Facts of the Matter – Microlending

 

 

Ceramic Masks: Azure Moon, Sun of the Sierra, Rose Moon. By Pedro Dominguez and Maria Sanchez, Mexican artisans and loan recipients.

Modern microlending is closely associated with the Grameen Bank in Bangladesh. It dates back to 1976, when professor Muhammad Yunus, head of the Rural Economics Program at the University of Chittagong, made a personal loan of US$27 to 42 people in the village of Jobra, enabling them to buy raw materials for their work. He won the Nobel Peace Prize in 2006.

• After those first borrowers repaid their loans, Yunus established the Grameen Bank Project, which expanded across Bangladesh with the help of his students. The Grameen Bank was officially chartered in 1983. Grameen means “village” in the Bengali language.
• As of August 2009, Grameen Bank had 2,559 branches serving 84,652 villages in Bangladesh, and 141 “replication” partners operating microcredit programs in 38 countries.
• In 1973, Acción International claimed credit for coining the term microenterprise and launching the field of microcredit when it issued small loans in the town of Recife, Brazil. Started as a student-run volunteer organization in Venezuela in 1961, it grew into an economic development group and one of the world’s largest microfinance institutions.   
• The majority of microloan recipients are women. The United Nations estimates that women make up 76 percent of microcredit recipients around the world, accounting for nearly 90 percent of those in Asia but less than 33 percent in the Middle East. At Grameen Bank, women receive more than 95 percent of loans. One of the world’s largest microfinance institutions – Pro Mujer, in Bolivia – lends only to women.
• Of all microcredit borrowers, 70 percent are in Asia, 14 percent are in Latin America, and 10 percent are in sub-Saharan Africa. As of 2007, the countries with the highest loan portfolios were Indonesia, Colombia, Peru, Mexico, and Vietnam.
• Microlending has spread into the United States. The U.S. Small Business Administration has a microloan program that operates through intermediary lenders in 46 states, Puerto Rico, and Washington, D.C. Loan amounts range from $500 to $35,000; the average is about $13,000.
• Acción USA began making microloans in the United States in 1991. Grameen America opened its first branch in Queens, New York City, in January 2008.
• The opportunities for individuals to participate as microlenders grew significantly in October 2005 with the establishment of Kiva.org, a nonprofit Web site that enables users to make personal loans over the Internet to people and microenterprises in developing countries. Based in San Francisco, the organization takes its name from a Swahili word that means agreement or unity. With nearly $60 million in completed loan terms, Kiva reports that its repayment rate is over 98 percent. The average Kiva loan is about $400.
• In September 2007, eBay launched an online, for-profit “competitor” to Kiva called MicroPlace, which it acquired in 2006 from its founder, Tracey Pettengill Turner, a Stanford business school graduate trained in microfinance at Grameen Bank. Individuals who lend through MicroPlace can earn interest on their loans, whereas those who lend through Kiva can only receive repayment of principal.