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submitted: Jun 6th 2008 | by: HealthyWealthynWise | Total views: 2 | Word Count: 474 | |

Muhammad Yunus is an economics professor in Bangladesh. He is also the creative mastermind behind a new banking trend called microcredit. Unlike traditional business loans, microcredit loans are tiny loans given to people in poverty to help them get on their feet with a small business. With no collateral, background check, or interest, it might surprise you to learn that most of the loans are repaid in a timely manner.

Until the microcredit concept was introduced, banks only loaned large amounts of money to privileged people starting major companies. These loans were charged interest and were subject to approval. Poor people had no chance in this market, but today they are able to get small loans, usually less than $1,000, to open businesses like roadside fruit stands.

For his efforts, Muhammad Yunus and the bank he founded, Grameen Bank, were jointly awarded the Nobel Peace Prize in 2006. The bank now has approximately 2,500 branches in rural areas of Bangladesh serving 80,000 villages. Another surprising fact is that 94% of the bank is owned by members who have little or no land.

Most of the world's business owners are men, so obviously most of the loans are also in the name of men. This is another major difference between traditional and microcredit loans. Microcredit loans are given to women 96% of the time. In poor countries, women traditionally manage the basic needs like food and clothing, so it makes sense that they would open businesses to sell their excess.

Muhammad Yunus made his first personal loan in 1974. At that time, there was a famine in Bangladesh. People were struggling and turning to loan sharks. As a professor of economics, Yunus saw that the real world isn't anything like the theories taught in a classroom. He wanted to help these poor people dig themselves out of poverty.

What shocked Muhammad Yunus more than the extreme poverty all around him was just how little the people needed to get out of it. He made his first loan to a group of 42 women for only $27. They were able to pay off the loan sharks (who were charging interest) and begin to rebuild their lives. When Muhammad Yunus approached a bank about making similar loans, he was denied.

The microcredit idea was born and the Grameen Bank was founded because of one man's passion to help others. Little things are sometimes more powerful than one could ever imagine. Muhammad Yunus believes everyone is bankable and that credit should be a right for all, not just the privileged.

Microcredit banks are entirely opposite of traditional banks, yet the repayment of microcredit loans is still almost 100%. Even during times of disaster when richer nations would default on their loans, poor people strive to repay theirs through adversity. There are no lawyers, collateral, or interest, only hard-working people with the drive to better themselves.

About the Author

Muhammad Yunus is the founder of microcredit, which allows indigent people in countries around the world to procure money. Go to Muhammad Yunus to find out how Grameen Bank became a lifesaver for millions.

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