Silicon Insider: Social Entreprenuers Could Help Monetize the Web
Nov. 2, 2006 — -- The recent announcement that Muhammad Yunus would receive the 2006 Nobel Peace Prize was a piece of good news in a bleak year.
It's become easy to be cynical about many of our big global institutions. The United Nations, that shining hope for all mankind when I was a boy in the Kennedy era, has become a platform for homicidal thugs, a hotbed of kleptocrats, and the home of the toothless diplomatic gesture. And the Nobel Peace Prize, which I was once taught was reserved for secular saints, has been doled out the usual run of anti-Westerners and mass murderers with the right ideologies -- and most recently, it seemed destined to become the latest publicity site for celebrity do-gooders.
Thus, Yunus' award came as a pleasant shock. Here, for once, was a laureate who actually used proven practices (entrepreneurial capitalism) to produce actual, measurable good works (rather than merely good intentions) to make the world a better place. And not only that, he did so by developing a model that was both scalable and transferable. Shocking!
For those of you readers who heard the news but didn't dig deeper into the details of the story, Muhammad Yunus is the founder of Grameen Bank, the Bangladesh institution that pioneered the practice of making very small loans -- microloans -- to needy people who would normally not qualify for a bank loan.
Yunus' story has become almost mythical; and it will no doubt be taught to schoolchildren for generations to come.
In 1976, as a young economics professor at Chittagong University, Yunus literally emptied his pockets -- a total of $27 -- to help out a group of local craftsmen. He then also offered to act as guarantor of an even larger loan from a traditional bank nearby.
Out of this interaction came the Grameen Project, and ultimately, Grameen Bank, today a huge institution with thousands of employees that manages these small loans to the poor.
To give you an idea of just how small, consider that Grameen itself has lent just $5.1 billion to a total of 5.3 million people. If you assume that many of these millions of lenders have taken out multiple loans as they pulled themselves out of poverty into small-scale businesses, it becomes apparent that few of these loans are for more than $100. No Western bank could afford to offer loans of 10 times that amount. Even more remarkable, Grameen Bank demands no collateral from its loan recipients -- a good thing, because they have none.
Grameen Bank alone would guarantee Yunus' place as one of the great business innovators of the last century. But the story doesn't end there. One of the glories of Yunus' model is that it can be implemented almost anywhere, and with a comparatively small amount of initial capitalization. So it's not surprising that in recent years microcredit banks similar to Grameen have sprung up throughout Bangladesh, Southeast Asia and Africa. The latest estimate is that there are now more than 3,200 microcredit institutions in the world, serving more than 90 million customers.
