MICROCREDIT AND ITS SIGNIFICANCE

Microcredit and its Significance



Microcredit and Significance

Introduction

Grameen Bank was founded by economist Muhammad Yunus in 1976, disgusted by the wear rate charged by banks in India, launched the Grameen paying himself $ 27 to a group of forty-two women a small village in Bangladesh so that they create their own economic activity. This will be the beginning of the adventure of the Grameen Bank, the leading financial institution in the world to lend money to insolvent people so they can launch themselves their own micro-enterprise. Based on the system of micro-credit secured, the "bank for the poor" in 1983 was officially awarded the status of bank. It now in Bangladesh 6.6 million customers (including 95% women), 1861 branches, 17,400 employees and 5.7 billion of loans disbursed, or 1% of GDP. Its repayment rate is 98% above the rate of repayment of loans in the conventional banks. It helped transform the lives of millions of poor people not only in Bangladesh, where 10% of the population benefits, but also worldwide since its experience is now successfully reproduced in a hundred countries by some 4,000 bodies development aid or social inclusion.

Brief Review of Related Literature

Typically, microfinance is seen as a financing arrangement for supporting the totally helpless. Granted that:

The emerging orthodoxy is that microfinance and micro-financing could as well be the missing link in the search to nurture and sustain global development, particularly among micro enterprises that are seen as potential engine for poverty alleviation. Following from this diverse conceptualization, microfinance has been defined in varying degrees by several scholars. Most definitions seem to highlight the bias and sentiments of the different authors but have nevertheless all centered on assisting the poor through the provision of financial services. The poor-centric nature of micro-financing is made obvious in the definition of, which conceptualized micro-financing as “the supply of credit, saving vehicles and other basic financial services made available to the poor and vulnerable people who might otherwise have no access to them or could borrow only on highly unfavorable terms”. Those who operate their own businesses have also been identified as potential clients of microfinance scheme. This perspective is important as it projects microfinance, not just as a scheme for the very poor but also as a veritable tool for fund mobilization and allocation among active economic agents. In this regard, microfinance can rightly be seen as “instrument of development” (Chavez, ...