentators have issues with this "abrogation of an individual's rights," I am more than fine with this form of social engineering -- the prospective borrowers are always free not to ask for a loan.

arZan, I believe the Nobel Committee does not award any of the Prizes posthumously.

Manju,
The connection between poverty or inequality and Terrorism is very dubious and there is some evidence that it is social mobility itself that "creates" social unrest.
I think you are thinking of the "movements" in Saudi Arabia and other parts of the Middle East wherein social mobility is a contributing factor. However, in the specific context of Bangladesh, it is almost definitely poverty that is causing them to migrate to states such as Maharashtra and cities such as Mumbai and Delhi. These people would be far less likely to migrate if they had opportunities in their own villages. That was the connection, although admittedly it is not an well established one. Plus, there are other groups in the Indian subcontinent, such as the People's War Group, that explicitly make this linkage of social iniquity and terror.

MD,
shankar - even if production is not increased, surely wealth is created at some level? And, at least they get a chance to create wealth, or else, why would they even be interested?
Nothing particularly subtle here. Don't read too much into this. (That is why I added the statement : "To be more precise, ...".) When I said 'production is not increased', I am only saying that there is an opportunity cost for that capital which is lent. In a purely capitalist system, capital should go to where it has the highest returns. Compared to that level of production, we have lesser production.

arZan, I believe the Nobel Committee does not award any of the Prizes posthumously.

Correct. Though Gandhi was nominated five times.
There's an interesting article on the Nobel prize committee webpage on the issue.

The connection between poverty or inequality and Terrorism is very dubious

Humiliation over real, perceived insults coupled with poverty, inequality, lack of hope can be a fertile ground for the recruitment of new terrorists. You will always have ideological terrorists like Osama etc. but for a mass movement to emerge, it certainly helps to have the above factors in place.

...One creative thing thay do is lend money to groups...

In the intrest of balance someone will post their limitations and failures too.

Ayn Rand must be turning in her grave. Micro-credit is a great example of thinking out of box, which doesn't fit any of the isms(capital/social/communist).

The essential, enabling diffs b/t Grameen loans and traditional bank loans are

1) loan size -- traditional banks probably have too much overhead to do a $5 loan, so there's real "efficiency" being created by the Grameen system...

2) forms of discrimination that are "appropriate" for the local culture but are illegal for traditional banks which operate against more "western" cultural norms. Namely

- sexism (loan to women over 95% of the time - imagine going to a bank in the US and they "no" to you but "yes" to your wife; statistical diffs far smaller than that are enough to accuse US banks of "redlining" areas)

- individual sovereignty (requiring "cosigners" not just for biz loans but also personal loans - imaging going to buy a car in the US but they'll only let you buy it if you get 4 of your friends to cosign the loan with you; here that sort of thing is limited to teenagers, etc.)

- privacy (in the west, banking privacy is a notoriously strict subject... given the lack of a reliable, apersonal credit scoring system, Grameen is hardcore about using social pressure and knowledge as an alternate means of enforcement; FWIW, i remember reading that back in the Wild / Old West, American banks actually did use forms of public humiliation to get folks to pay up their overdue loans -- big signs in your front yard visible the neighbors, signs in the town square, etc. )

The broad ideas are certainly consistent with capitalism -- for ex., there's no overt force being used here. But, it's probably NOT consistent with classic forms of Western banking which do (for both better and worse) emphasize individual responsibility / autonomy / privacy ...

And, of course, that's before you mention the other effect of helping these women / families participate in & gain the skills to further the economy... But that's also ultimately pro-capitalist. Presumably, they'll one day be able to "graduate" into the pros (and cons) of a more formal banking environment...

So I wonder why the muslim world is not celebrating this? No huge demos like we saw after 9/11 Two Muslims have won this year- one in Lit and the other in Peace. Is this beacsue neither is a Koran thumper?

I wanted to add 1 more bullet point to the whole 'This Nobel laureate was born in the des' discussion.. Ronald Ross was born in Nepal and he got the Nobel for discovering malaria's mode of transmission to humans. He did most of the relevant work for the prize in Calcutta. I would call him a honorary desi at the very least.

So I wonder why the muslim world is not celebrating this? No huge demos like we saw after 9/11 Two Muslims have won this year- one in Lit and the other in Peace. Is this beacsue neither is a Koran thumper?

arZan, I believe the Nobel Committee does not award any of the Prizes posthumously.

Correct. Though Gandhi was nominated five times.
There's an interesting article on the Nobel prize committee webpage on the issue.

Actually, in 1948, the year of Gandhi's death, they did not award the Nobel Peace Prize saying that there were "no suitable living candidates", which some people interpret as the closest Gandhi came to getting the Nobel.

Vinod,
that's a pretty narrow view about what capitalism, etc. is about.
True. But do you believe that ROIs on such schemes are always going to be high enough that a free market will make such loans available to the top-level entity, such as Grameen bank in this case? I think states may have to intervene in certain cases to make available such forms of credit since it is quite possible that the underlying businesses are subject to greater risks and lower returns than average.

Perhaps b/c his innovation fundamentally enabled a new class of folks to be subject to usury?

The wikipedia entry indicates the following :
The bank's stellar repayment rate was broken in 1995 by a religious fundamentalist boycott by certain sections of society who objected to the bank's focus on improving the status of women

But do you believe that ROIs on such schemes are always going to be high enough that a free market will make such loans available to the top-level entity, such as Grameen bank in this case? I think states may have to intervene in certain cases to make available such forms of credit since it is quite possible that the underlying businesses are subject to greater risks and lower returns than average.

As far as I can tell, the magic of Grameen is that there has never been state involvement. It's been a private entity from the outset...
Not true. Check out this.

Not true. Check out this.

for those wondering about celebration, there's one going on right now in the Bangladeshi neighborhood of Macdonald Ave. in Brooklyn.

Ronald Ross was born in Nepal and he got the Nobel for discovering malaria's mode of transmission to humans. He did most of the relevant work for the prize in Calcutta. I would call him a honorary desi at the very least.

hmmm...by those standards, the prophet of British imperialism would be a desi Nobel laureate.

Ronald Ross was born in Nepal and he got the Nobel for discovering malaria's mode of transmission to humans. He did most of the relevant work for the prize in Calcutta. I would call him a honorary desi at the very least.

hmmm...by those standards, the prophet of British imperialism would be a desi Nobel laureate.

touche.. my point was that if you claim Naipaul to be desi.. then we might as well expand the definition and call Ross desi

Let me "spin" the Grameen system a different way

It is also not capitalism since their main aim is not to maximise profit but other benifits, and ofcourse they make a point of not loosing money...Key points being not using force and creating an appropriate solution which works.

According to a more philosophical definition, a "free" market is a market where trades are morally voluntary and therefore free from the interference of force and fraud.

... BUT that the real defining aspect is "not using force" ...

FWIW, i remember reading that back in the Wild / Old West, American banks actually did use forms of public humiliation to get folks to pay up their overdue loans -- big signs in your front yard visible the neighbors, signs in the town square, etc. )

It was an American abolitionist named Lewis Tappan who is credited with starting the first credit rating agency

From Wiki entry:

Business activities
Tappan hated credit, but he realized offering it to customers was becoming the only way to make a sale. He also wondered how a merchant could gauge his customer's trustworthiness, and assess whether he'd ever get paid. Tappan began keeping files on customers, reviewing their characters and their credit-worthiness. Pretty soon, other merchants were turning to Tappan for advice. Exploiting his abolitionist connections across the country, Tappan created a network of correspondents to offer up-to-date and comprehensive credit information about people in their communities.

Some saw the files kept by Tappan's Mercantile Agency, founded in 1841, as an invasion of privacy. But by 1844 the business had 280 clients. It opened branch offices in Boston, Philadelphia, and Baltimore. Tappan transferred the running of the agency to his chief clerk, Benjamin Douglass, in 1849. By 1851, 2000 full-time correspondents were reporting from across the nation. Douglass would transfer the company to his brother-in-law, Robert Graham Dun, in 1858, and in 1933 R.G. Dun & Company would merge with its main rival, Bradstreet, forming Dun & Bradstreet, the largest credit reporting entity in the world.

As for Tappan, he retired wealthy to spend all his time opposing slavery. He died in 1873, a decade after the Emancipation Proclamation, in Brooklyn, New York. His papers are collected in the Library of Congress.

Read the Wiki entry if you dont know about Tappan... Being a capitalist and a humanist isnt an either or thing.

voiceinthehead:

I think you're reading too much into group lending. Traditional lenders often ask for co-signers to loans in order to utilize social pressure and insurance for repayment..

The beauty of the program is that it is not an entitlement, it is not a government program, and thus it creates the opposite of a culture of dependency...empowerment. The borrowers are not asked to sacrifice their own profits for the greater collective good. The poor are learning to live as capitalists.

i've heard yunus himself say his primary goal is to turn a profit. That he may have ulterior motives is not unusual for capitalists despite the stereotype of them (Companies often have other goals: he biotech entrepreneur who wants to cure cancer, the newspaper publisher who wants to be the paper of record, fair and balanced). And since you’ve read Rand, i'm sure you know all her heros sacrificed money, power, prestige, indeed virtually everything but their selves, for their principles.

So maximisze profit/efficiency and all other good things will follow is not capitalism ?

Why isn't "Infantile marketism" still a major force.

As far as I can tell, the magic of Grameen is that there has never been state involvement. It's been a private entity from the outset...

Actually the bank is substantially subsidized by grants and aid agencies, even after charging rather high interest rates. The project isn't economically viable in and of itself.

Kumar Pallana:

Actually the bank is substantially subsidized by grants and aid agencies, even after charging rather high interest rates. The project isn't economically viable in and of itself.

from what i understand the fund/bank itself turns a profit and is econimically viable in and of itself. But he funding of the bank itself started with govt $$ below market rates, although these days the govt of bangledesh only owns 6% of the bank.

The theory, going forward, being championed by vinod khosla is that this template could be duplicated w/ private $$ b/c it has proven itself to be economically viable. there is some controversy, and to be honest it sounds a bit too good to be true, but if you have any sources that contradict what i say i'd love to see them.

Argh. It should have been "Why is Infantile ..." So holding corporates and govt accountable for externalities on threads like this doesn't make me or the blog tilt left. http://www.sepiamutiny.com/sepia/archives/003647.html. You mean your fans, who donot express their views and wish for glorious past when you blog more do not have your support.

... is that it is not an entitlement, it is not a government program,...

Wouldn't govt programs which do not involve force, dependence, entitlement be as good as any.

If the government did it it would invlove force. Think about it.

from what i understand the fund/bank itself turns a profit and is econimically viable in and of itself. But he funding of the bank itself started with govt $$ below market rates, although these days the govt of bangledesh only owns 6% of the bank.

No, in 1995 a world bank report judged the bank to be financially unsustainable and this 2002 article reports pretty much the same, a heavy dependence on foreign aid in the funding of the bank, and this is after already charging 20% interest rates. The article goes on to deflate a lot of the microcredit hype by pointing out various inconvient facts of its actual track record.

http://taylorandfrancis.metapress.com/index/YWH5NC61HYC14JAP.pdf

Microcredit seems to me to be the basically the right-wing counterpart to the government bureaucracy solutions of the 60s and 70s, heavy on rhetoric, light on results. Seems to almost be a familiar pattern now in the economic development literature, schemes get proposed that vindicate some particular ideology and the poor stay poor.

I wanted to leave a comment on how peace in today's world depends on more than just talk. Last year someone won for planting trees...a lot of them...and rightly so (IMHO)

AND

If you want