The Nobel Committee's well-deserved recognition of Dr. Muhammad Yunus and the Grameen Bank with this year's prestigious Peace Prize marks a significant milestone in society's quest for peace. Their decision clearly trumpets: Poverty is a threat to peace. If poverty were a disease, then micro-credit would be the best vaccine. Access to capital in a capitalistic global economy is the best route to ensure access to other rights and needs. We have seen it work firsthand.
Yunus has been leading a social movement beyond the borders of Bangladesh for several decades. Since his start in 1976 with bamboo stool maker Sophia Khatoon in the village of Jobra, Grameen Bank has become a pioneering example of a for-profit, regulated financial institution, 94 percent owned and governed by the very women who borrow from it. It lends to the poor without collateral and is repaid. The bank has also financed more than 637,000 mortgages for the poor, and provides a full range of financial services, including a popular pension savings scheme and attractive rates for depositors.
Yunus is also a central figure in the Microcredit Summit Campaign, a global effort launched in 1997 to reach 100 million of the world's poorest families with credit for self-employment and other financial and business services. Its new report compiled from 3,000 organizations states that at the end of 2005, over 113 million poor people were reached, of whom 82 million were considered "poorest'' when they took their first loan.
Now, the campaign has two new goals: reaching 175 million of the poorest families by 2015, and ensuring that 100 million of the world's poorest families move from above the threshold of earning the equivalent of $1 a day.
But we must push the field for deeper change. Micro-finance can become a platform for more comprehensive development and opportunities for those at the bottom of the economic pyramid as Yunus has done through social business entrepreneurship.
The key challenge in the years ahead will be to keep the industry's focus on reducing absolute poverty, even as the commercialization trend accelerates. Based on a 10-point checklist, 58 percent of Grameen Bank members have lifted themselves out of poverty. As the industry grows, there is a real possibility that those narrowly focused on institutional profitability will "crowd out'' the movement focused on profitability and transformation at the client level.
Greater market-based investment is clearly needed to meet demand at the bottom of the economic hierarchy, but increasing efficiencies should be passed on to the customer as lower interest rates, rather than maximizing returns to shareholders and investors.
Micro-finance is a new breed of capitalism for the poor. Unlike other approaches, it is not flowing from North to South. It is a "bottom up'' approach, in stark contrast to the top-down approach of Western aid models.
Grameen Bank's influence has spread to almost every country. Grameen Trust in Bangladesh and Grameen Foundation in the United States support a growing global network of micro-finance institutions that follow "Grameen essentials'' -- a focus on the poorest, on empowering women, on building financially sustainable institutions by offering collateral-free credit.
The Nobel Committee recognized Yunus' leadership in galvanizing a truly global movement as well as the 7 million members of Grameen Bank and its 20,000 staff. Nine village women who are board members of Grameen Bank will be present in Oslo for the Nobel ceremony, underscoring the knowledge gained from poor women's survival skills and entrepreneurial abilities.
Most media accounts refer to Yunus as an economist, a professor or a banker. The truth is that Yunus is the quintessential global social entrepreneur. Investing in more like him is a good bet.
Susan Davis is the chairwoman of Grameen Foundation and chairwoman of the Ashoka Global Academy for Social Entrepreneurship. They wrote this article for the Mercury News.