Big banks find little loans a Nobel winner, too

"I don't want that conventional banks go into this. We have enough enterprises generating money for profit," he adds. "I would rather think that the rich can set up social enterprises."

That is how Yunus has expanded beyond his original notion of microfinance. In addition to Grameen Bank, which means "Bank of the Villages," Yunus has founded a company that sells solar panels to equip 2,000 homes a month – serving villagers frustrated by Bangladesh's fickle power grid. Next month, French soccer star Zinedine Zidane will come to Bangladesh to inaugurate the first Grameen Danone Foods plant, which will offer inexpensive and nutritious food to the poor.

And through Grameen Phone, Yunus has teamed with Norwegian telecom Telenor to create Bangladesh's largest mobile network, and to bring solar- powered phones to remote villages – some 260,000 so far.

"What he has shown is that different ... approaches can work," says Allison Scuriatti, a spokeswoman for the Development Gateway Foundation in Washington, which gave Yunus an award in 2004 for his work on Grameen Phone. "Everyone around the world is looking at what he is doing because he is a leader."

In Bangladesh, he is more than that. Yunus's bank has benefited 6.5 million families in 70,000 villages – almost every village in Bangladesh, says Mustafizur Rahman, director of research at the Center of Policy Dialogue in Dhaka.

"The news itself was received with a lot of enthusiasm in Bangladesh," says Mr. Rahman. "I look at his success not just in economic terms but as social empowerment – he combined loans with health education, women's empowerment, and helped send children to school."

Amid the joy, many in Bangladesh also see Yunus's prize as a much-needed moment of unity. Political fighting between the country's main parties has incapacitated the government for months and sparked street clashes. Elections are scheduled for January, but by law, the administration must cede power to a caretaker government on Oct. 28.

"The good news comes at a time when the nation is tense," says Rahman. "This will also inspire Bangladesh."

On whether it will inspire Western banks and investors, though, Rahman – like Yunus – has his doubts: "This tinkering at the margins by bigger banks – I'm not hopeful about that."

None of this means that nonprofits, philanthropists, and nongovernmental organizations will become irrelevant to microfinance anytime soon. They will play crucial roles in nurturing MFIs.

For all its profit potential, microcredit remains a world apart from Western banking. MFIs require armies of loan officers. Since the typical loan is less than $1,000, an MFI must make many more loans than a US bank would to create a $10 million portfolio. Training all those loan officers isn't an overnight affair. In many nations, dirt roads or haywire phone service challenge microlenders.

Critics contend that targeting governance and corruption in poor nations would do far more than microfinance, which reaches a relatively small number of the world's poor.

Still, MFIs are making headway. "There's a growing number of MFI institutions that are ready" to link up with commercial banks, says Shari Berenbach, executive director of the Calvert Foundation in Bethesda, Md., which facilitates investment aimed at ending poverty.

As the private-sector arm of the World Bank, the International Finance Corp. had a microfinance loan portfolio of $421 million in June. But it sees its role as helping to spawn MFIs in developing nations, and helping to attract capital from major banks and investment pools.

The loans are priced for profit, and the IFC network boasted $4 billion in microloans in December, with 2.5 million borrowers.

That's good, finance experts say. "There will never be enough donor dollars out there to directly address poverty alleviation," says Bruce MacDonald of Acción International, a nonprofit group that pioneered microlending in Latin America. "The capital market is going to have to get involved."

• David Montero contributed to this report from Islamabad, Pakistan.

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