Microcredit as we mean it today was born between the late 1970s and the early 1980s. The best-known example is the work done by Muhammad Yunus in Bangladesh with his Grameen Bank. By granting small loans to women and families who did not have access to the credit market, it supported the birth and development of thousands of economic activities that were important to the development of entire rural areas. Yunus’s commitment was awarded with the award of the Nobel Peace Prize in 2006.
There are mainly three aspects that differentiate microcredit from bank loans:
- low interest rates;
- technical assistance and monitoring activities financed by the loan;
- the balance between the interests of the lenders and the need for money for those who demand the loan.
Unlike traditional finance, in the world of microcredit there is a greater focus on ethical issues and an attempt to listen and understand the needs of people who need money.
The overwhelming majority of people who get a small loan through microcredit (and return it within the agreed terms) are female. The experience gained by Grameen Bank and other international players shows that women have a lower rate of insolvency. Women account for 98% of Yunus Bank customers and 75% of the total number of people globally financed by microcredit.
Microcredit: Differences between Developing and Industrialized Countries
As mentioned earlier, microcredit is born to support very small entrepreneurial activities in contexts of poverty and social exclusion. Microcredit providers were born and have been successful especially in developing countries, where the need for an ethical and secure system was stronger, through which to get money to support the creation of self-employment.
Soon in the industrialized countries, microfinance and microcredit forms have been introduced. In this case the loans are intended for people and small businesses who need support for the further development of the business or who want to start an economic activity.