Microcredit

Microcredit:

"In 1974 Bangladeshi Economics Professor Muhammad Yunus observed a poor countrywoman and calculated that, if she could raise less than thirty cents, she might escape the poverty imposed by middle-men who manipulated the prices at which she bought her raw material and sold her finished furniture. Bemoaning the failure of his American economics Ph.D. to highlight this travesty Yunus founded the `Grameen' (meaning `Community') Bank. But how could it make these loans and get them repaid when its borrowers had no collateral to put up and Bangladeshi culture was shot through with corruption and debt evasion?

The secret was lending to individuals, but doing so within groups of people - particularly women - all of whom went co-guarantor. People might walk away from a loan to themselves, but these `solidarity groups' helped transfer skill and share risk as well as radiating both the financial pain and the social shame of default. These groups, the desire to increase borrowing as businesses grow, and the `training' that borrowers get enable the Grameen Bank inculcate a culture of trust and repayment and a default rate of around one percent.

Group and self-interest coalesce a deft and miraculous new combination." (http://troppoarmadillo.ubersportingpundit.com/archives/009157.html)