Monday, October 16, 2006

What Economics is truly about.

This is Muhammad Yunus, a banker and economist from Bangladesh that recently won the Nobel Peace Price. He is also the prime example of why the concept of Economics, and the theory of ownership, is so important in creating a stable economic structure.

Yunus helped develop and implement a concept called microfinancing, the idea of giving very poor people no-collateral, low/no interest loans in an effort to get them out of poverty. His bank, the Grameen Bank, has succeeded in this endeavor on a scale that is unimaginable. Over $5 billion in loans have been handed out, with a repayment rate of nearly 99%!! Oh, and the bank is making a profit!

In exchange for the lack of collateral, the Grameen Bank insists on doing business in a way that gives incentive to better the borrower, and the overall community. Borrowers are a part of a group of five people, and the entire group must show that they can responsibly pay back the loan. One person defaults and they all are considered in default. Over 90% of all borrowers are women (more likely that the money goes toward the family), and there has to be an agreement that the borrower will use the funds to empower themselves. Check out the 16 Decisions of Grameen Bank. It gives excellent insight into what is expected from the institution.

Muhammad Yunus is a man who deserves the Nobel Prize, and thank goodness that we finally have a capitalist that both parties can look at as a success story. Those that teach Economics might what to consider using the Newshour video from 2001 that gives a nice summary of the actions of the Grameen Bank.

Hopefully, it will also be used as another classic example why you don't simply give money away to certain groups of people and expect them to want to work for a better life. A great quote, "Give a man a fish and he'll eat for a day. Teach him how to fish and he'll eat forever".

Thanks Mr. Yunus for teaching those that need to learn.
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