Microfinance as an industry does not get enough credit. While it is a type of lending, microfinance is much more than just an extension of credit to people in need. Microfinance, when executed with the consumer in mind, is a strong tool in facilitating financial inclusion and building long-term resiliency in the face of unexpected hardships for individuals and households around the world – in developed and developing countries alike.
Microfinance is associated with the name of a Nobel Peace Prize winner Muhammad Yunus, a Bangladeshi economist, who pioneered work in giving tiny loans to millions of poor people no commercial bank would touch — to destitute widows and abandoned wives, landless laborers, rickshaw drivers, sweepers, and beggars. As the NY Times reported in 2006, the Nobel Committee praised Mr. Yunus, who was 66 at the time, and the Grameen Bank (Bank for the Poor, as it titles itself), which he founded in 1983, for making microcredit a practical solution to combating rural poverty in Bangladesh and inspiring similar schemes across the developing world.
“Yunus was one of the early visionaries who believed in the idea of poor people as viable, worthy, attractive clients for loans,” said Elizabeth Littlefield, who at that time led the Consultative Group to Assist the Poor (CGAP). “That simple notion has put in motion a huge range of imitators and innovators who have taken that idea and run with it, improved on it, expanded it.”
It’s interesting that the effect of microfinance varies depending on where in the defined poverty group the beneficiary is. Moreover, wouldn’t be right to deny that microfinance projects in their waves