A Social Business, Microlending Essay

1594 words - 6 pages

What is microlending? In simplest terms microlending is the lending of very small amounts of money at low interest, to low income people in urban and rural areas. It started forty years ago, when a person named Muhammad Yunus was visiting his family and his country Bangladesh which had recently become an independent country. Muhammad Yunus had left his home country then –East Bengal- when he was a child with his parents in search of a better future. He graduated from Vanderbilt University in Nashville, Tennessee, with a PhD in economics. Muhammad Yunus is the founder of Grameen Bank, the first non-profit organization to offer microfinance services in Bangladesh and in the world (New York Times). This bank showed the world on how little money can make a tremendous difference in people’s lives. Presently, there are thousands of institutions around the world that offer microfinance services, which sometimes suffer setbacks and uncertainties as any other for-profit or non-profit organization.
When Muhammad Yunus was in Bangladesh, he realized that Bangladeshis were living in a more precarious condition than he had imagined and read on the newspapers. Many people owed money to these ruthless and heartless village money lenders. These people were never going to repay the loans because the interest rates were so high therefore, they were trapped for life. However, he found something very thought-provoking, which was the fact that when he accumulated the debt of approximately forty people, the grand total was seventy dollars. He gave people money out of his pocket so that they can repay their debt and they can be liberated. This was the moment when the idea of creating a microfinance institution originated- Muhammad Yunus realized that small amounts of money can make a vast difference in people’s lives- where the institution would charge very low interests, just so that it can be self-sustainable. The money to start the business came from donations and from a loan from the bank where he served as the guarantor. Hence Grameen bank was created, the bank started expanding very rapidly because people were paying their loans back given that they had to pay very little on interests, and it was much easier to pay the capital back. As time progressed and Grameen Bank kept getting bigger, Grameen bank representatives noticed that women in comparison with men were always punctual with their payments and that they were the most productive with their money, and took it directly to their families, which was the mission when the bank was created (New Delhi). Based on those facts, Grameen bank created more programs for women. For instance, Grameen bank would give a woman a goat or a chicken depending on what the woman picked so that she can sell the milk or eggs and she would also get a weekly stipend. If something were to go wrong, she would not be tempted to kill the animal to feed her family. Grameen bank obtained these animals from donations and from purchases...

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