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History of Micro Lending

For centuries, Micro Loans have existed in many forms, and even longer in Asia. But the true ‘birth’ of Micro Lending is believed to have taken place in Bangladesh in the mid 1970’s.

In the midst of poverty, a Dr M Yunus, Professor of Economics at the University of Chittagong, was becoming concerned that economics failed to explain the growing rate of poverty and starvation in Bangladesh.

Dr Yunus then began visiting local villages and in one village, found a group of 42 women who made bamboo stools.

For these women to break out of the cycle of debt with local traders, Dr Yunus was shocked to find that the entire borrowing needs of the women only amounted to the equivalent of US$27.00. Dr Yunus then lent them the funds at 0% interest, required for the women to purchase their own raw materials. Hence they paid the money back and also

made a profit for their village.

So the 1970’s and 1980’s saw rapid growth in the number of micro lending institutions around the world. This showed and proved that the poor could be relied on to repay their loans, even without security.

As a result of the growth, the 1990’s sought the restructuring of micro loans to attract commercial investors, and adopting a more formal business practice.

By the end of 2008, nearly $15billion had been channelled to micro financing institutions. The majority from government funded organisations such as the World Bank, but also large amounts deriving from private and commercial sectors.

Looking towards the future, several estimates suggest that 500 million to 1.5 billion people in the world still lack the access to financial assistance that could strengthen their economic situation and improve their lives and conditions.

That is where Micro Loans Aust aim to help.

Category: Payday loans

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