Today, the concept of microfinance is favored worldwide but, do you know how and where it started? Knowing its history will not only be interesting, will also help you understand its importance and appreciate it much better! So, let’s travel back in time to unravel the great cause of this great concept!
Before the modern era of Micro financing
Much before this modern micro financing concept came into existence; the 1800s theorist Lysander Spooner had penned regarding the importance of offering financial assistance aka credits to the farmers and growing entrepreneurs that can forever get them out of their economically dwindled condition. Thus, although the concept is an old one, it only started flourishing after World War – II with the Marshall Plan, where the Americans funded the Europeans with the aim of helping them to rebuild their position after the devastating outcomes of the World War – II.
The modern era of Micro financing
The modern concept of Micro financing started long back in the year 1970s with Bangladesh and parts of Latin America as its base. Predominantly, Bangladesh it was, as the pioneer Muhammad Yunus was responsible for shaping the micro financing concept to well fit the needs of the modern society. His small act of helping a group of impoverished people of the country with the needed money of $27 in the year 1974 made him realize how such little financial assistance is very much needed and helpful in uplifting the poverty-stricken people, both economically and socially. Much to his surprise, these people were also able to pay their loan with the interest, appreciably.
This urged him to found The Grameen Bank, a micro financing institution, which has, till date lent more than $6 billion financial assistance to the poorest Bangladesh families and few others in the Asian subcontinent that helped them to get rid of their poverty condition and come up in life successfully. For his revolutionizing concept, he received Nobel Peace Prize in the year 2006. Yunus’ micro financing methods of group-lending, women-centric assistance have now become one of the standard principles of the modern micro financing concept, widely favored and benefitted by the community.
Today, there are many institutions dedicated to micro financing, where even the top players have joined the bandwagon, such as the Deutsche bank’s microfinance venture, Citi Bank’s Citi Microfinance, Barclays’ Ghanaian Microfinance and so on aimed at helping the poor in the developing nations, primarily.
According to the International Finance Corporation in the year 2014, more than 130 million people have benefitted due to various microfinance-related activities, which shows the success of the concept and more of these to follow in the future!