OpenIDEO is an open innovation platform. Join our global community to solve big challenges for social good. Sign Up / Login or Learn more

The Success of Microfinance

The success of microfinance shows how we can take advantage of our sense of community for financial empowerment

Photo of Mansi Parikh
11 13

Written by

Microfinance is a community based lending system which helps provide loans to people/communities that are normally considered high risk. 

The success of Grameen Bank in Bangladesh has highlighted both the benefit and the potential success of community based lending programs. 

These small loans given to these "high risk prospects" actually have the lowest default rates (less than 2%) and one of the major reasons for these low defaults is the sense of pride that the community members feel when they begin to repay their loan. It improves their standing in their community and benefits the community at large. 

Maybe we can learn from these microfinance institutions and how they've taken advantage of the human need for community to create a successful financial programs for empowering the poor communities largely neglected by traditional banking.


Join the conversation:

Photo of Eliza Rosenbaum

Mansi, what a fantastic post to help kick off this challenge! You've captured the power of microfinance so clearly and succinctly (only a 2% default rate – truly a compelling stat) – and captured the essence of the challenge question perfectly, too :) One other compelling statistic shared in the video is the fact that 90% of the borrowers are women.

I love your mention of community pride and accountability as fundamental to the success of microfinance. The mention of the Hopeline Institute (microfinance NGO in Ghana) in the video was another interesting example of a potential driver for success: they talk about the influence of religion in serving their clients, "reaching them through evangelism," and through holistic training, showing how it's "business as a mission." I'm intrigued by this as another example of using existing community values to strengthen the financial potential of members.

Photo of Mansi Parikh

Thanks Eliza! Even I was surprised by the statistic about the number of women who benefit from microfinance and when you consider just how much buying power women have even in traditional patriarchal societies it really makes sense that any initiative to encourage community based financial planning/saving will have to put the women at the centre. They really are the lynchpins of the household!

The idea about religious influence is also an interesting one. We usually tend to separate the purely financial from the spiritual in most religions but there might be a strong idea worth exploring.

Photo of Eliza Rosenbaum

Exactly! That one line where someone referenced "spiritual poverty" really stood out to me.

Photo of Andy Witt

That's really interesting, Eliza. Traditionally, I've seen community change for social impact focus on five levels of social ecology: the individual, family, communities, institutions (particularly education) and government. I've rarely seen religion taken into consideration like this—especially as one of the key pillars of change mentioned: saving, training, micro insurance and spiritual poverty.

View all comments