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Equal Opportunity Loans

06.06.2008 · Posted in Miscellaneous Articles

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.rnrnUntil the creation of microcredit, banks only loaned money in large amounts to people starting major companies. These loans were subject to approval and were charged interest. Now poor people have the opportunity to start businesses like street fruit stands or clothing repair shops in places where such is hard to find. Most loans are less than $1,000.rnrnFor 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.rnrnIn the developed world, most businesses are owned by men. Obviously, that means most of the business loans are also for men. Microcredit is entirely different in many ways, and this is one of them. About 96% of the loans are made to women. In poor nations, women are traditionally in charge of the basics like food and clothing, so it makes sense that those types of businesses would be best run by women.rnrnMuhammad 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.rnrnIt was amazing to Yunus to find just how little money was needed to turn someone’s life around. His first loan was to a group of 42 women who together were only $27 in debt to loan sharks. With the $27 he gave them, they were able to rebuild their lives and eventually pay back the interest-free loan. When Muhammad Yunus approached banks about his idea to help more people, he was denied.rnrnThe 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.rnrnMicrocredit banks are the opposite of traditional banks in so many ways, yet the repayment rate is still almost 100%, even when disasters like floods or earthquakes happen. There is no need for lawyers or collateral. Payments are made by honest people working hard to change their lives and the lives of their community.

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