Microcredit CGW4U

What is Microcredit? Very small loans made to impoverished borrowers who lack collateral Women in particular benefit from microcredit In many communities, women lack the highly stable employment histories that traditional lenders tend to require Many are illiterate, and therefore unable to complete paperwork required to get conventional loans Women make up 75% of all microcredit recipients worldwide

What is Microcredit? The central idea is that low-income individuals are capable of lifting themselves out of poverty if given access to financial services

Grameen Bank Started in Bangladesh in 1976 by Muhammad Yunus as an experimental project to combat rural poverty by providing credit to the very poor Provides small, collateral-free credit to groups of borrowers Yunus was awarded the Nobel Prize in 2006

Some numbers As of July, 2005, Grameen Bank disbursed $5 billion in loans to 5 million borrowers 96% of them women Repayment rate of 99% Loans averaging around $130

Who provides microcredit? Some microfinance institutions (MFIs) are run as non-profits, and some are run as for- profits Some are very small local lenders, while others are branches of large multinational banking institutions The latest trend is peer-to-peer lending Individuals collectively loan small amounts to fund portions of a loan Usually done via online tools (ex: kiva.org)

The Results The Good Should reduce poverty through higher employment and higher incomes Should also lead to improved nutrition and improved education of the borrowers' children The Bad Actual results (in terms of income generation, improved health and education, and women’s empowerment) are mixed Has driven some poor households into debt traps, directly resulting in suicides in some cases