A little history of microloans

How and where were they born?

history of microcredits

If you are a regular customer of or some other microloan company you will surely have wondered how, when and where this financial concept was born that helps so many families every day. Today we are going to review a little the history of microloans . Do you dare to dive a little in this exciting world?

Brief history of microloans: the origin

Currently, the microloan concept is part of our day to day, but the microloans are not as old as we could think and were born in a very specific place, at a very specific time and for a very specific reason. The microloans were invented, implanted for the first time and popularized by the Graamen Bank in Southeast Asia more than 30 years ago.

We are going to put ourselves in context before beginning this history of microloans. Bangladesh. 70-80 years After getting a scholarship, a Bangladeshi professor holds a Ph.D. in economics from Vandervil University of Tennessee in the US in 1969. Despite having a job as a teacher in the United States, Muhammad Yunus (that’s the name of the ‘inventor’ of microloans) ) decided to return to Bangladesh, his country of origin, to join the rural economy department of the Chittagong University in Jobra, the city where he was born, located in the south of the country.

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Yunus proved to be a man concerned about improving the lives of the people around him (that is why years later he would receive the Nobel Peace Prize), so he devoted a long time to detecting the problems of his environment, trying to understand them and think about how to solve them. This is the origin of the history of microloans: grant small loans with reasonable interest rates to people who wanted to start small business projects and did not have access to traditional bank loan.

In 1974, a terrible famine caused thousands of victims causing Muhammad Yunus to light the bulb: with very little money, those people who had been victims of starvation, could aspire to get ahead through small business initiatives with an initial capital so small , that the traditional banks did not consider them as clients. For two reasons:

  • They lacked guarantors and / or guarantees to respond to the repayment of the loan.
  • Lending such small amounts of money simply was not profitable .

Yunus endorsed, personally, the loans that a bank granted to the most disadvantaged, of 27 dollars, to be exact, and quickly could verify that more than 98% of the loans were reimbursed .

In order to fight closely against poverty and financial exclusion, Yunus created the Grameen Bank in 1976. A bank that based its activity on trusting people, especially women. And despite the surprise of many, the Grameen Bank showed itself not only as a supporter, integrator and beneficiary for the community, but also as an economically and financially profitable initiative that would absolutely mark the history of microloans.

From that moment, microloans became a global icon of development cooperation. So much so that in 2005 the then Secretary General of the UN, Kofi Annan, referred to them as a fundamental tool for the fight against poverty throughout the planet. A year later, Muhammad Yunus received the Nobel Peace Prize for his struggle, channeled through the Grameen Bank, to achieve a just economy for the poor classes .

The microloan in Western Europe

The concept of microloan has become popular and widespread throughout the world. It has also reached the societies of Western Europe, including our country, in which was a pioneer. Although its implementation, of course, requires special specificities, since the circumstances of Bangladesh and those of Spain or France are, today, very different.

In Spain, the microloan began to take some momentum at the beginning of the current decade. As in other developed countries, here it has been adapted to the socioeconomic context, but always bearing in mind its ultimate objective: to provide financing to people who could not obtain it in any other way .  

At present , according to the World Bank, there are around 7,000 microfinance institutions that grant microloans. Awesome, right?