As Vittana grows, we thought it might be beneficial to explore some of the early foundations of microfinance. While student loans go a step beyond the traditional concept to focus on students rather than business ventures, we are definitely rooted in its core principles. So let’s take a quick look at the early days.
It all started with a $27 loan. Dr. Muhammad Yunus, the founder of Grameen Bank, discovered that small loans could make a significant difference when he began lending to 42 female basket weavers in the village of Jobra, Bangladesh.
Dr. Yunus quickly realized the women could repay the loan in a short amount of time by selling their baskets in the market. In many developing countries, banks do not provide loans to the poor because they are considered unreliable clients. Instead, loan sharks are their only option. However, because they hold a monopoly of sorts this allows the loan sharks to charge incredibly high interest rates. In some cases interest rates can exceed 10 percent each week.
Despite the stigma and against the advice of other banks and the government, Dr. Yunus started giving loans to the poor in Bangladesh. He officially formed the Grameen Bank in 1983, fueled by the belief that credit is a fundamental human right. Dr. Yunus’ objective was to help poor people escape poverty by providing loans on terms suitable to them and by teaching them a few sound financial principles so they could help themselves.
As of April 2010, Grameen Bank has 8.10 million borrowers, provides services in 81,355 villages and covers more than 97 percent of the total villages in Bangladesh you can read more about this in his book, Banker to the Poor). Today, more than 250 institutions in nearly 100 countries operate micro-credit programs based on the Grameen Bank model. Thousands of other microcredit programs have emulated, adapted or been inspired by the Grameen Bank, including Vittana.
At Vittana we believe a college education can completely change someone’s life. By finishing college, a student can earn more money to support his or her family; on average, Vittana graduates earn a staggering 200-300% more than they would have otherwise. However, in most developing countries college loans don’t exist, similar to how credit didn’t exist for Dr. Yunus’ basket weavers in Bangladesh. Through partnerships with local microfinance organizations around the world, Vittana is working to build student loan programs from the ground up and change the cycle.
To learn more about how Vittana works, please visit: www.vittana.org/howitworks
Or to check out some of our students, go here: www.vittana.org/students
Resources:
http://www.thedailystar.net/2006/10/14/d6101401033.htm
http://nobelprize.org/nobel_prizes/peace/laureates/2006/yunus-bio.html
Photo credit: jankie via Flickr
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Thanks for sharing Yunus’ story. Banker to the Poor is an amazing book and it is yet another reminder that our small efforts really can and do change the world.
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