Is “microfinance” the solution to global poverty?

Perhaps. Microfinance (aka microcredit) are very small loans — typically less than $100 — made to the rural poor in developing countries who would have no other legitimate way of receiving traditional banking credit. Read on for links and resources that provide an introduction to this concept and to a few of the organizations pioneering the way.

Many experts including famed economist Jeffrey Sachs (Sach’s The End of Poverty is a must read) believe that microfinance is quite possibly the most promising strategy we have for ending global poverty. Pioneered by the Nobel Peace prize winning Bangladeshi economist Professor Muhammad Yunus, microcredit works on the idea that just a few dollars can lift someone out of poverty.

Professor Yunus founded his Grameen Bank in 1976 during a devastating famine in Bangladesh. Today it has 6.6 million borrowers of whom 97% are women. Learn more about the Grameen Foundation here and through this video:

A very exciting new organization, Kiva, is pioneering microfinance in a very peer-to-peer way through the internet. Lenders can pick specific businesses, make connections, loan money, receive updates, and chart repayment all from Kiva.org. Learn more from them and through this video:

That video is from PBS’s outstanding series Frontline who recently did a story on microfinance in Uganda. View the entire story at Frontline World.

Another exceptional organization, Unitus, has pioneered an “Acceleration Model” that combines best practices from the venture capital, investment banking and strategy consulting industries to help create large-scale, poverty-focused and commercially sustainable microfinance institutions. Learn more about Unitus here and through this video:

What’s more is that the availability of these loans could go a long way to breaking oppressive loan structures and keeping those that would exploit the poor from being in a position to do so. Loans in impoverished countries often come from “loan sharks” who lend with sinister intent — frequently leading to bonded servitude and sex trafficking. Certainly, using modern technology and leveraging trustworthy organizations both at home and abroad to provide a poor family with the small amount of money that would keep them from such desperate measures is an idea that gives great hope.

While not without its critics, the possibilities for microfinance solutions are very exciting. Either way it is a phenomenal experiment to combat poverty and a concept that deserves to explored to its limits.

Learn more through the Microfinance Gateway.