INVESTING IN EQUALITY LEADS TO PEACE PRIZE

What wonderful news that Muhammed Yunus and his Grameen Bank were awarded the Nobel Peace Prize this year. What a high profile recognition that increasing inequality leads to conflict and increasing equality leads to peace.

In 1976, Professor Yunus launched an action research program aimed at reducing poverty by extending credit to the poorest of the poor in Bangladesh. (Grameen means ‘rural’ or ‘village’ in the local Bangla language.)

The Grameen system is compellingly simple. A group of 5 prospective borrowers is formed. Only two can receive the first loan and the whole team ensures the loan is repaid since only then can the others borrow money. No collateral is used other than the trust offered by the community. A track record is quickly established and borrowers who successfully repay the first loan can then borrow larger amounts. The first loan made was for $27. Since 1983 the Grameen bank has lent $5.1 billion to 5.3 million people and adds more than 1% to the Gross Domestic Product of Bangladesh annually.

Some realities are hidden by these figures. Dr. Yunus’ action research project became a bank through government legislation and received support from both the central bank and the nationalized commercial banks. The Grameen bank is 90% owned by the poor whom it serves with the government owning the remaining 10%. Most of the borrowers are women and the loan repayment rate is 95%.

Readers familiar with the credit union and cooperative movements will recognize some familiar features in this arrangement – especially the emphasis on self-help activities and collective action to promote economic and social development. I began to wonder if there were any modern Canadian examples continuing to work in this tradition. I immediately thought of Father Greg MacLeod.

Greg is a Catholic Priest who grew up in Cape Breton, an economically depressed but socially vibrant part of Nova Scotia. In 1976 he created a community development corporation named New Dawn Enterprises. One of its first challenges was to deal with the shortage of dentists on the island of Cape Breton. New Dawn built and equipped a dental clinic and then persuaded a newly graduated dentist to occupy it. The young dentist was attracted because he didn’t need to borrow money to establish himself. New Dawn then repeated this process until Cape Breton had established a good reputation as a place to practice dentistry. Over 25 years the number of dentists on the island increased from 2 to 70.

New Dawn also responded when a local rope factory was being sold and relocated to the United States. The factory had been built with government money and locals thought they should have a chance to revive it before it was taken away. It was the women of the community who blockaded the factory site and prevented it being removed and it was New Dawn that negotiated the purchase. The rope factory is now a thriving commercial venture. Today, there are ten different companies operating under New Dawn Enterprises with assets of $20 million.

Both Prof. Yunus and Fr. MacLeod have demonstrated that when communities get behind an idea they bring something with real value to the table. Economists are beginning to call this ‘social capital’. It is as valuable as financial capital but you won’t find it under the mattress. You find it in your relationships in community.

First published November 30, 2006