Bellerbys Economics - Mr Stephenson

Monday, January 01, 2007

Nobel Peace Prize

In growing recognition of the contribution that a stable and growing economy can make towards world peace, the Nobel Peace Prize has been awarded this year to Muhammed Yunus, the Bangali economist who developed the concept of microcredit.

You can hear an interview with him here:

http://nobelprize.org/nobel_prizes/peace/laureates/2006/yunus-interview.html

And you can read Muhammed's story here:

http://en.wikipedia.org/wiki/Muhammad_Yunus

Normally, bank loans are given on a secured basis - meaning that the person receiving the loan must have enough wealth to pay back the loan should something go wrong. What Muhammad Yunus showed is that statistically it is worth banks making small unsecured loans using a number of other criteria - such as commitment, potential, future projections of income and so on. The Grameen Bank has shown that the payback to both the bank and the person from such loans is greater than that often received from secured loans - even allowing for the occasional business failure.

The microcredit approach allows people in developing countries to work their way out of poverty and has been a remarkable success story in South Asia.

Development Economics - module 6

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