Reducing poverty and empowering communities.

• Author: Srivastava, Paritosh
• Position: Microcredit

Mohammed Yunus, founder of Grameen Bank, one day in 1974 met a woman from a small village in Bangladesh who made bamboo chairs for sale. Despite her endeavour, the woman was left with barely any profit after repaying the middlemen the money for the raw bamboos. He also discovered that some 42 people in the village suffered a similar fate and were in debt for a mere total of $27. Mr. Yunus paid the loan so that they could break free from lenders. He also offered himself as a guarantor for the poor at a local bank. (1) From that day onwards, he embarked on a journey to eradicate poverty and empower people deprived of financial services, especially women, to be self-reliant.

In spite of strong advice from banks and Governments, Mr. Yunus began to issue microcredits and in 1983 formed the Grameen Bank, which gave small loans to entrepreneurs too poor to qualify for traditional bank loans. Since then, the concept of microcredit has come a long way. Many developmental agencies have started to comprehend its essential role in poverty reduction, and financial institutions are realizing immense opportunities in the microcredit domain.

A major reason why people cannot get out of poverty is because they do not have enough credit to invest in small enterprises. The poor do not have access to credit simply because financial institutions consider them a risk, as they often lack an underwriter or security deposit to guarantee repayment of the loan. (2) Nonetheless, these opinions are slowly changing. Microcredit banks, which cater towards the underprivileged, see the poor as credit-worthy.

To raise awareness and draw worldwide support, especially from financial institutions, the United Nations has designated 2005 as the International Year of Microcredit (IYM). Its main objectives are to draw awareness on microcredit in order to eradicate poverty, foster partnerships among financial institutions to provide adequate services for the needy, and assess the role of micro-finance in meeting the Millennium Development Goals (MDGs). Advisors and spokespersons have been appointed to raise understanding and advocate the concept of micro-finance, including the IYM goals and objectives. In addition, the UN General Assembly encourages Member States to create national committees or focal points to commemorate and implement national activities for the Year. So far, there are more than 50 committees.

During the year, many conferences and gatherings are also taking place...