Microlending

In the category of financing, we should definitely look into the Grameen Bank, probably the most successful microlending institution in the world.  It was founded by economist Muhammad Yunus, who won a Nobel Peace Prize in 2006.  He started the Grameen Foundation, which “combines the power of microfinance, technology and innovative solutions<!––> to defeat global poverty.”  The loans are often used to help women in undeveloped nations start small businesses.  Though the loans tend to not be related to design and community development, there may be a framework there to study.

More info available at http://www.grameen-info.org/

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3 responses to “Microlending

  1. good find, ryan. i’ve actually heard about yunus before, and i think that using him as a model for studying finance/profitability is a good idea.

  2. agreed. the new yorker article i linked to in the proposal document is about the grameen bank and describes an approach to transition to a for-profit model:

    Yunus is now seen by Omidyar (founder of Ebay) and many others as the archetypal founder, too wedded to his original vision. In recent years, younger and nimbler players have been taking microfinance—their preferred term—toward the idea of building a fully commercial, profit-making sector. This conflict, between pure do-gooders and profit-minded do-gooders, has come to define the current debate in the microfinance world.

    During that weekend at Doerr’s, Omidyar told me later, he was most impressed by the notion of “sustainability,” and by the idea that microfinance could help millions of poor people. “I was asking questions—‘How much does it cost to reach a new borrower? How much does it cost to open a new branch?’ What I was hearing back from Professor Yunus was very encouraging. So if you do the math, say it’s two hundred dollars per client—and that includes initial loan capital and the cost of the loan officer and the branch. This is cocktail-napkin math, right? But multiply the two hundred dollars by the three hundred million poorest people.” He estimated that three hundred million heads of household represented the world’s 1.2 billion poorest people. It would cost sixty billion dollars. “And then you’re done! It’s not an annual number. Once it’s scaled”—that is, once it has expanded to its full potential—“it’s a self-sustaining, profitable model, which opens the door to reaching large numbers of people who need to be reached by this tool of access to capital.” Microfinance institutions would eventually be able to raise money in the capital markets, and no longer have to rely perpetually on donor funding. “Rather than saying it’s going to cost forty-five billion dollars a year, this year, next year, and forever, you can think of it as an initial investment—but there’s a cap to how much you’re ever going to put in. That’s the difference between microfinance and the typical sort of government aid or charity, which is an ongoing thing.”

  3. This is exactly where I want to focus my research. I’d love to be in touch with any of you regarding the topic so we can exchange ideas/thoughts, etc.

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