Alleviating Poverty Using Microfranchising Models: Case Studies and a Critique

Lisa Jones Christensen

Chapter Chapter Eight in Alleviating Poverty through Business Strategy, 2008, pp 149-170 from Palgrave Macmillan

Abstract: Abstract Over 30 years ago, Muhammad Yunus founded the Grameen Bank in Bangladesh with just $27 and the idea that desperately poor, working rural women were credit-worthy (Yunus 1997). Yunus found that women almost universally used the credit to expand their fledgling businesses, and they would pay back the loans with proceeds from these businesses. Yunus thus developed the idea that even with no collateral, these women should be granted small loans at competitive interest rates with frequent payback cycles. This concept, that small loans (usually less than $100) should be granted to the previously “unbankable,” came to be called microcredit (Unitus 2007). Early on, practitioners such as Yunus realized that microcredit borrowers have payback rates as high as 95 percent (Felder-Kuzu 2005). These payback rates allow the lending institutions to survive, expand, and provide loans to additional borrowers. Concurrent to the work of Yunus in Bangladesh in the early 1970s, other social innovators developed similar practices in other countries (consider ACCION and its early work in Brazil or the subsequent work of John Hatch and the growth of village banking [ACCION 2007; FINCA International 2007]). Thus. the microcredit movement was born.

Keywords: Business Model; Microfinance Institution; Small Loan; Population Service International; Edward Elgar Publishing (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-61206-8_8

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DOI: 10.1057/9780230612068_8

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