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Microcredit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment, and a verifiable credit history. It is designed to support entrepreneurship and alleviate poverty. Many recipients are illiterate, and therefore unable to complete paperwork required to get conventional loans. As of 2009 an estimated 74 million people held microloans that totaled nearly US$40 billion. Grameen Bank reports that repayment success rates are between 95 and 98 percent. The first economist who had invented the idea of microloans was The Very Reverend Jonathan Swift in the 1720s. Microcredit is part of microfinance, which provides a wider range of financial services, especially savings accounts, to the poor. Modern microcredit is generally considered to have originated with the Grameen Bank founded in Bangladesh in 1983 by their current Chief Adviser Muhammad Yunus. Many traditional banks subsequently introduced microcredit despite initial misgivings. The United Nations declared 2005 the International Year of Microcredit. As of 2012, microcredit is widely used in developing countries and is presented as having "enormous potential as a tool for poverty alleviation."
Microfinance consists of financial services targeting individuals and small businesses (SMEs) who lack access to conventional banking and related services.
Grameen Bank is a microfinance specialized community development bank founded in Bangladesh. It provides small loans to the impoverished without requiring collateral.
Self-Employed Women's Association (SEWA), meaning "service" in several Indian languages, is a trade union based in Ahmedabad, India, that promotes the rights of low-income, independently employed female workers. Nearly 2 million workers are members of the Self-Employed Women’s Association across eight states in India. Self-employed women are defined as those who do not have a fixed employer-employee relationship and do not receive a fixed salary and social protection like that of formally-employed workers and therefore have a more precarious income and life. SEWA organises around the goal of full employment in which a woman secures work, income, food, and social security like health care, child care, insurance, pension and shelter. The principles behind accomplishing these goals are struggle and development, meaning negotiating with stakeholders and providing services, respectively.
A micro-enterprise is generally defined as a small business employing nine people or fewer, and having a balance sheet or turnover less than a certain amount. The terms microenterprise and microbusiness have the same meaning, though traditionally when referring to a small business financed by microcredit the term microenterprise is often used. Similarly, when referring to a small, usually legal business that is not financed by microcredit, the term microbusiness is often used. Internationally, most microenterprises are family businesses employing one or two persons. Most microenterprise owners are primarily interested in earning a living to support themselves and their families. They only grow the business when something in their lives changes and they need to generate a larger income. According to information found on the Census.gov website, microenterprises make up 95% of the 28 million US companies tracked by the census.
Opportunity International is a 501(c)(3) nonprofit organization chartered in the United States. Through a network of 47 program and support partners, Opportunity International provides small business loans, savings, insurance and training to more than 14 million people in the developing world. It has clients in more than 20 countries and works with fundraising partners in the United States, Australia, Canada, Germany, Switzerland, Singapore, Hong Kong and the United Kingdom. Opportunity International has 501(c)(3) status as a tax-exempt charitable organization in the United States under the US Internal Revenue Code.
Aga Khan Agency for Microfinance (AKAM) is a microfinancing agency of the Aga Khan Development Network.
Kiva Microfunds is a 501(c)(3) non-profit organization headquartered in San Francisco, California. Kiva's mission is "to expand financial access to help underserved communities thrive."
MicroLoan Foundation is a UK-based microfinance charity that gives small loans and business training to women in Malawi, Zimbabwe and Zambia. The main objectives of the organisation is poverty alleviation and gender empowerment, and consequently its main focus has been on the women living in the rural areas, who make up majority of the poor in Sub-Saharan Africa. In 2022 alone, MicroLoan supported over 160,000 women to grow businesses. With these loans and free business and financial literacy training, the women are able to start businesses thereby increasing their household incomes, business profits and assets. They are able to make savings to support them during future hardship. The women are also able to pay for their children to attend school, pay for medical care and make their families more food secure. Much of the training is delivered in song, dance and role-play because of low literacy rates.
The Comilla Model was a rural development programme launched in 1959 by the East Pakistan Academy for Rural Development. The academy, which is located on the outskirts of Comilla town, was founded by Akhter Hameed Khan, the cooperative pioneer who was responsible for developing and launching the programme.
Village banking is a microcredit and saving methodology whereby financial services are administered locally in a community bank rather than in a centralized commercial bank. Village banking has its roots in ancient cultures and was most recently adopted for use by micro-finance institutions (MFIs) as a way to control costs. Early village banking methods were innovated by Grameen Bank and then later developed by groups such as FINCA International founder John Hatch. Among US-based non-profit agencies there are at least 31 microfinance institutions (MFIs) that have collectively created over 800 village banking programs in at least 90 countries. And in many of these countries there are host-country MFIs—sometimes dozens—that are village banking practitioners as well. The latest developments globally can be seen in Southeast Asia, where digitization is pacing fast to reach rural areas with hybrid on- and offline solutions.
John Keith Hatch is an American economic development expert and a pioneer in modern-day microfinance. He is the founder of FINCA International and the Rural Development Services (RDS), and is famous for innovating village banking, arguably the world’s most widely imitated microfinance methodology.
The Grameen family of organizations has grown beyond Grameen Bank into a multi-faceted group of both commercial and non-profit ventures. It was first established by Muhammad Yunus, the Nobel Peace Prize-winning founder of Grameen Bank. Most of the organizations in the Grameen group have central offices at the Grameen Bank Complex in Mirpur, Dhaka, Bangladesh. The Grameen Bank started to diversify in the late 1980s when it began attending to unutilized or underutilized fishing ponds, as well as irrigation pumps like deep tubewells. In 1989, these diversified interests started growing into separate organizations, as the fisheries project became Grameen Fisheries Foundation and the irrigation project became Grameen Krishi Foundation.
Grameen America is a 501(c)(3) nonprofit microfinance organization based in New York City. It was founded by Nobel Peace Prize recipient Muhammad Yunus in 2008. Grameen America is run by former Avon Chairman and CEO Andrea Jung. The organization provides loans, savings programs, financial education, and credit establishment to women who live in poverty in the United States. All loans must be used to build small businesses.
Innovations for Poverty Action (IPA) is an American non-profit research and policy organization founded in 2002 by economist Dean Karlan. Since its foundation, IPA has worked with over 400 leading academics to conduct over 900 evaluations in 52 countries. The organization also manages the Poverty Probability Index.
Fonkoze is Haiti's largest microfinance institution serving the poor in Haiti, with 44 branches located throughout the country.
Fundación Pro Vivienda Social (FPVS) is a non-profit organization created in 1992 by a group of businessmen concerned with values of community solidarity and social responsibility. The foundation's primary mission is to alleviate problems associated with poverty by improving housing and living conditions in low-income districts: the “bottom of the pyramid.” FPVS's projects involve primarily microfinance and infrastructure development.
Microcredit for water supply and sanitation is the application of microcredit to provide loans to small enterprises and households in order to increase access to an improved water source and sanitation in developing countries.
The impact of microcredit is the study of microcredit and its impact on poverty reduction which is a subject of much controversy. Proponents state that it reduces poverty through higher employment and higher incomes. This is expected to lead to improved nutrition and improved education of the borrowers' children. Some argue that microcredit empowers women. In the US and Canada, it is argued that microcredit helps recipients to graduate from welfare programs. Critics say that microcredit has not increased incomes, but has driven poor households into a debt trap, in some cases even leading to suicide. They add that the money from loans is often used for durable consumer goods or consumption instead of being used for productive investments, that it fails to empower women, and that it has not improved health or education.
Kashf Foundation is a non-profit organization, founded by Roshaneh Zafar in 1996. Kashf is regarded as the first microfinance institution (MFI) of Pakistan that uses village banking methodology in microcredit to alleviate poverty by providing affordable financial and non-financial services to low income households - particularly for women, to build their capacity and enhance their economic role. With headquarters in Lahore, Punjab, Kashf have regional offices in five major cities and over 200 branches across Pakistan.
References
- ↑ CSMonitor.com (2008-08-09). "U.S. Army microgrants". Csmonitor.com. Retrieved 2009-09-23.
- ↑ Schmidt, M.; Plochg, T.; Harting, J.; Klazinga, N.S.; Stronks, K. (2009). "Micro grants as a stimulus for community action in residential health programmes: A case study". Health Promotion International. 24 (3): 234–242. doi: 10.1093/heapro/dap017 . PMID 19525506. Archived from the original on 2013-04-15.
- ↑ "Conditions of Sponsorship | Microgrants".
- ↑ BenchFly.com (2010-04-02). "Search for Research". BenchFly.com. Retrieved 2010-05-02.