I am very excited to see that a Bangladeshi microloan pioneer has won the Nobel Peace Prize.

Microloans (or microcredit, as they are sometimes known) are a way to offer people in an impoverished background a small amount of money to create/improve a business. Loans are tiny by American standards — under $500 usually — and are used by people who would be turned down by standard banks because they lack financial collateral. There usually is no interest demanded and repayment is encouraged so that others in similar straits can also get ahead. This sort of financial system can be a real boon to people who might be discriminated against, like women who want to start a home-based business.

I first became aware of microfinance a few years ago while working at Wesleyan and I’ve touted the idea to Rudi a couple times as an example of the sort of program that really does seem to work. I’m glad to see it recognized in such a public way.

This year’s prize recipient is Muhammad Yunus, who created the Grameen Bank to manage the microcredit program in 1974. He has said he’s going to use his portion of the prize money to open an eye hospital and to create a food company aimed at the poor.