Sunday, October 30, 2011

The Promise of Microfinance

Is extending credit to those who are the poorest in society a good idea? It is if with that credit, farmers can install a tube well, women not part of the formal workforce can purchase sewing machines and other paraphernalia so that they can embroider and then sell their embroidered clothes in the marketplace, and people can open small shops in their villages.

Microfinance can help us reach out to the marginalized segments of developing nations and make a difference in their lives. What is more, a little can go a long way because sometimes all it needs is a small loan to get people started on the path to self-sufficiency.
The Nobel Peace Price of 2006 in particular brought Grameen Bank of Bangladesh into limelight. Grameen bank extends credit to people who otherwise would not be eligible for it. And it does that at very low interest rates and without collateral backing the loans. There are also community-based organizations (CBOs) doing the same in Bangladesh and beyond. The video below sheds light on how one such effort, Shitu Bandan, is helping change lives in Bangladesh.


As the video shows, even a loan equivalent to just $30 can help people like Hawa Begum start a small business in poor countries like Bangladesh!

What is also heartening is that often, as the video explains, women get majority of the loans because they are seen as more responsbile and committed than men. Women, after all, are less likely to squander their loans playing cards or buying cigarettes. By making lending to women a priority, microfinance is thus not only helping families make ends meet but also empowering women in the process. This is important because many developing countries are essentially patriarchal societies where more often than not women do not enjoy a very high status.

Microfinance is helping change the status quo, empowering women and lifting people out of abject poverty. Which is why efforts like Shito Bandan need to be applauded.