People tend to consider Microfinance something exotic. Maybe it is time to tell the West about their own microfinance phase that started at the end of the 19th century and is still under development.
An article on Wikipedia about Microfinance mentions
The history of microfinancing can be traced back as far as the middle of the 1800s, when the theorist Lysander Spooner was writing about the benefits of small credits to entrepreneurs and farmers as a way of getting the people out of poverty. Independently of Spooner, Friedrich Wilhelm Raiffeisen founded the first cooperative lending banks to support farmers in rural Germany.
In 1972, Raiffeisen merged with “boerenleenbank”, the dutch cooperative lending bank for farmers, and became Rabobank. Rabobank is currently the biggest bank in the Netherlands, roughly estimated at 600 billion. That is the size of dutch GDP.
A dutch Boerenleenbank commercial from 1968
Is there a future for microfinance banking ? Well :
Rabobank (Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.) is a Dutch multinational banking and financial services company headquartered in Utrecht. It is a global leader in Food and Agri financing and in sustainability-oriented banking. The group comprises 139 independent local Dutch Rabobanks, a central organization (Rabobank Nederland), and a large number of specialized international offices and subsidiaries. Food & Agribusiness is the prime international focus of the Rabobank Group.
In terms of Tier 1 capital, the organisation is among the top 30 largest financial institutions in the world. As of June 2012, total assets amount to EUR 771 billion and a net profit of EUR 1.3 billion. Global Finance currently ranks Rabobank 10th in its survey of “the world’s safest banks”.
source : wikipedia
Yunus is widely considered the inventor of modern day Microfinance, however, microfinance itself was implemented in the germanic region two centuries ago.
Why is that important to comprehend ?
Some doubt that microfinance were a legit and viable financial branche or had any benefits or point to it. You could make a strong case that it is actually a normal phase in the socio-economic development of a region and the “missing link” in helping regions develop. Where first maybe 5 or 10% have access to and use financial instruments and are actively involved in development of business, administration, agriculture, production, 90% are not involved. If that is expanded to 100% of the community and becomes from kindergarten part of their ‘normal’ world, their culture, in time after a few generations you get a 1000% acceleration of the overal growth and socio-economic development of a region.
Microfinance may actually be both inherent to the development of a society as the main instrumental key succes factor, making financial instruments common in and available to 100% of the population.
In Western Europe microfinance development and implementation started 2 centuries ago, and we still are far from finished. Finance is virtual and for most people hard to comprehend and handle. We have a lot of problems with people with credit cards debts (a form of micro-lending) and buying on credit (“buy now, pay in two years”), failing to make payments, incurring more and more added interest debts and ending in the “debt trap”. We have a running media campaign “borrowing money costs money” to make people aware of the added cost of a loan in terms of accounting cost and interest. Educating people in the use of financial instruments is still a main focal point in the West.
But because we never learn to think of these finanial instruments under the term microfinance, most consider microfinance something exotic for the “third world posse” (no offense) and some even pretend all the problems microfinance is encountering donot occur in the West. Au contraire, we just got used to the problems and consider them normal. Same as microfinance is a normal part of our every day life.