Microcredit programs provide small loans to low-income individuals, usually women, to start or expand small businesses. Loans are repaid in weekly installments and have high repayment rates of over 98% due to group lending structures. Microcredit has grown significantly and now serves over 150 million people worldwide, empowering the poor and increasing dignity. Related programs include microfinance, which offers additional services like deposits and insurance, and microfranchising, which replicates small, low-cost business models to promote entrepreneurship. Social businesses use profits to further social goals rather than paying owners.

1. Microcredit/Microfinance/MicroFranchise
Social Business, Social Entrepreneur - Enabling the Resource Poor to work their way out of poverty
Programs that transcend political ideologies, religions and cultures in making the world a better place.
Microcredit – small (typically $100 - $500 in third world/developing countries) loans to the resource poor for the purpose
of starting or expanding a small business. Money is paid back in weekly or biweekly installments over a period of
typically 8 – 16 months. Most loans (95%+) go to women. Typical interest rate is 20% (10% above local cost of money).
In some cases the woman uses the money to pay for equipment/materials/inventories to put their husbands in business.
There is no collateral, no written contracts and no lawyers. The borrowers are typically in “solidarity” groups of five
women who meet weekly or biweekly in eight or so groups of five (40 total) in their villages with their banker and assure
that the loans are repaid. Repayment rate is typically above 98%. When a loan is repaid, the borrower normally takes
out a larger loan to expand their business further which often includes hiring others. Grameen Bank, ASA and BRAC –
all from Bangladesh are the three largest microcredit institutions in the world – all of which are now replicating their
products/services in many other countries in the world – including the United States. 2006 Nobel Peace Prize winner
Muhammad Yunus of Bangladesh and Grameen Bank is the world’s foremost visionary, leader and spokesperson for all
of the elements described in this paper. There are currently nearly 150 million people in the world being served by
microcredit. Microcredit is a hand up rather than a hand out which in turn increases the dignity and self esteem of the
borrower as well as providing dramatically more leverage of the money from the funder. Microcredit is most likely the
greatest woman empowerment program in the world.
Microfinance – microcredit is the primary microfinance product, but microfinance also includes other financial services –
primarily taking deposits (providing interest on deposits) and providing insurance that does things like assuring that if the
borrower dies, her/his heirs will not have to repay the debt as well as providing insurance that covers the funeral/burial
costs of the deceased borrower. Being able to take deposits is a significant element in creating sustainability of
microcredit. Additional microfinance products include student scholarships,student loans and housing loans.
MicroFranchise – a small businesses that can easily be replicated by following proven marketing and operational
concepts. The overall objective of MicroFranchising is to promote economic development by developing sound business
models that can be replicated by entrepreneurs who are poor - therefore, the start-up costs of MicroFranchises must be
minimal. The key principle is replication, replicating success to scale. A leading model of MicroFranchising is Vision
Spring (formerly Scojo Foundation) which is a non-profit social enterprise that reduces poverty and generates
opportunity through the sale of affordable reading glasses. Vision Spring “Vision Entrepreneurs” are low-income men and
women living in rural villages who are trained to conduct vision screenings within their communities, sell affordable
reading glasses, and refer those who require advanced eye care to reputable clinics. Each Vision Spring Vision
Entrepreneur receives his or her own "Business in a Backpack," a sales kit containing all the products and materials
needed for vision screening, sales, data collection, and marketing, and receives ongoing support from staff. With
blueprints for success, Vision Spring “Vision Entrepreneurs” run profitable businesses, earning more than twice their
previous daily income on each pair of glasses sold. With a pair of low-cost glasses, their customers are able to double
their productivity.
Social Business – a business that measures success in terms of doing social good. Once a social business is making a
profit, it returns the original investment to the original investors without interest or dividend and pours all of its profits back
into expanding the business to make a positive difference in the world. Grameen-Danone is the leading model of a
social business. Grameen is the world’s largest microcredit organization in and Danone (in France) is the world’s largest
yogurt manufacturing company. They each loaned $500,000 to start a joint venture in Bangladesh. The JV produces a
tasty vitamin fortified yogurt to provide nutrition to poor children at a very low cost - $.08 per container. The factory
employees 20 people, the milk is purchased from 500 Grameen borrowers who have cows and the yogurt is distributed
by local Grameen Yogurt Ladies who are Grameen borrowers and is also sold through small stores. Once profitable
Grameen and Danone will be paid back their original $500,000 (with no interest or dividends) and the additional profits
will be used to create 50 additional replications throughout Bangladesh.
Social Entrepreneur – someone who recognizes a social problem and uses entrepreneurial principles to organize,
create, and manage a venture to make social change. Whereas a business entrepreneur typically measures
performance/success in profit and return, a social entrepreneur assesses success in terms of the impact s/he has on
society. Social Entrepreneuring is a major movement in the world led by a wonderful group of elders and leaders (Yunus,
Drayton, Abed, Daley-Harris, Hatch, Counts, Woodworth, Gibson, Fairbourne, Davis, etc.) and being carried on in a
massive way by youth and young adults led by Bangladesh and from around the world.
Marty India Blog – www.travelpod.com/members/martysb - July 25 – September 28, 2008
Marty Bangladesh Blog www.mytb.org/MartyJ - November 21 – December 14, 2007
Created, compiled and edited by Marty Jenkins, RespectfulDialogue@cox.net, 805-964-2550, October 2008