Micro-Credit, Major Impact

Written on 07/15 at 01:04 PM by Andy Posner 0 comments

Filed under: brown micro credit

Among my numerous ongoing projects (which include my masters thesis and starting a company) I’m also working with several Brown students to create a student-run micro-credit program in Providence, Rhode Island. Initially, I had the idea to do something like this around 5 months ago when I read Muhammad Yunus’ autobiography Banker to the Poor. Muhammad Yunus won the Nobel Peace Prize in 2006 for founding the Grameen Bank in Bangladesh 30 years ago, and bringing micro-credit to the fore as a means of addressing poverty. After I read his book, I began researching the possibility of starting a similar initiative locally.

Micro-Credit Serves a Need
Basically, the idea behind micro-credit is that the world’s poorest individuals are often, by necessity, also the world’s most entrepreneurial people. In order to survive they have to find creative ways to create and sell goods or services. What they lack, then, is not energy or ideas, but rather access to capital. As a result, they are forced to rely on loan sharks who charge them exorbitant interest rates, keeping them in perpetual poverty no matter how successful their business is. And of course traditional banks don’t bother providing loans to the poor, both because they view them as an unacceptable credit risk and because the transaction costs of dealing with loans as small as $10 USD are too high for them.

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