Microfinance and Financial Inclusion
How small loans to the poor became a global movement, why the hype outran the evidence, and what works better.
The Grameen Revolution
In the 1970s, Muhammad Yunus began lending tiny amounts to impoverished women in rural Bangladesh. The idea was elegantly simple: the poor are not unbankable, they are just unbanked. Given access to small loans, they could start businesses, smooth consumption during lean seasons, and climb out of poverty. Grameen Bank, founded in 1983, reported repayment rates above 95% and reached millions of borrowers. Yunus won the Nobel Peace Prize in 2006, and by then microfinance had become the most celebrated anti-poverty tool in development.
The model spread rapidly. By 2020, microfinance institutions served over 140 million borrowers globally, with a combined loan portfolio exceeding $120 billion. Countries from Bolivia to India to Kenya built entire microfinance ecosystems. International donors and private investors poured capital in, attracted by the promise of doing good while earning returns.
