The whole concept behind microfinancing is that a little can go a long way. For individuals, families, and communities that are trapped in poverty, microloans can represent a singular beacon of hope, as these people don’t have the proper income to do business with traditional financial institutions. Most microloans are directed at empowering women in particular, because as the main character from the film Crazy Rich Asians puts it: “Microloans help women, and women lift up economies.”
Microfinance is a concept pioneered by Dr. Mohammad Yunus, who experimented with making small loans to women in Bangladesh making and selling bamboo furniture. These women had previously depended on unfair and predatory loans just so that they could purchase the raw materials they needed. While traditional banks refused to give loans because of perceived risks and costs, Yunus found that his microloans were actually making a significant difference in the lives of the underserved, and that these individuals and groups would pay back these loans after their situation was alleviated. Yunus then went on to found Grameen Bank, a microfinance organization based in Bangladesh that has grown to support microfinance efforts across the world — and he also received a Nobel Prize for his work in 2006.
So what is it about these microloans that benefit women in need? For one, it empowers these women to become entrepreneurs of their communities and pull themselves out of poverty. When they are finally able to utilize financial services, they are able to invest that money into building or expanding a business — whether that involves clothing, food, or other avenues. They can use the funds they receive to purchase equipment or buy supplies, which greatly increases the amount of products they can sell, which in turn generates more profit.
It also helps these women take better care of their families. When these matriarchs gain profits from their businesses, they are able to use those funds not just to pay back their loans, but to further invest in their families’ comfort and well-being. One organization involved in microfinance, FINCA International, reports that 72 percent of their female clients are able to become the primary breadwinners of their family. This means that they are able to put food on the table, provide a safe and clean home, and enable their children to have better education.
There are a number of organizations that work to deliver microloans to women and individuals across the world, and to much success. Kiva, a microlending nonprofit, has enabled more than 2 million borrowers across 78 countries, which has resulted in over $1 billion lent — with a repayment rate of nearly 97 percent. Opportunity International is another organization, funding loans to nearly 10 million individuals, 95 percent of which are women. In addition, FINCA International uses new technologies to enable wider and easier access to microloans across the developing world.
For impoverished women around the world, microloans can mean everything. While the process has room to grow, improve and innovate, it remains the primary method for lifting individuals out of poverty in a meaningful way. As long as we can continue to support women, and educate them on the best financial practices, we can see microfinance help others overcome their dire situations.