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Introduction to Microcredit & Microfinance

Microcredit & Microfinance

  • Microcredit and Income Generation
  • Microfinance Gateway
  • Grameen Bank
  • Opportunity International
  • Journal of Microfinance
  • Financing Income Generation in the Wake of Conflict

Microcredit and Income Generation

While all livelihood strategies could technically be called income generation, the term is often used to indicate strategies for earning cash, usually through small-scale production or commerce. Income generating activities are often a primary approach for assistance in urban areas.

When established income generating activities like shops or other businesses are damaged by a disaster, the response often focuses on replacing assets lost to allow the business to recover. In other areas, where normal livelihood strategies are insufficient and causing chronic vulnerability, or the normal strategies are rendered unusable by a crisis, new activities must be started. In this case, training and marketing can be added components.

Income generation is very closely linked with microfinance/microcredit. In many cases, new income generating strategies are started with a micro-loan.

CARE USA is a leading agency in both Income Generation Activities and in Microfinance. They have a Small Economic Activity Development (SEAD) unit with several publications. The SEAD web page below contains two very useful guides as well as multiple external links.

http://www.care.org/careswork/whatwedo/sead/pub.asp

Microfinance Gateway

www.microfinancegateway.org has thousands of documents, training resources and links.

Grameen Bank

Grameen Bank is the most famous microcredit institution. It was set up in Bangladesh in 1976, and now has well over 3 million borrowers. It pioneered the concept of microcredit, which reverses conventional banking practice by removing the need for collateral. Grameen Bank provides credit to the poorest of the poor in rural Bangladesh, without any collateral. Grameen Bank and its founder, Muhammad Yunus, won the 2006 Nobel Peace Prize.

The Bank’s website is at www.grameen-info.org/index.html.

Some of the features of Grameen bank’s lending are:

  • An exclusive focus on the poorest of the poor
  • Borrowers are organised into small groups
  • Special loan conditions which are particularly suitable for the poor
  • A simultaneous social development agenda

Opportunity International

Although Grameen Bank is the most famous example, there are probably many thousands of other microcredit institutions.

Opportunity International (www.opportunity.org) is an example of a Christian-based international microcredit NGO.

Journal of Microfinance

The Journal of Microfinance is at www.microjournal.com.

Financing Income Generation in the Wake of Conflict

Ton de Klerk has written a guide on providing credit, savings and insurance in the wake of conflict. Click here to go to the www.networklearning.org page from which his guide is accessible.

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