"…micro-credit is an essential tool in our search for a poverty-free world."

- Muhammad Yunus founder of the Grameen Bank and 2006 Nobel Peace Prize winner

In 1976. the idea for Gameen Bank was born after Professor Muhammad Yunus discovered he could help his fellow Bangladeshis break through extreme poverty when he loaned $27 of his own money to 42 women. In 1997, Grameen Foundation was founded to replicate the success of Grameen Bank around the world.

Microfinance is an approach to alleviating poverty which empowers the world’s poorest people to rise above it by providing them with financial support instead of charity, in an effort to support the poor in establishing, sustaining and expanding self-supporting, income-generating businesses. An integral part of microfinance programs is the group lending system pioneered by Grameen Bank. Small, collateral-free loans called microloans, usually less than $200 dollars, are provided to members of small groups within a community. Every group has a leader that supervises the group. Initially, one member receives a loan. As the loan is repaid - usually within six months to a year- it is recycled to benefit other members of the group. The group system has proved successful; borrowers show support and encourage each other to pay off their loans. Because of this, Grameen has a high repayment rate between 95-98%.

The poor innately rely on their traditional skills and entrepreneurial instincts to support themselves. Yunus says in his book Banker to the Poor, "[The poor] already have received this training as part of their household chores or have acquired the necessary skills in their field of work. All they need is financial capital". Loans are funded by microfinance institutions (MFIs) that reach out to provide microloans to thousands of clients in their specific areas. Grameen Foundation provides funding for MFIs through innovative financing techniques and with funding that comes from individual philanthropists, foundations, governments and international institutions. MFIs also borrow funds from traditional banks to loan to their clients. Additionally, the interest paid by clients on microfinance loans goes back into the program to cover costs and fund more loans.

Grameen Foundation’s grassroots MFI partners , offers its clients (of which 95% are women) hope for a better life. Microfinance has a positive impact far beyond the individual borrowers and their families because as families rise out of poverty and microbusinesses expand, communities benefit as well.

The study “Measuring the Impact of Microfinance: Take Stock of What We Know” summarizes more than 90 impact studies and shows how powerful a tool micrfofinance is. This study can be downloaded for free from the Grameen Foudation website.

To learn more about Microfinance, visit the Grameen Foundation web site.