Peace in $130 increments

Two years ago, the Nobel Peace Prize went to a Kenyan woman who led a campaign to plant trees in Africa. Now it's going to a Bangladeshi economist with enough faith in the poor to lend them money. Not exactly marquee peacemakers, but well chosen for the deeper understanding they bring to peace.

Countries and tribes can go to war over natural resources, which is why the 2004 award to environmentalist Wangari Maathai made sense – even if it was met with controversy for honoring someone who wasn't a high-profile statesman or diplomat.

War and conflict can also arise from lack of economic opportunity. High jobless rates in many parts of the Muslim world, for instance, help breed terrorists. Just last week, at a Monitor lunch with reporters, Gen. Peter Pace, chairman of the Pentagon's Joint Chiefs of Staff, described economic development as vital to securing Iraq (this, along with a functioning government and contained sectarian violence).

So it's entirely fitting that this year's Peace Prize was awarded to Muhammad Yunus and his for-profit Grameen Bank. The bank has made tiny business loans to millions of very poor Bangladeshis, improving individual and village life. As the Nobel Committee observed on Friday, "Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty."

Mr. Yunus made his first "micro" loan ($27) to a group of 42 villagers in 1974, when Bangladesh was hit by a severe drought and famine. The villagers, who were basket weavers, used the credit to make products that they then sold at a profit. Through micro loans averaging $130, his bank has since loaned at least $5.7 billion to more than 6 million Bangladeshis – individuals too poor to qualify for a conventional loan.

The bank's borrowers are almost entirely women, who have a good repayment record, the bank finds. The bank claims its default rate is less than 2 percent (a few years ago, 19 percent of the bank's loans were at least a year overdue; the bank has since adjusted its operations).

This financing system is built on trust instead of collateral, along with a degree of societal and peer pressure, because borrowers are required to apply as a small group.

On a global scale, the prosperity-peace connection was the very concept that motivated America in its postwar reconstruction efforts in Germany and Japan – and which proved so successful. Today, the World Bank and the International Monetary Fund are examples of cross-border financing to promote both economic development and stable societies.

This Peace Prize is as much a recognition of the link between prosperity and peace as it is of Yunus's vision that every individual has the power to tap inner resources to achieve a better life. Where big business saw no business, he saw millions of eager entrepreneurs ready for responsibility – not handouts.

Now, major financial and charitable institutions are seeing what Yunus saw, and are pouring serious money into micro credit. Last year, more than 100 million micro loans were made around the world – a nice ripple effect from Yunus's work, if still only a drop in the poverty-fighting bucket.