The Grameen Bank was first set up by one Mohammaed Yunus, and it was the original version of Microcredit. The idea was to lend to the poorest of the poor to start their own businesses with the idea that they would pay it back just like anybody else. And therefore, it would help them to rebuild their country and really start their own lives. The idea is to give people a chance who never had a chance before. And as it turns out, Yunus was right. It did not even exist before Yunus or before the 70’s. But this accountant decided to take money from the bank. He paid it back with money given to him by the borrowers on time and with interest every time. And this is what led him to start microcredit.
Microcredit comes in a number of forms and does a number of things. Traditional, informal microcredit comes from moneylenders, pawn shops, loans from friends and relatives, etc. This type of microcredit can come from anybody. And it is offered in every part of the world.
But the microcredit that we refer to now is found only in third world countries. It is offered exclusively through specialized banks, and they search out the borrowers. As it has been put by Yunus, they go to someone, and they ask who is the poorest person you know. They go to that person, and they ask who is the poorest person you know, and they continue until they find someone who says “I don’t know anybody poorer than me.” They do not lend to people who come to them and ask. Because most of the time, these people do not qualify, and they will not pay the money back, therefore not contributing to the future cause.
They lend mostly to women. They do lend to some men. But Yunus and others like him strongly believe that women handle money better than men. They hold households together, and they manage money for their entire family, no matter who is pulling the money in. When they give them this money along with counseling and help in choosing their field of business, they can succeed and even pay loans back early.
These loans are small keep in mind. In some countries and situation, loans are as small as $25. With this money, they buy coats, cows, and other livestock. They start sewing businesses, they start their own farms, and they take other steps to sustain themselves and their families. Some now offer cell phones, and others work for the Grameen bank to help others like themselves. But they have shown that virtually 100% of borrowers pay loans back in a short period of time as opposed to many American borrowers for example who borrow from traditional banks and go into foreclosure or otherwise do not pay the loans back or do not make payments on time.
Microcredit is changing not only individual lives, but entire countries. They are breaking down the boundaries and proving old adages in the banking world to be completely wrong.
