Microcredit consists of small loans offered in developing countries mostly to impoverished women, with no requirement for collateral, so that they can start small businesses.
The Self-Employed Women’s Association bank, started in 1974 by 6,000 grassroots women in India, was one of the first organizations to provide loans to marginalized women.
In 1976, Muhammad Yunus, who popularized the microcredit concept, loaned $27 to 42 poor women in Bangladesh, leading to the establishment of the Grameen bank in 1983.
The Grameen model, or peer-lending system, consists of five self-selected women who guarantee the loan taken by their members. Other variations, called self-help groups, and trust groups, are practiced by non-government organizations and microfinance institutions.
Since 1997, there have been regular regional or global microcredit summits somewhere in the world. The last regional one was in Kenya and the most recent global one was in Spain.
An estimated 137 million poor, 113 million of them women have access to microcredit, thereby reaching more than a half a billion people, and roughly half of the poorest in the world. (See State of the Microcredit Summit Campaign Report 2012.)
Interest rates for microcredit average around 35% because of the high costs of servicing the poor. In India the average interest rate is 24%. To monitor interest rates being charged, and to guard against exploitation, an NGO called Microfinance Transparency has been set up.
Microcredit started with a strong social mission and depended largely upon donor money, but now sustainability gained by profits is becoming a requirement.
Big commercial banks have entered the arena and some microfinance institutions are now trading on the stock exchange. This has created a spirited debate over the question of social mission versus profit and the appropriate balance between the two.
Microcredit, accompanied by training and varying kinds of insurance, continues to grow. Now microcredit schemes have sprung up in countries such as Canada and the U.S. where powerless groups without collateral have also been denied access to credit.
Resources
Montreal Organizations
- Montreal Microfinance Club
- Montreal Community Loan Fund
- Chantier de l'économie sociale (FR)
- Institut du Nouveau Monde
Quebec Organizations
Organizations in Saris on Scooters
- Self-Employed Women's Association (SEWA)
- Deccan Development Society (DDS)
- Indira Kranthi Patham(IKP)
- Confederation of Voluntary Associations (COVA)
- Ankuram Sangamam Poram (ASP)
- SKS Microfinance
- Navdanya
- Andhra Pradesh Mahila Abhivruddhi Society (APMAS)
- Women's World Banking
- Consultative Group to Assist the Poor (CGAP)
- Women Advancing Microfinance (WAM)