Carolina is a young woman who for a very long time had to accept any kind of work in order to feed her two children. Tired from working in very poor conditions, being exploited, and making very little amount of money, she asked an organization to lend her some money.
The money she borrowed allowed her to start selling flowers in the streets. The cash flow from the initiative allowed her to pay the loan back, buy more flowers, and feed her children. Her micro-business developed so much that she was able to have a stable income, and feed her children three times per day.
Stories like Carolina's have multiplied around the world and are being celebrated by the Nobel Peace Prize Committee.
The 2006 Nobel Peace Prize was awarded to Bangladesh's Muhammad Yunus, 65, and the bank he founded, Grameen Bank, for their pioneering use of micro-credit — loans of tiny amounts to transform destitute people into entrepreneurs.
Dr. Yunus founded Grameen bank with the conviction that poor people can be both reliable borrowers and avid entrepreneurs. The bank lends small amounts of cash — often as little as $20 — to local people, especially women, who could use it to fund or sustain a small business.
Grameen Bank was the first lender to hand out micro-credit without asking for collateral. Traditional banks considered poor people too risky to lend to, and the amounts they needed too small to bother with.
The principle behind the micro-loans is that it is possible to achieve lasting improvements to people's living standards with a little bit of capital, and that the poor could be as creditworthy as the rich. The repayment is based on an honor system: the borrowers take out loans in groups of five, once two members of the group have borrowed money, the other three must wait for the funds to be repaid before they get a loan.
The results are hard to argue with: since the bank’s creation in 1983, Grameen has lent more than $5.7 billion to 6.6 million people, the interest rate is of 16 percent, and has a 99 percent repayment rate. This success has inspired many imitators, and encouraged other banks in many developing countries to take up microcredit lending as well.
Since Yunus gave out his first loans in 1974, micro-credit schemes are now considered a key to alleviating poverty and spurring development. "Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty," the Norwegian Nobel Committee said. "Micro-credit is one such means. Development from below also serves to advance democracy and human rights."
This is the first time that The Nobel Committee has chosen to award the peace prize to a profit-making business. The selection highlights that private enterprise is essential to attacking poverty and to creating peace.
The desire of the poor to produce, innovate, and work always exists, but even the most hardworking people cannot dream of a good life without economical resources. People rise out of poverty every day. People can change their own lives, if they are provided with the right kind of support.
The availability of economical resources is unleashing the energy and creativity of each human being to respond against poverty and control their own development. The entrepreneurship from the bottom is creating a new culture of confidence and self-dignity by building businesses that are not at the mercy of anyone else.
*Enrique Luis Bazan is a partner of Right Reality and executive editor of its Children's Aid Fund.
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