One of the main differentiators between a poor person and one who is not has to do with credit access. This represents a financial tool that, if used wisely, allows people to improve their purchasing power, thus improving their living conditions. It is basically a loan that banks sell you to cover certain expenses or even to invest.
Currently many people have access to bank loans, even more so now with the fintech boom, which has made it easier to have a loan. Nonetheless these loans do not take into account a population that probably is the one that most needs a bank loan: poor people.
Banks lend money to those who are certain that they will pay it back.
To be sure of this, they carry out socio-economic studies, interviews, etc. On the other hand, banks have very rigid terms that, in the event of any delay, your debt increases considerably. These deadlines are established as perverse incentives for people to pay.
What would happen if a poor person went to a bank to ask for a loan that would allow him/her to build his house or buy capital to start a micro business? They would probably deny the loan since this type of person, for conventional banks, is considered “not creditworthy”.
The Grameen Bank:
Faced with this problem, the Indian economist and Nobel Peace Prize winner, Muhammad Yunus, saw an opportunity to challenge the logic of conventional banks and decided to create the Grameen Bank (the village bank, which is the English meaning of Grameen) in India, which grants microcredits to poor people at low interest rates and with flexible terms.
Yunus was surprised because, as loans were granted to the poor, he realized that they complied with their payments and, above all, they improved their living conditions. These microcredits represented a small push that they needed to improve their realities.
Grameen Bank quickly became a platform that, through accessible financing, poor people could have access to better food, improve their health and give their sons and daughters more and better educational opportunities.
Currently, the Grameen Bank has contributed significantly to the reduction of poverty in India, as well as to the women empowerment in this country since more than 90% of the loans issued by the bank are destined for poor women.
To date, this model has been replicated in more than 2,500 places around the world, seeking to eradicate poverty through accessible and inclusive financing.
Yunus, M. y Weber, K. (2010). Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs. New York: Public Affairs.