Micro-

financing
Evolution:
• It was the year of 1974. Bangladesh was struck
by a great famine.
• A professor of economics at University of
Chittagong was very worried o the disaster.
During a visit to the nearby village of Jorba, he
was astonished to find that a sum of $27 could
radically change the lives of 42 people in the
village. This was the sum of money they
collectively needed to buy bamboo to make the
stools they sold to make a living. He took $27
from his pocket and made 42 loans to the stool
makers in that tiny village. They were able to pay
him back with interest and take a step towards
lifting themselves out of poverty.
 What is micro-
financing?
• "Microfinance is the supply of loans,
savings, and other basic financial services
to the poor."
• “Microfinance, is banking the un-
bankables, bringing credit, savings and
other essential financial services within
the reach of millions of people who are too
poor to be served by regular banks, in
most cases because they are unable to
offer sufficient collateral.”
 History of micro-
financing:
Micro-financing in 1800s
century:

•Lysander Spooner
 Micro-financing at present
• Mohammad Younas
• Akhtar Hameed Khan
Grameen‘s success and its impact
 Report of WORLD BANK:
• 16 Million people
• 7000 micro-finance institutions

International year of micro-financing:

2005 was declared as the international
year of micro-financing
 Institutions of micro-
financing:
• Grameen Bank
• Morgan Stanley
• Deutsche Bank
• Citi group of Banks
 Microcredit
• Microcredit is the extension of very
small loans to the unemployed, to
poor entrepreneurs and to others
living in poverty.
 Principles of microcredit:
• Microcredit is based on a separate set of
principles, which are distinguished from general
financing or credit. Microcredit emphasizes
• Building capacity of a micro-entrepreneur,
• Employment generation,
• Trust building
• Help to the micro-entrepreneur on initiation and
during difficult times.
 Five goals of
Microcredit:
• The International year of Microcredit consists of five goals:
• Assess and promote the contribution of microfinance to
the MFIs
• Make microfinance more visible for public awareness und
understanding as a very important part of the development
situation
• The promotion should be inclusive the financial sector
• Make a supporting system for sustainable access to
financial services
• Support strategic partnerships by encouraging new
partnerships and innovation to build and expand the
outreach and success of microfinance for all.
Strengths
Micro-financing in developed
world
USA:
 Role of developing countries—
a recent Forbes ranking:
US business magazine Forbes ranked world's top 50 microfinance
institutions.
India and Bangladesh are the home of most MFIs.
• Seven of them were from India, most of any country.
• 5 from Bosnia and Herzegovina,
• 4 each from Morocco and Peru,
• 3 from Colombia,
• 2 each from Ecuador, Ethiopia and Serbia,
• 1 each from 15 other countries, Russia, Pakistan, Mexico, Brazil etc.
• Grameen Bank ranked 17th in the list.
Forbes magazine states:
• "microfinance has become a codeword of the decade for development
of the poor."
• "Billionaires, global leaders and Nobel Prize recipients are hailing these
direct loans to uncollateralized would-be entrepreneurs as a way to lift
them out of poverty while creating self-sustaining businesses".
Grameen Bank
 History
Grameen Bank started in 1976 when Professor
Muhammad Yunus launched a research project to
examine the possibility of designing a credit
delivery system to provide banking services
targeted to the rural poor. The organization and
its founder, Muhammad Yunus, were jointly
awarded the Nobel Peace Prize in 2006; the
organization’s Low-cost Housing Program won a
World Habitat Award in 1998.
 Operational
statistics:
Equity of the bank:
• the borrowers own 94%, and the
remaining 6% is owned by the
Government of Bangladesh.
 Kashf
Foundation