What is micro-credit and how is the growing global network of micro-financing changing the lives of women in developing regions all around the world? Micro-credit is a system whereby participating institutions provide applicants with small loans, which allow them to start or expand small businesses -- selling handicrafts, prepared food, or flowers, to name just a few. Those accepted for micro-credit loans are too poor to be approved for loans by conventional banks. But thanks to small micro-credit loans--even with loans as small as $25., $50., or $100 -- women can significantly develop their small enterprises and earn enough money to send children to school and build better homes for their families. When enough families in a given region benefit from micro-credit loans, the result is improvement in their communities' living standards and general quality of life.
Women who apply for micro-credit must often do so as part of a cooperative of three to five women. Each woman obtains a loan and each woman becomes the guarantor of the loan of the other members of the cooperative. In other words, each woman promises that all members of the cooperative will pay back the loans to the bank. This approach has proved successful again and again and has shown repeated success in many parts of the world. In acknowledgement of the system's contribution to economic and social development, the United Nations declared 2005 "The International Year of Micro-credit".
Micro-financing was originally begun by Mohammad Yunus, a Professor of Economics from Bangladesh. It started when Yunus decided to try an experiment, making small loans to some Bangladeshi village women so they could develop their businesses. Conventional banks would not even consider giving loans to such poor women, but Mr. Yunus was determined to give the women a chance. His decision paid off. All the women in the "loan cooperative" paid him back -- and on time. Loans were made to other cooperatives with similar success. This led to the creation of the Grameen Bank, which believed that poor women with an entrepreneurial spirit could be trusted to pay back money they borrowed. As Mr. Yunus says, the difference between the Grameen Bank, which he founded, and other banks is that Grameen accepts credit as a human right and gives the highest priority to those most in need--those with the least material wealth who are most in need of credit.
By 2005, the International Year of Microcredit, all corners of the world saw the establishment of successful micro-enterprise networks, many coordinated by the United Nations Development Programme. When asked why 94 per cent of micro-enterprise loans were given to women, Yunus replied, "Women have plans for themselves, for their children, about their homes, their meals, their education. They have a Vision."
In 2006, the Nobel Committee awarded the Nobel Peace Prize in two parts: half to Mohamed Yunus, the founder who fostered the system of micro-credi and to the Grameen Bank which made low-interest loans available to so many poor people around the world. The micro-credit system has given millions hope of overcoming extreme poverty, and gaining an increased sense of dignity.
As Mohamed Yunus said in his Nobel prize acceptance speech, "This years' prize gives highest honour and dignity to the hundreds of millions of women all around the world who struggle every day to make a living and bring hope for a better life for their children. This is a historic moment for them."
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