Microfinance

Microfinance, microlending is the offering of small loans ($20, $100 USD) to individuals or groups, normally would not be approved by regular financing institutions. Loans are given to finance business ventures, while providing profit to the microlender. Grameen Bank in 2007 was able to generate a profit of $1.56 million. Microloans are meant for individuals who would normally not receive loans from banks, but would be deemed a low credit risk by the micro-lender.

Muhammad Yunus developed the concept and received the Nobel Prize in 2006 for his innovation. 

Microfinance is an attempt to spur development in developing countries. Forbes noted that 33 million microfinance loans were made in 2007. Microfinance has help 80 million in Bangladesh acquire phones. The World Bank estimates that 500 million has been helped by microfinance loans. 

Recently, microfinance entities have come under fire for abusive loan practices, charging exorbitant rates in the 20 to 30 percentile- loan sharking. Microlenders would require multiple co-signers so default rates would be minimized. 

Works Cited

Kolakowski, Mark. Microfinance. About.com, retrieved February 4, 2011

Kolakowski, Mark. Microfinance. About.com, retrieved February 4, 2011

Pritchard, Justin. Microfinance definition. About.com, retrieved February 4,2011 

Kolakowski, Mark. Microfinance Critics. About.com, retrieved February 4, 2011