Does micro-credit promote peace? —Syed Mohammad Ali

Choosing Dr Yunus is a good decision, but personal and national prestige aside, one wonders if a Nobel Prize for Peace means much for the poor people of BangladeshGrameen Bank and its founder, Dr Muhammad Yunus, have just been awarded the Nobel Peace Prize for 2005. While getting a Nobel seems like a tremendous accomplishment, one wonders what this award means in terms of altering ground realities in Bangladesh. Does it prove that micro-credit changes the lives of poor people, which in turn helps secure peace? Let’s begin by identifying the rationale behind awarding Dr Yunus a Nobel Prize for Peace instead of for economics, which seemed more relevant given his line of work. The Nobel Committee has implicitly recognised that lasting peace is difficult to achieve unless the population at large finds a way to break out of poverty. Moreover, the Nobel Committee has assumed that micro-credit provides the means to accomplish poverty alleviation and thus micro-credit is seen to contribute significantly to promoting peace. Before assessing the veracity of these assumptions, a brief introduction of the actual accomplishments of Dr Yunus is in order. Dr Yunus has no doubt proven to be an astute entrepreneur who has managed to involve millions of poor people in utilising conventional banking services. He began doing this at a time when banks were not interested in providing micro-loans to poor people since they were commonly perceived to pose serious repayment risks. The micro-credit model developed by Dr Yunus reaches out to groups of poor people to undertake collective responsibility for individual loan repayments, thus sidestepping the need for financial collateral.Dr Yunus began micro-lending in the 1970s. The terms offered by him enabled the recipients, mostly women, to make a modest profit to support themselves or their families. Thus, the idea of the Grameen Bank was born and this institution went on to lend $3.5 billion, mostly to poor women, and then recovere most of this money without any financial collateral. Yet the question is whether micro-credit can be viewed as an important liberating force in societies. Micro-credit has taken a varied path over the years and has since been embraced by economists like Jeffrey Sachs and institutions like the World Bank. The Bank has latched onto it because it seems to reinforce the idea that a little bit of money is all everyone needs. But then, as an academic of Bangladeshi origin recently put it, why isn’t the Nobel Peace Prize being awarded to credit card companies? Credit card companies charge under 20 percent interest and they do not hound their defaulters to the extent of compelling them to part with ornaments, goats or cattle or even utensils to pay off their loans.One cannot dispute the fact that many people in the lower income group have borrowed money from micro-credit agencies and succeeded in improving their lives by starting up small businesses. But there are also numerous instances of loan officers pushing micro-credit on reluctant clients who often deflect these funds to purposes other than starting businesses, and resultantly land themselves in unnecessary debt. As for the poorest of the poor, they cannot even qualify to receive micro-credit loans, nor be productive enough to pay back a Grameen loan in 52 instalments at 30 percent interest. There are many stories of Grameen borrowers further lending the money they borrow at 80 to 100 percent interest to other villagers who could not qualify for the loans directly. There is also a suspicion of husbands, fathers or brothers exerting real control over loans taken in the name of their women. In some villages in Sylhet, men were reportedly using three or four wives to get Grameen loans to run their own lucrative money lending businesses. If poor women are being widely empowered due to micro-credit, why does the UN’s Common Country Assessment for 2005 indicates a significant increase in the reports of violence against women across Bangladesh? Some years ago, Grameen Bank was assailed by a leading environmentalist, Dr Vandana Shiva, for entering into a joint venture with the chemical and seed transnational, Monsanto. Dr Yunus announced a joint venture with Monsanto to establish a Grameen Monsanto Centre in Bangladesh in 1998 in New York at the Micro-credit Summit. Shiva, alongside many others, sharply criticised this venture pointing out how it would be used by Monsanto to disseminate its own hybridised products among poor farmers, leading to an erosion of livelihood security, besides causing environmental damage.Luckily, Dr Yunus decided to forego the Monsanto collaboration. More recently, Grameen Phone, the largest cell phone company in Bangladesh, which is working in partnership with the Norwegian telephone company, Nortel, has been criticised for not paying taxes to the Bangladesh government. On the other hand, the decisions of the Nobel Prize Committee are themselves hardly infallible. Tariq Ali unleashed a vocal critique of the Nobel Committee when it chose to award Jimmy Carter in 2002 despite his backing of death squads in Argentina, authorising covert CIA operation in Afghanistan, rearming Pol Pot in Thailand, and supporting Indonesia’s occupation of East Timor. Although the Nobel Committee has managed to award many distinguished people over the years like Jean Henry Dumont, the Swiss founder of the Red Cross, it is also known to have short-listed the likes of Hitler in 1938 for taking a stance against the Bolsheviks. Even George Bush and Tony Blair were recently short-listed for the award but then 43,000 protest letters from around the world prevented them being awarded a Peace Prize.By far, choosing Dr Yunus is a much better decision, but personal and national prestige aside, one wonders if a Nobel Prize for Peace means much for the poor people of Bangladesh.

The writer is a researcher. He can be contacted at ali@policy.hu