Muhammad Yunus, Grameen Bank and the Nobel Peace Prize: What Political Science Can Contribute to and Learn From the Study of Microcredit

Abstract

Despite the vast literature on the economic and social affects of micro-financing in poor countries, little attention has been given to its political implications. At a time when the broader development implications of micro-financing are being recognized—thanks, in part, to the Nobel Prize Award to Prof. Yunus and the Grameen Bank—political scientists have an opportunity to contribute to and learn from the study of this financial instrument. This paper traces the existing microcredit—and more broadly the microfinance—literature to delineate the ways in which microcredit can contribute to the political awareness and activism of the poor, i.e., their political empowerment. I argue that the link between microcredit and political empowerment is self-efficacy and social capital, which can be generated from a particular form of microcredit lending where clients apply for loans as a group and share responsibility for repayment. Furthermore, I make the case for why the Central Asia and Caucasus region would provide an appropriate case to analyze the political effects of microfinance. Research in this area will not only fill an obvious gap in the literature, but it will also help microfinance institutions, donor communities and governments to better understand the wider political implications of microfinance and the ways by which to measure them.

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