The 2006 Peace Nobel laureate Muhammad Yunus, the bank’s founder, earned a doctorate in economics from Vanderbilt University in the United States. He was inspired during the terrible Bangladesh famine of 1974 to make a small loan of $27 to a group of 43 families so that they could create small items for sale without the burdens of predatory lending.Yunus believed that making such loans available to a wide population could ameliorate the rampant rural poverty in Bangladesh.

The system is the basis for the microcredit and the self-help group system now at work in over 43 countries. Each group of five individuals are loaned money, but the whole group is denied further credit if one person defaults. This creates economic incentives for the group to act responsibly (such as other members then being able to receive additional loans), increasing Grameen’s economic viability.

In a country in which few women may take out loans from large commercial banks, the fact that most (96%) loan recipients are women is an amazing accomplishment. In other areas, Grameen’s track record has been equally astonishing, with very high payback rates—over 98 percent. However, according to the Wall Street Journal, a fifth of the bank’s loans were more than a year overdue in 2001. More than half of Grameen borrowers in Bangladesh (close to 50 million) have risen out of acute poverty thanks to their loan, as measured by such standards as having all children of school age in school, all household members eating three meals a day, a sanitary toilet, a rainproof house, clean drinking water and the ability to repay a 300 taka-a-week (8 USD) loan.

In my next post you will check out the 16 basic decissions of Microcredit