Microcredit Misses Its Mark

Since Muhammad Yunus pioneered the concept of microcredit in 1976 and founded the Grameen Bank in Bangladesh, microcredit has become a major movement.1 The Nobel Peace Prize for 2006 was awarded to the Grameen Bank and its founder, and the Nobel Committee affirmed that microcredit must play “a major part” in eliminating poverty, noting that, “from modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed microcredit into an ever more important instrument in the fight against poverty.” The United Nations designated 2005 as the International Year of Microcredit, and it states on its website, “Currently microentre-preneurs use loans as small as $100 to grow thriving business and, in turn, provide [for] their families, leading to strong and flourishing local economies.” Kofi Annan, then Secretary-General of the United Nations, declared that providing microloans to help poor people launch small businesses is a recognition that they “are the solution, not the problem. It is a way to build on their ideas, energy, and vision. It is a way to grow productive enterprises, and so allow communities to prosper.”2 C.K. Prahalad, in his popular book The Fortune at the Bottom of the Pyramid, argues that we should recognize the poor as “resilient and creative entrepreneurs,” and commends commercial banks, such as ICICI in India, for expanding into microcredit.