Microcredit against poverty

The economist, social entrepreneur and banker Muhammad Yunus pioneered the use of microcredits to support start-ups and entrepreneurs too poor to access traditional bank loans. During his 1970s tenure as a professor of economics at the University of Chittagong, Bangladesh, he experimented with lending to poor women in the village of Jobra.

Economically active poor and low-income people have generally very limited or no access to services provided by financial intermediaries such as banks, instead working with a variety of financial relationships - mostly informal. Microcredits focuses on helping poor people to work and become more self-sufficient.

In 1983 Yunus founded the Grameen bank, which provided small loans at low interest rates to the rural poor - generally seen as the start of modern microfinance. In 2006 Yunus and the Grameen Bank were jointly awarded the Nobel Peace Prize for their pioneering use of microcredits to help people out of poverty.

The microcredit model has been criticized for being too simplistic and trapping people into debt instead of lifting them out of poverty. Despite mixed results, evaluations suggest that it has succeeded in helping a large number of poor households.