Historical development of microfinance

Terms micro – loans and micro – crediting did not exist until the ‘70s of the last century, when Muhammad Yunus, and his Grameen Bank, commenced with his activities in the village Jobra in Bangladesh. He was providing loans to poor women, living in rural areas, for starting a small business aimed at the improvement of their living conditions in their households. Amounts of these loans were minimal, being used for the purchase of small livestock and tools. Women – loan beneficiaries, would form solidarity groups for the purpose of guaranteeing for each other. None of the known collateral forms were used other than their oral promises.

Thanks to the Bangladesh’s success, Brazil, Peru and many other underdeveloped countries of the world have started with the application of similar programmes. The basic principle of the Grameen Bank was that the clients should not go to the bank, but rather the bank should come to them. Therefore, officers of micro - credit organization worldwide are operating on the field, working from door to door, providing for unfettered access to loans to the people from the remotest areas.

In October 2006, Muhammad Yunus won the Nobel Peace Prize for his efforts made in addressing the economic and social development issues, not only in Bangladesh, but all over the world. In the rationale, the Nobel Prize Committee emphasized that the ultimate peace in the world may not be achieved until the majority of the world’s population does not find a way out from poverty, and micro - credits represent the right way.

Nowadays, micro – financing services are provided by more than eight thousand institutions only in the Europe and Central Asia Region, being one of the smallest regions of the world. The total portfolio is exceeding US$ 16 billion, with more than 9 million clients. New data on the number of institutions and clients in the world haven’t been released, but it is estimated that the number of clients is exceeding 100 million.