One of the most famous MFIs is the Grameen Bank of Bangladesh. Grameen was started in 1976 by an economist named Muhammad Yunnus, who came up with the idea for the bank during a research project. The goal of the project was to provide banking services -- including credit lending -- to the poor living in rural Bangladesh. Objectives included the generation of self-employment activities in the area, because of its high unemployment rates, and to discourage the exploitation of the poor by other banks and money lenders. (Because such loan sharks who provide credit but at very high interest rates are often the only resource available to poor people). Yunnus' project was a huge success, and was eventually sponsored by various commercial banks. The Grameen Bank Project was renamed the Grameen bank in October 1983. Today it boasts over 3.7 million borrowers (96% of whom are women), Grameen is Bangladesh's biggest rural bank, and its system has been copied in over 70 countries. Grameen's lending system is based on responsibility, a peer lending circle made up of five members per group, and mutual trust.
The Grameen Bank has proved that microcredit works and is an effective tool to fight poverty. Today Microfinance Institutions have widespread credibility and have been created by many other programs such as NGOs (Non Government Organizations), Community Development and educational facilities, all designed to help the poor create productive financial and employment opportunities where few if any existed before.
Another pioneer in Microfinance is ACCION International. They are a nonprofit organization in Boston that has been a MFI since 1973. The program's initial goal was to reduce poverty by focusing on helping to create jobs through business ownership for the poor in the U.S. ACCION now has microfinance programs in 15 Latin America countries, 5 African countries and 33 US locations. In 2003, they've provided services to 3.2 million people.
ACCION is unique to many other MFIs because it believes that to be a sustainable answer, the MFI must be financially sustainable. This means that they don't rely solely on private donations and goverment funding. ACCION's programs are designed to become self-sufficient within three to five years. Using this concept, ACCION has helped to create commercial microfinance institutions like BancoSol in Bolivia, Mibanco in Peru, SogeSol in Haiti, Banco Solidario in Ecuador and Financiera Compartamos in Mexico.
The International Foundation for Community Assistance (FINCA) is another MFI that started microlending in 1984. They grant microcredit primarily to women. FINCA is famous because of its unique lending system, known as the "Village Banking" method. Village banks are savings and credit institutions made up of between 10 and 50 members, generally mothers, who jointly manage the MFI while providing a support and networking system for each other. The members of each Village bank administer the system and guarantee each other's loans. FINCA's successful Village Banking system has been modeled in more than 32 countries around the world.
