Microcredit Is a Recent Financial Innovation, Essay Example

Microcredit is a recent financial innovation that involves the provision of very small loans with high interest rates geared towards those in poverty in order to facilitate community level wealth generation and entrepreneurship. Though the concept is not entirely new, microcredit in its modern incarnation is widely considered to have begun with Grameen Bank in Bangladesh, started by Dr. Mohammed Yunus in the late nineteen seventies.  By the end of 2008, Grameen bank had provided over USD 7 billion in micro-loans to borrowers. Interestingly, and very deliberately, 97% of people given credit by Grameen bank are severely impoverished women.

Women in the developing world face a far more difficult struggle against poverty then men. The ‘global feminization of poverty’ is a trend reinforced by many women’s lack of control over family planning. Without access to effective methods of contraception and usually within the context of male-dominated traditional hierarchies, many women find themselves with far more children than they can support. These children grow up without proper nutrition and with little or no access to education and as a result help perpetuate rising poverty levels.

Micro-loans given to women lend them the means develop their communities instead of relying on aid, and provides recipients with a level of dignity that empowers this development. Grameen Bank also claims a repayment rate of close to 99%, though some critics doubt the accuracy of this statistic. Grameen bank loan recipients must adhere to a set of sixteen rules that encourage the rise from poverty; the most notable are “We shall plan to keep our families small…” and “We shall educate our children…”, clearly showing how Grameen Bank is effectively undermining the root causes of feminized poverty through its loans and the promotion of financial accountability.