Handbook of Critical Issues in Finance
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Handbook of Critical Issues in Finance

Edited by Jan Toporowski and Jo Michell

This vital new Handbook is an authoritative volume presenting key issues in finance that have been widely discussed in the financial markets but have been neglected in textbooks and the usual compilations of conventional academic wisdom.
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Chapter 31: Microfinance

Judith Tyson


In 1976 Professor Muhammad Yunus lent a small amount of money to finance income-generating activities on an uncollateralized basis to poor people in a rural village in Bangladesh, who had been refused loans from commercial banks on the grounds that such people were ‘unbankable’. His experiment to provide credit to the poor has since evolved into today’s global microfinance movement. Whilst this huge explosion of microfinance, and its promise to provide a path out of poverty for the poorest, has many advocates and success stories, its increasing growth and complexity is giving rise to a new series of challenges and issues. FROM EARLY TO CURRENT MICROFINANCE: PRACTICE AND THEORY The Early Microfinance Model: The Grameen Model The microfinance idea, born in 1976 in Bangladesh, under the leadership of Yunus, developed into the Grameen Bank (Yunus, 1999). The concept that was developed by the Grameen Bank was to lend on an uncollateralized basis to the poor to provide them with capital to generate income.

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