A few years after receiving his PhD in Economics from Vanderbilt University, Bangladeshi Muhammad Yunus found himself searching for ways to help people suffering and living in poverty find a path forward to economic stability. Yunus met with farmers, artisans and other laborers in the village of Jobra, Bangladesh and discovered how small “micro” loans with low interest rates to groups of co-guarantors could become a successful model for alleviating poverty worldwide. This model became the template for Yunus’ Grameen Bank, and ultimately helped him earn a Nobel Peace Prize in Economics in 2006.
Grameen Bank helped launch what has become a worldwide movement that helps those at the bottom of the economic pyramid, through microloans, finance their business operations, purchase farm equipment, pay wages and produce food and safe drinking water for their communities. This movement, now believed to account for USD $185 million in economic activity annually, assists people in nearly every country and on every continent.
Yunus and other microfinance evangelists believed if lending institutions followed the Grameen model, offering low-interest loans with locked-in rates, the impact on eliminating poverty, especially for women, would be enormous. In many countries, microfinance has become a lifeline for low-income earners. For example, in Benin, where a third of the population lives on less than $1.25 a day, peasant farmers, food processors and small-scale traders depend entirely on microcredit for survival.
Koi Cha Piseth runs a wholesale vegetable business financed by a $5,000 loan from TPC microfinance, Cambodia 
Microfinance loan reimbursement in Northern Togo. 
Vegetable farming finance by a 1 million riel loan from Chamroeun microfinance. Cambodia. 
Evelyn Oryemao runs a brick factory financed by a 700,000 UGS loan from Uganda Kolping Society. Uganda 
Chamroeun microfinance loan officer greeting a client. Cambodia. 
Mechanic working in a garage financed with a loan from ENCOT microfinance. Uganda. 
Symphoroza Bujune bought oxen with a 500,000 UGS group loan from Kolping Uganda Society. Uganda. 
Thanh Young makes and sells pickles at the Kampot market with a $3,000 loan from TPC microfinance, Cambodia 
Vivianne Degbo runs a floating cafeteria financed by a loan of 100,000F CFA from Alide microfinance institution
While microfinancing has become a lifeline to many, the success of the model has naturally attracted banking organizations worldwide, including many who do not follow the original low-interest model of Grameen. Some of these lenders have been accused of creating the opposite effect of what was intended for microfinance. Instead of lifting people out of poverty, these lenders force borrowers deeper into debt, making the climb out of poverty nearly impossible. Interest rates for some microfinance lenders can be 100% annualized or even higher, and borrowers often end up taking out more loans so they can pay the interest on their original loan.
Still, microfinance in poverty-stricken societies worldwide is seen as a vital lifeline for those needing access to credit to begin or continue in the hopeful process of finding financial stability and freedom. Yunus remains committed to eradicating poverty and hunger wherever it exists. In a 2017 interview with the New York Times, Yunus shared his beliefs about poverty and society’s responsibility for it. “Poverty is not created by poor people,” he said. “It’s created by the system we built.”
Sources:
https://www.bloomberg.com/graphics/2022-microfinance-banks-profit-off-developing-world/
-by Gavin Finch and David Kocieniewski May 3, 2022
https://www.un.org/africarenewal/magazine/august-2015/microfinance-good-poor
– by John Njiraini August 2015
https://www.nytimes.com/2017/10/10/opinion/giving-capitalism-a-social-conscience.html
– by David Bortnstein, October 17, 2017
– January 16, 2019
All photos credited to Godong / UIG
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