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History of microfinance

The history of microfinancing can be traced back as long to the middle of the 1800s when the theorist Lysander Spooner was writing over the benefits from small credits to entrepreneurs and farmers as a way getting the people out of poverty.
But it was at the end of World War II with the Marshall plan the concept had an big impact.
The today use of the expression microfinancing has it roots in the 1970s when organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer Mohammad Yunus, where starting and shaping the modern industry of microfinancing.
Another pioneer in this sector is Akhtar Hameed Khan. At that time a new wave of microfinance initiatives introduced many new innovations into the sector. Many pioneering enterprises began experimenting with loaning to the underserved people.
The main reason why microfinance is dated to the 1970s is that the programs could show that people can be relied on to repay their loans and that it´s possible to provide financial services to poor people through marketbased enterprises without subsidy.
Shorebank was the first microfinance and community development bank founded 1974 in Chicago .
An economical historian at Yale named Timothy Guinnane has been doing some research on Friedrich Wilhelm Raiffeisen´s village bank movement in Germany which started in 1864 an by the year 1901 the bank had reached 2million rural farmers.
Timothy Guinnane means that already then it was proved that microcredit could pass the two tests concerning peoples paybackmoral and the possibility to provide the financial service to poor people.
Another organization, The caisse populaire movement grounded by Alphone and Dorimène Desjardins in Quebec , was also concerned about the poverty, and passed those two tests. Between 1900 to 1906 when they founded the first caisse, they passed a law governing them in the Quebec assembly , they risked their private assets and must have been very sure about the idea about microcredit.
Today the World Bank estimates that more than 16 million people are served by some 7000 microfinance institutions all over the world. CGAP experts means that about 500 million families benefits from these small loans making new business possible.
In a gathering at a Microcredit Summit in Washington DC the goal was reaching 100 million of the world´s poorest people by credits from the world leaders and major financial institutions.
The year 2005 was proclaimed as the International year of Microcredit by The Economic and Social Council of the United Nations in a call for the financial and building sector to “fuel” the strong entrepreneurial spirit of the poor people around the world.

The International year of Microcredit consists of five goals:
• Assess and promote the contribution of microfinance to the MFIs
• Make microfinance more visible for public awareness und understanding as a very important part of the development situation
• The promotion should be inclusive the financial sector
• Make a supporting system for sustainable access to financial services
• Support strategic partnerships by encouraging new partnerships and innovation to build and expand the outreach and success of microfinance for all

The economics professor Mohammad Yunus and the founder of Grameen Bank were awarded the Nobel Prize 2006 for his efforts.


Read more at - http://www.microfinanceinfo.com/history-of-microfinance/

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