|
Microfinance began with the granting of short-term loans, without any formal guarantees, to people with low incomes. The objective was to help people, who had been previously excluded from the traditional banking sector, to launch or expand their businesses. Up to this point, these people had no access to basic services offered by financial institutions. Microfinance today has progressed beyond credit to include other financial services such as savings, insurance and leasing.
 The pioneer countries in this field, Bangladesh and Bolivia, initiated their first microfinance initiatives more than thirty years ago with Grameen Bank and the BancoSol respectively. Over the years, microfinance has proven to be an effective means of fighting and alleviating poverty.
In response to this success, microfinance institutions (MFIs) and various non-governmental organizations (NGOs) joined together in the struggle against poverty by setting up microcredit programmes. Microcredit encompasses all operations developed to allow easier credit access to the poor through the provision of short-term loans. These loans are typically for small amounts which facilitates borrowing to start up small local businesses.
Loans are granted to the poorest sections of the population, especially women, who can use them to earn additional income and finally escape conditions of extreme poverty
.
Aware of the tremendous achievements of microcredit in the world and of its role in alleviating poverty, the United Nations General Assembly proclaimed the year 2005 as the International Year of Microcredit.
"The Year of Microcredits 2005 calls for building inclusive financial sectors and strengthening the powerful, but often untapped, entrepreneurial spirit existing in communities around the world." - Kofi Annan quote.
>> Top |
