Introduction> why Microcredit?
Many of the world’s poor do not have access to the banking system, this makes it difficult for families, individuals and small business owners to earn save and grow their money. At a macroeconomic level it is a major obstacle to sustainable economic development. It conducts poor persons intoa vicious circle of poverty.
“Microcredit” is considered as the extension of very small loans to those without access to traditional banks. People who need microcredit lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Therefore microcredit is a part of microfinance, which isthe provision of a wider range of financial services to the very poor.
This new-banking technique is a financial innovation that is generally considered to have originated with the Grameen Bank in Bangladesh. In that country, it has successfully enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to buildwealth and exit poverty.
Indeed, The Microcredit principle aims at solving that problem. Where this project has been implanted poor are now able to securely borrow small amounts of money through microfinance institutes.
Why microcredit is a solution to the current capitalism issues?I-History
Professor Muhammad Yunus earned an Economics doctorate from Vanderbilt University in the United States. Then, in 1976 being the head of the Rural Economics Program at the University of Chittagong (Bangladesh), he launched an action research project to examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor, especially women. Hewas inspired by the Bangladesh famine of 1974 and generally by the poverty all over the world: he espoused the view that, as hunger and malnutrition limited a person's freedom of thought and action, so too was credit itself to access to economic resources which is a basic human right.
He started with small loans of 27 dollars that he paid from his own pocket to 42 families so as to expand theirfamily businesses. This kind of loans did exist but most of the lenders were taking advantage of the poor villagers, for instance 10% interest rates per week. This is how the Grameen Bank project was created Grameen means "rural" or "village" in Bangla language. The Bank was immensely successful and the project, with support from the central Bangladesh Bank, was introduced in 1979 to the TangailDistrict (to the north of the capital, Dhaka ).
Although its clientele was evenly mixed at first, the bank soon began to loan more to females, who spent more of their profits on family needs rather than personal desires. Another unique feature was the group of five that prospective borrowers had to organize. All the members would be collectively responsible for each individual's loan. Besidespeer pressure, the groups were also a source of mutual support, and a large reason Grameen would be able to boast repayment rates in excess of 97 percent.
The system was so successful it spread rapidly to hundreds of villages and now serves more than four million borrowers. By the beginning of 2005, the bank had loaned over 5 billion dollars and by the end of 2008, 7.6 billion to the poor. Thegreatest recognition of the bank's achievements came on October 13, 2006, when the Nobel Committee awarded Grameen Bank and its founder, Muhammad Yunus, the 2006 Nobel Peace Prize "for their efforts to create economic and social development from below."
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