December 16, 2007

Micro Credit

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Just finished this book, which starts off as a autobiography by Muhammad Yunnus, but becomes a biography of his life's pursuit: micro credit. Yunnus won the Nobel Peace prize for his work in 2006.

Like any entrepreneurial idea the execution required persistence, energy and passion. The concept is simple, provide simple and tiny loans (usually less than $100US) to the truly poor, based on the merit of their "business plan". Allow the poor access to capital for materials, tools, etc. Additionally, studies show that if you raise the income of women, their entire family tends to benefit (the whole family eats better, kids go to school, health care is provided), so focus on loaning to women. To do this, Yunnus started the Grameen Bank and associated foundations. They've done an impressive amount of good -- look at these stats from Wikipedia:

• Total number of borrowers is 6.67 million, and 97% of those are women
• The Bank has 2,247 branches (as of May, 2006) covering 72,096 villages, with a total staff of over 18,795.
• Loan recovery rate is 98.85%
• Since inception, total loans distributed amounts to Tk 290.03 billion (US$ 5.72 billion).

Many organizations have replicated the Grameen Bank program in countries throughout the third world.

At Slate's annual conference on Philanthropy, guest speaker Bill Clinton commented on the good that micro credit can do, even in the US. He suggested that while big donors (like those recognized by Slate) are important, everyday people can have more impact than ever. His complete remarks from 2006 are online at Slate.

Like the idea of micro credit and lending, as opposed to charity? Thanks to the brilliant folks at Kiva, anyone can now get involved. Hol and I gave this book and a kiva.org certificate as a white elephant gift at my company party this year.

Posted by ben at December 16, 2007 10:00 AM