Micro-credit lending has proven to be a positive tool for economic growth in many developing countries, and Africa is joining them.  The Grameen Bank, developed in 1983 in Bangladesh by Muhammad Yunus, is one of the first micro-credit lenders to receive national attention and has been the model for many lending institutions.  Based on the idea that small sums of money can actually make a large difference to many small business owners in developing countries, the Grameen Bank (meaning village bank) lends out micro sum loans that average around $320 US.  These loans are targeted to the poor in order to create development opportunities and help citizens out of poverty [1]. 

Because borrowers have no credit or collateral, trust is the only basis for most of the loans.  In order to continue borrowing, borrowers must pay back existing loans and prove themselves to be credible.  The loans are paid back in weekly or bi-weekly installments, with interest rates that are lower than those offered by the government.  Borrowers are also either required or heavily encouraged to enroll in savings plans at the bank in order to promote future development, instead of short-term or one-time spending.  The most amazing part of this model is the fact that the repayment rate is 98 percent higher than any other banking program.  This return rate has led multitudes of other countries and organizations to copy the model laid out by the Grameen Bank, in order to further the reach of lending programs around the world [2].

Since the establishment of the Grameen Bank, Yunus was awarded the Nobel Peace Prize in 1996, and also has been named one of the “Greatest Entrepreneurs of All Time” by Business Week.  As of 2007, the Grameen Bank has expanded to 2,462 branches in Bangladesh, with over 7.31 million borrowers in 79,925 villages.  Of the vast majority of borrowers, 94 percent are women.  This is associated with the high number of statistics designating women as the more responsible heads of family income.  Nearly all micro-credit banks lend mainly to women, or simply refuse to lend to men [3].

Micro-credit lending institutions are mainly used to finance small-business ventures, something Africa has an abundance of.  Commonly used to open stands selling clothing or produce, loans are often the jump-start that citizens need to break through the vicious cycle of poverty.  On top of economic improvement, the institutions have also been praised for many positive externalities associated with raising income levels.  Banks set up social programs including health education, orphan programs, and even accounts in which members can pay fees for their children in order to enroll them in local area schools [4].

Lending institutions have also been credited with easing the burden of HIV/AIDS in Africa.  Many of the banks set up health-care plans to ensure care at local hospitals.  This is a vital resource for citizens facing the disease, and also for those who may be exposed to it.  In addition to increased care at hospitals, the financial independence women gain through banking programs is an important step in itself to fighting the spread of HIV/AIDS.  Studies have shown that financially independent women are more likely to refuse risky behavior, including unprotected sex or other behaviors that could lead to the contraction of AIDS.  This is a great step toward subduing the AIDS epidemic in Africa [5]. 

IIJD recognizes micro-credit lending as a critical step in strengthening and expanding economies.  These types of lending institutions are long-term solutions and incorporate total social reform.  Lenders are able to use money they borrow to establish sustainable businesses as they see fit.  This encourages citizens to use their own personal ingenuity and creativity to capitalize on business they believe will flourish in their locale.  The importance of the community is emphasized–citizens are brought together and encouraged to engage themselves in social development. These are keys to lasting social development, something Africa is ready to capitalize on.