Microcredit, the concept of granting small loans to impoverished people with the goal of inspiring entrepreneurship and transforming lives, has delivered hope and opportunity all over the world. Some organizations have made strong names for themselves, while others are just getting off the ground. Below we profile three microcredit groups working in three different continents: ACCION USA, LAPO, and Grameen Bank.
America's Leading Lender
The microcredit approach to combating poverty didn't show up in the United States until 1991. That year, ACCION, an international group, launched a pilot microlending project in Brooklyn, New York. ACCION's microcredit activity spread throughout the country and eventually a separate, nonprofit organization was formed: ACCION USA. Today, ACCION USA is the largest microcredit organization in the United States.
ACCION USA targets low-income communities in Chicago, New Mexico, San Diego, and Texas. In almost 10 years, it has disbursed more than $150 million in small business loans to thousands of entrepreneurs charging annual interest rates as low as 13 percent. By giving people the financial tools they need to start a business—microenterprise loans, business training, and other financial services —ACCION USA hopes to help clients work their way out of poverty. The results from a three-year evaluation of ACCION USA are promising. The study found that clients increased their take-home income by 38 percent and average monthly profits by 47 percent.
Heavy Lifting in Nigeria
In Nigeria, LAPO, which stands for Lift Above Poverty Organisation, works to extend affordable credit to the bottom 50 percent of the population living below their country's poverty line. While providing microcredit is LAPO's primary function, it supplements financial services with social development programs for clients, such as health and social justice services.
A nonprofit organization, LAPO opened its doors in 1993. Today, it serves more than 95,000 clients. Although CEO Godwin Ehigiamusoe touts his clients' high repayment rate, LAPO is having trouble attracting Nigerian banks. In order to grow and fill the need for microcredit, LAPO must find new donors and investors.
Like many microcredit organizations, most of LAPO's clients are women. The profit from their small business - whether from making yam or selling kerosene - helps them buy food for their children, pay their school fees, and buy health care.
Banker to the Poor
Grameen Bank was founded in 1983 by Muhammad Yunus, the Bangladeshi economics professor who received the Nobel Peace Prize in 2006 for revolutionizing the microcredit concept. Yunus launched Grameen to create employment opportunities for the vast multitude of unemployed people in rural Bangladesh and counter the exploitation of the poor by money lenders.
Since 1983, Grameen Bank has operated as a for-profit, member-owned bank. From the beginning, Yunus sought to show that the business of lending to the poor could be sustainable and even profitable. Most of the Grameen Bank's branches do produce small profits, which are reinvested into the operation. Today, it is one of the biggest microcredit banks in the world. 97 per cent of its 7 million borrowers are women. According to Yunus, 58 percent of borrowers have already advanced across the poverty line.
Grameen Bank continues to play a role as an innovator in the world of microcredit and social enterprise. To target the neediest Bangladeshis, Grameen Bank started an interest-free service for beggars called the "Struggling Members Programme," which is producing positive results. The Bank has also partnered with a telecommunications company to make cell phones more affordable for rural Bangladeshis while offering microenterprise opportunities.