Microfinance Institution (MFI): A financial institution (e.g. nonprofit organization, regulated financial institution or commercial bank) that provides microfinance products and services to low-income clients.
Since the financial services of MFIs usually involve small amounts of money – small loans, small savings etc. – the term "microfinance" helps to differentiate these services from those which formal banks provide.
Grameen Bank brought international focus to the practice of loaning money to the world’s poorest inhabitants when its founder, Muhammad Yunus, won the Nobel Peace Prize in 2006. (Grameen is Bengali for rural)
Principal is repaid first. Interest, calculated weekly on the
diminishing principal, is repaid only after the principal is paid off.
Repayment responsibility rests solely on the individual borrower, although each borrower must belong to a five-member group composed of fellow villagers. Yet there is no form of joint liability, i.e. group members are not responsible to pay on behalf of a defaulting member.
Borrowers must strive to abide by the “16 Decisions.”
In 1998, Grameen Bank stopped receiving donor funds. It finances 100% of its outstanding loans from its deposits... 54% of which come from the bank’s own borrowers! In fact, deposits amount to 142% of the outstanding loans.
Grameen Bank savings interest rates : 8.5% to 12%.
Today Grameen Bank is owned by the rural poor whom it serves. Borrowers own 90% of its shares , while the remaining 10% is owned by the government. In 2007, shareholders received a 20% dividend.
By reducing vulnerability and increasing earnings and savings, financial services allow poor households to make the transformation from "every-day survival" to "planning for the future."
In India, 50% of SHARE clients graduated out of poverty.
In El Salvador, the weekly income of FINCA clients increased on average by 145%.
In Lombok, Indonesia, the average income of Bank Rakyat Indonesia (BRI) borrowers increased by 112%, and 90% of households graduated out of poverty.
The Microcredit Summit estimates that $21.6 billion is needed to provide microfinance to 100 million of the world's
Incredibly, the world's seven richest men could provide this amount and wipe out global poverty.
Their combined wealth is more than enough to provide the basic needs of the poorest quarter of the world's people.
We can wait around for them to act.
“ I have come out of the crowd of women who are looked down upon. Today I'm a very respected woman in the community. Due to the loan that I received... you have made me to be a champion out of nobody.“ - Rose Athieno , Produce Reseller, Uganda
… there are millions of women like Rose who would leap at the opportunity to grow a business, ensure the survival of their families, and take back the dignity that poverty and oppression have stripped them of.