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Micro man: everyone, from free-market conservatives to socialists, loves Muhammad Yunus and the Grameen Bank, which has been lending tiny sums to millions of women in Bangladesh. Yunus won the Nobel Peace Prize last year, but Tom Bethell wondered if the story was too good to be true.

Article Excerpt
Something about the Grameen Bank story didn't seem quite right, but I couldn't put my finger on it. Muhammad Yunus is the apostle of microcredit who won the Nobel Peace Prize last year. The Grameen Bank itself shared the prize. In the off-told story, Yunus lent $ 27 to basket we avers in Bangladesh, rescuing them from the professional moneylenders and their sky-high interest rates. The women repaid the loan as promised, and Yunus founded Grameen in 1983.

Since then it has greatly expanded. In a speech at the National Press Club in November (about which more later), Yunus summarized the Grameen Bank's operations today: it has 2,300 branches, and 21,000 staff with "very decent salaries" and good retirement benefits; nearly $1 billion a year is lent to 7 million borrowers, 97 percent of whom are women; average loan: $130. Borrowers are also owners of the bank, and when he was told that the bank shared in the Nobel Peace Prize, Yunus joked that maybe 7 million people would have to go to Norway to collect it. (He settled on the nine members of the board.)

Microcredit is simply the lending of tiny amounts of money to small entrepreneurs who probably couldn't borrow otherwise. Grameen has made loans to millions of women in 62,000 villages in Bangladesh, and Grameen is also helping similar institutions in 37 countries, including Nigeria and the Philippines. The Grameen Bank itself requires no collateral, and borrowers don't have to "sign any legal instrument," Yunus says. He claims a repayment rate of 99 percent, but The Wall Street Journal questioned that figure on the day after his Nobel Prize was announced, noting that it "ignores the clients who are far behind in their loan payments. The bank reports a loan as overdue only if the borrower has missed ten or more repayments. And the bank has often provided new loans to allow borrowers to keep current on old ones. The problem came to a head early this decade, when 19 percent of Grameen loans were at least one year overdue."

Whatever the true condition of his balance sheets, Yunus has pulled off the remarkable feat of appealing to policymakers across the political spectrum. There has been hardly a murmur of dissent. Yunus must be the most widely admired moneylender in history. Praise pours in--from free-market enthusiasts like Mark Skousen and Henry Hyde; from Bill and Hillary Clinton, and Jane Fonda; from Queen Sofia of Spain. And from Israeli-born actress Natalie Portman ("Star Wars III: Revenge of the Sith"), who was spokesperson for the International Year of Microcredit (2005, by the way). And, of course, the Nobel Prize committee itself was no mean catch....

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