Many people are not reaching their full income potentially merely because they do not have access to credit. Microfinance seeks to provide access to financial capital to people who otherwise would not have the opportunity.

Microfinance loans are intended for those who cannot qualify for loans from traditional financial institutions. The loan terms are designed to help those who only need a small amount of capital to facilitate their microenterprise.

Some organizations that offer microfinance also offer other financial services, such as savings plans, insurance, and business training classes. Like microfinance loans, these services are designed to help microenterprise owners achieve growth and success in their business.

History and Impact

The founding of microfinance is generally attributed to Muhammad Yunus, an economics professor from Bangladesh. In 1976, Yunus visited a local village seeking fundamental solutions to poverty. He met a woman named Sufyia who made and sold chairs to support her family. She relied on high-interest-rate loans from village moneylenders to buy the materials. Because of the severe terms of her loans, she had no way to improve her situation. Recognizing that Sufyia's situation was not unique, Yunus lent 856 taka-about 27 U.S. dollars-to 42 microenterprise owners. Not only did the loan recipients pay back their loans promptly, but they were able to earn more income and grow their businesses. Of this first experience, Yunus remarked, "If I could make so many people so happy with such a tiny amount of money, why not do more of it?"

Do more of it he did, thus beginning the international revolution of microfinance. In 1983, Yunus founded Grameen Bank in order to offer microfinance on a wider scale. Today, Grameen Bank serves over 2 million borrowers in more than 80,000 villages. In 2006, the impressive global impact of microfinance earned Yunus and Grameen Bank the Nobel Peace Prize.