Microcredit banking offers business training, peer support, and small loans (even only a few dollars) to the world’s poorest people. It has been extremely successful at driving sustainable development. Microfinance is a form of Socially responsible investing.
Integral part of development
Microfinance is not a complete solution to development problems, but can be an integral part. For example, microcredit is used in the Slum NetworkingW model, to enable facilities to be built by the slum community without relying on subsidies.
Microlending is a new emerging solution to economic development because it allows its recipients to reinvent their lives; it is a bottom-up, grass-roots approach that recognizes the entrepreneurial and tenacious spirit of the poorest of the poor. It is a way to build infrastructure, save lives, create role models, unlock people's potential, and ultimately push a hurting economy forward.
Emancipation loans are used to release people from difficult situations, such as owing a large debt to a moneylender, and thus having no capital, and no means to repay the debt, in spite of hard work. The emancipation loan pays off the debt and releases the financial pressure, and they can then participate in other microfinance activities. Repayment of this debt is deferred until the borrower's situation has improved; the time to begin repayment is decided jointly by the borrowers group (typically 5 people) to which she/he belongs. This is practised by the Grameen BankW as well as other MFIs (microfinance institutions).
While microfinance is a source of many inspiring stories, and opportunities for empowerment, and for more direct engagement between supporters and loan recipients, proper monitoring and evaluation are essential to ensure the actual impact is positive and maximal.
MIX Market - "Strengthening the Microfinance Sector with Objective Data and Analysis" - is one prominent effort to do this.
- Socially responsible investing
- Energy in Common - microfinance specifically focused on renewable energy technologies
- Economic Strengthening: Finding the Right Tool for the Job