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         Laptop Audio Chat  - "Banks not Lending" /  'M3' Masters, our Chief Mentor    

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History of Microcredit 

Microcredit came into existence internationally in the 1970s as a means of making small loans to those in poverty to spur entrepreneurship. Typically, those impoverished in developing countries lack collateral, steady employment and a verifiable credit history -- essentially making these prospective entrepreneurs "pre-bankable" under traditional lending standards.  Microcredit has developed an established a good track record of creating self-employment projects that allow the family of the entrepreneur to generate income, and in many cases, begin to build wealth and exit poverty.

Due to the success of Microcredit, internationally, some in the traditional banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as 'bankable'; thus, microcredit is increasingly gaining credibility in the mainstream finance industry, and many traditional large finance organizations are contemplating microcredit projects as a source of future growth. 

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Lending to Women

Lending to women has become an important principle in microcredit, with some banks and NGO’s catering to women exclusively.   Though some Microlenders initially tried to lend to both men and women at equal rates, women presently make up ninety-five percent of larger Microlender's clients. Women continue to make up seventy-five percent of all microcredit recipients worldwide. Exclusive lending to women began in the 1980s when Grameen Bank found that women have higher repayment rates, and tend to accept smaller loans than men. Subsequently, many microcredit institutions have used the goal of empowering women to justify their disproportionate loans to women.  

SHARE² MicroFunds is aware of the historical international statistics and certainly believes in the empowerment of women and it has been proven that women experience higher bargaining and decision making power within the family as they bring more income to the household.

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Group Lending

Though Self-Help-Group (SHG) lending has long been a key part of microfinance. Microcredit initially began with the principle of lending to individuals. 

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Despite the use of solidarity circles in 1970s, early microcredit institutions initially focused on individual lending. Indeed, a few lenders propagated the notion that every person has the potential to become an entrepreneur. The use of SHG-lending was motivated by economics of scale, as the costs associated with monitoring loans and enforcing repayment are significantly lower when credit is distributed to groups rather than individuals, It is this notion of Group Lending that SHARE² MicroFunds believes has real potential to quickly help the American Recovery effort. 

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Microcredit and the Web 

The principles of microcredit have also been applied in attempting to address several non-poverty-related issues. Among these, multiple Internet-based organizations have developed platforms that facilitate a modified form of peer-to-peer lending where a loan is not made in the form of a single, direct loan, but as the aggregation of a number of smaller loans—often at attractive interest rates. There are several ways by which the general public can participate in alleviating Small Business and Micro Business financing stress simply by using Web platforms.  

New platforms that connect lenders to micro-entrepreneurs are emerging on the Web, for example SHARE² MicroFunds provides a guarantee to a local bank which then lends back double that amount to the micro-entrepreneur. We believe this provides both greater leverage and allows the micro-entrepreneur to develop a credit history with their local bank for future loans. 

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Collateral Services

Many scholars and practitioners of Microfinance suggest an integrated package of services (‘a credit-plus’ approach) rather than just handing out money. When access to credit is combined with other services, such as voluntary savings facilities, insurance, production-oriented and risk-management training along with leadership training and marketing support, the entire microcredit process is enhanced and historical international success rates range to the high 90% threshold with previously impoverished clients.

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