Last week, we talked about microfinance and how it works. This week, we will talk about how it all began.
The microfinance movement was started off by one man: Muhammad Yunus, with one vision: to eradicate poverty from the world. Muhammad Yunus, the Bangladeshi economist, widely known as the Father of Microfinance founded the Grameen Bank to make small loans to the poor in Bangladesh.
Dr Yunus was greatly influenced by his mother who was known to never turn away anyone in need. The famine that hit Bangladesh in 1974 pushed him to do something about poverty. During his visits to the poorest households in the village of Jobra, he realised that a small loan can make a big difference to a poor person. He made his first loan to 42 women in the village, with just USD $27 from his own pocket. With this money, the women were able to make baskets, sell them and quickly repay the money they borrowed from him. He began to see that small loans would not only help them survive, but create in them the spark of enterprise and this could empower them and pull them out of poverty.
Since traditional banks refused to make small loans to the poor, the idea for Grameen Bank was born. In 1976, Dr Yunus launched the activities of Grameen bank, giving out microloans to the poor. In 1983, Grameen Bank was officially formed. The borrowers typically repay back the loan in small weekly installments. In small villages with no access to banks, Grameen has brought banking to people’s homes. The bank’s 22,149 staff serve 8.37 million borrowers at their door-step in 81,379 villages all over Bangladesh, every week. So far, Grameen Bank has disbursed USD $11 billion in loans.
The success of the Grameen microfinance model has inspired hundreds of countries throughout the world, including the USA. Grameen Bank and Dr Yunus jointly won the Nobel Peace Prize in 2006.
Next week, we’ll learn all group-based credit approach, accountability and SHGs & JLGs .
Image source: World Economic Forum