General Microcredit History

The term microcredit is thought of as a fairly modern term which originated in impoverished/developing countries. Its initial and main purpose, which applies to this day, is to enable the poor, mostly women, to start a new life. Interestingly enough, the majority of microcredit loans are given out to Muslims. Many consider it as having begun in the 1970, when Muhammad Yanus started the first Grameen Bank and when a student organization in Recife, Brazil, started issuing microloans to later form ACCION International. Even though the term microcredit originated during this time period, the concept of issuing microloans to poor households has a thousand year history. For centuries microcredit has been a huge help to poor households trying to get a new start at their financial lives. Years earlier, billions of poor households were serviced by informal financial mechanisms such as “moneylenders, loan sharks, pawnshops, saving and loan clubs,” and relatives. Some time after World War II, various economic development initiatives were geared toward providing credit to farmers. These loans were highly dependent on the success of crops, which in turn rely on the weather. Due to the high risk dependent on weather, the repayment rates on these loans were not always high. It was not until the 1970’s that microcredit became a popular means of extending small loans to the poor who lacked the opportunity of receiving regular bank loans. Microcredit has been of a lot of help to millions of poor families who needed an extra inflow of cash to get economically started with their lives. In fact, “one hundred million of the world’s poorest families are less destitute today because they received microloans that allowed them to improve their economic situations.” Since microcredit loans have become popular between the poor, about three decades ago, the amount of loans being given out has increased by 20 percent. This is equivalent to 100 million people out of 500 million people in the world, who are considered to be on the verge of poverty. It is estimated that by the year 2015, microlending will increase to 175 million families. A great boost toward this goal will be given by the Bill & Melinda Gates foundation, which is planning to aim more of its charity toward microlending. So far, there are an estimated 3,000 microcredit banks worldwide. Today, organizations such as Bangladesh Academy for Rural Development, Opportunity International, ACCION International, Grameen Bank (whose founder Muhammad Yunus was awarded the Nobel Peace Prize in 2006), Women’s World Banking, and FINCA International, among others are top lenders in the microfinance industry.

1 http://www.grameen-info.org/mcredit/

2 www.kbyutv.org
3 Lynne Varner, The Seattle Times, Microcredit: Giving the Poor a Choice
4 Lynne Varner, The Seattle Times, Microcredit: Giving the Poor a Choice
5 Lynne Varner, The Seattle Times, Microcredit: Giving the Poor a Choice

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General Microcredit History

Historical Precedent

Models

Critiques of Microcredit

Benefits of Microcredit

Success Stories

Microcredit Summit Campaign

Conclusion

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