Microcredit is a system that provides small loans to poor individuals without collateral to start self-employment projects. Muhammad Yunus pioneered microcredit by providing small loans to 42 poor women in Bangladesh in 1976. This led to the founding of Grameen Bank in 1983, which has since loaned over $6 billion to over 7 million people, mostly women. Microcredit works by providing loans in small group through community support and accountability. It has significantly reduced poverty by generating income and empowering the poor, especially women. However, some critiques argue it can increase debt cycles and over-dependence on loans.

1. Group name:
Black and white
Welcome to our presentation

2. Our topic is
 micro-credit system

3. What is Microcredit?

A programme that extend small loans to very
poor people for self-employment projects
that generate income, allowing them to care
for themselves and their families.
 Part of microfinance which provides
numerous financial services to the poor

4. How does it work?

5. Why is Microcredit important?
 Why is Microcredit important?
 Four billion poor people need access to financial services
 Social justice
 Only philanthropy is not enough
 Women suffering the most
 Development of informal sector  farmers, tailors…
 Need to remove poverty in society
 ↑ Demand  $50 billion per year for Microcredit
 ↑ 15-30% growth annually
 Moral responsibility of businesses

6. How Microcredit
Different from Conventional Banks
 5 features
 Loan size is small  b/w $100-$500  average $100
 Customers are rural poor, particularly women
 Income activities  Self-employment, non-formal sector
 No collateral required
 Must have saving account linked to Microcredit

7. History of Microcredit:
Muhammad Yunus
 Founded by Muhammad Yunus
 Grew up in the village of Bathua in Hathazari, Chittagong
 Attended Dhaka University and has a BA and MA in
economics
 Ph.D. in economics from
Vanderbilt University
 Returned to Bangladesh and
became head of the Economics
Department at Chittagong University

8. History of Microcredit:
Women of Jobra
 In 1976 Yunus visited the village
of Jobra
 A Jobra woman was selling
bamboo furniture for 2 cents a
day
 A trader loaned her money so
that she could buy the bamboo
 Indebted to the trader and could
only sell her products to him
 Yunus found 42 women with
similar debts
 Total debt for the women = $27
 Yunus lent the women the
money
 Idea of microcredit is born

9. History of Microcredit:
Struggle for Support
 Yunus attempted to convince the banks of
Bangladesh to loan to the poor people
 Every bank denied his request
 Tried different banks for over 6 months
 “poor people are not credit worthy”
 Became a guarantor for a bank
 Successful lending in 5 different villages
 But banks continued to deny his requests
 Yunus realized he had to form his own bank
to lend to the poor

10. History of Microcredit:
Grameen Bank is Formed
 Success in the district of Tangail
and two other districts
 Established a new law so that
his bank would be different than
others
 Seven years after meeting the
women of Jobra, the Grameen
bank was established
 October 1, 1983

11. History of Microcredit:
Grameen Bank Today
 As of July 2007 Grameen Bank has loaned
$6.38 billion to 7.4 million people
 More than 94% of loans have gone to
women
 More likely to devote money to their family
 In 2006 Yunus received the Nobel Peace
Prize
 $1.4 million prize
 Company to make low-cost, high-nutrition food for
poor
 Eye hospital for the poor in Bangladesh

12. History of Microcredit:
Microcredit Today
 Today there are more than 7,000
microfinance institutions
 Microcredit is offered in more than 100
countries
 More than 13 million people have been
given microcredit loans
 Loan repayment is at 97%
 Microcredit banks are now finding more
ways to help borrowers through agriculture,
health, and other programs

13. Assumptions of Microcredit
 Credit is a human right
 Need a dollar to get a dollar
 Most banks create poverty
 Governments must enable people
 Lending to women empowers communities
 Credit creates self-employment
 Credit makes other human rights attainable

14. How Microcredit Works
 Major players: All of these groups must work
together to enable microcredit programs to
exist and eliminate fraudulent practices
which may harm the poor.
 Borrowers
 Government
 Banks
 Donors
 Wholesale Funds

15. Top 25 Microcredit Institutions
 The success of
Grameen lead to the
development of
similar banks in other
underdeveloped
countries
 Most also lend
mainly to women

16. Requirements to Borrow
 Willing to take part in a “solidarity group”
 Money used only for improvements of
village life
 Agree to the codes of conduct for members
of microcredit programs
 Grameen Bank’s16 Decisions
 BRAC’s 17 Promises
 RD-12’s 21 Oaths

17. Requirements to Borrow
(cont…)

Land ownership of the household: For example, landless and marginal
farmers owning or cultivating less than 1.50 acre (0.6ha) of land on
share-cropping including homestead can become members of ADIP
credit program.
 Age of the individuals : For example, in case of BRAC, individuals
applying for credit must be aged between 18-54 years.
 Income of the households: For example, household having a maximum
monthly income of up to 3000 taka (equivalent to 44.44 USD) can become
members of marginal and landless group of ADIP.
 Residence of the individuals: The individual should be a permanent
resident of the village.

18. Requirements to Borrow
(cont…)
 Marital Status of the individuals. For example, married people were
encouraged in ADIP rather than singles.
 Affiliation: The individual cannot be affiliated with other NGOs or any
other microcredit program at the same time.
 Health status of the individuals: Individuals must be physically active
having no serious diseases like cancer or disabled.
 Focus on poor and destitute women. For instance, BRAC gives priority
 on widowed or divorced women with children

19. Qualifications for Traditional
Credit
 Assets
 Income
 Debts
 Repayment History

20. Qualifications for Microcredit
 Activity will generate employment
 Little or no collateral
 Part of a support group
 Women preferred
 Agree to Codes of Conduct
 Previous borrowers can get a loan as
long as previous loans are paid off

21. B . Non -Agricultural Loan:
 Rickshaw-Pulling
 Small-scale non- agricultural trade
 Handy-crafts
 More Focus on Agricultural
Activities
A. Agricultural Loan:
 Crop production
 Poultry
 Livestock
 Fisheries

Small sell
agribusiness
 Nursery raising
 Social forestry
Types of LoanTypes of Loan

22. Impact of micro-credit program on
poverty reduction
 Impact of micro-credit program on
poverty reduction was measured by
considering four dimensions.
 those area are change in income,
change in farm and household assets,
change in living standard and change
in poverty situations.

23.  Resent study shows the number of
new businesses increased by one
third.
 microcredit in Bangladesh had a
"positive impact on enterprise and
household income and asset
accumulation
Impact of micro-credit program
on poverty reduction (cont…)

24. Impact of micro-credit program on
poverty reduction (cont…)
 Microloans in the US have allowed
small business owners to make their
businesses their primary source of
income with 67% of the borrowers
showing a significant increase in their
income as a result of their participation
in certain micro-loan programs

25. Impact of micro-credit program on
poverty reduction (cont…)
 Micro-credit also give good result on
enhancing living standard and change
in poverty situations.

26. Critiques of Microcredit
 Grameen Bank's high repayment rate does not
reflect the number of women who are repeat
borrowers
 Women become dependent on loans
 Women act as collection agents for their husbands
 Men spend the money
 Women fall into debt
 Over dependence on external capital
 Too much power given to field officers
 Sometimes violence is used to collect repayments
 Loan recipients could get into a cycle of debt
 Loans from other microcredit institutions to repay previous
microcredit loans
 High interest rates

27. Any question ?

28. thAnk you