Acton Institute Powerblog

Micro-Finance: A Way Out of Poverty

Share this article:
Join the Discussion:

In awarding the Peace Prize to Muhammad Yunus and the Grameen Bank, the Nobel Committee has focused the world’s attention on the power of “bottom up” economic development. Jennifer Roback Morse reminds us that “the micro-credit movement has helped many of the poor become less poor, and to lift themselves, their families, and their neighbors out of abject poverty.”

Dr. Morse reflects on Yunus’ background as an economics professor, educated at Vanderbilt, teaching in Bangladesh and seeing the abject poverty that afflicted communities near his post. Muhammad Yunus began to reach out and practice his own principles, and started giving loans — not handouts — to people in these communities who he believed had the potential to work themselves out of poverty, given the chance. In conjunction with the Grameen Bank, Yunus has now financed millions of small projects, many of them requiring loans of only $50, and helped many poverty stricken, yet driven, people emerge from their poverty by the work of their own hands.

Read the full commentary here.

Jonathan Spalink


  • Pauli

    Great article, and very timely for me as I’ve just become interested in micro-loans.

  • Mike Mathea

    While I find this award very commendable we must remember that the success of such a program is still under review. The programs most promising feature is that it is a private sector solution to a problem government is unable to solve. I hope future work in this area leads to a vibrant system for developing countries.

  • Tim

    Wouldn’t this economic system simply redistribute already limited funds. If person A is buying eggs for their family and a neighbor recieves a micro-loan to buy a chicken and to sell eggs. Wouldn’t the money that person A used elsewhere to buy eggs previously be missed? What happens to the person that used to sell eggs to person A? This isn’t really creating any new income but just redistributing it in a clearly crowded commons. Just a though. I really do believe in helping people help themselves, to teach people how to fish, not merely giving them fish for a day. I just wonder at the ramifications of this method of redistributing income in what would already apear to be an established egg market. The sat-phone though is very interesting as it is actually a new product.

  • Jude Chua

    What’s very special about Grameen bank is taht it is a social business enterprise, and not a charity. It’s a real business (so making some money is significant!), but directed not at profit maximization for the shareholder, but for promoting the good of lives of people.

  • Shadrack N. Kirunga

    A wonderful article. Micro credit is indeed liberating many people here in Africa especially women. In Kenya for instance, micro credit providers have found their into the interior, reaching even the pastoralist communities and helping them to adopt other forms of economic activities that provide more stability than their animals. I should think that the keepers of world’s pulse strings will notice this and put more money to support such activities in Africa than pour billions into governments that end up misusing or looting half of it. It would be better if the poor get credit and take responsibility for repayment rather than pay for a lifetime loans they never asked for.

  • A. Scott Crawford

    The claims of the "micro-financers" should be examined with great skepticism. Here are some items for people of sincere faith to consider:

    1. Bangladesh is 90%% muslim. In Bangladeshi culture, a womans oldest male relative is personally responsible for her finances. This means that should a young woman be convinced to take out a loan of $5o-$100 (the average Bangladeshi woman makes less than $1 a day), and is unable to pay the principal loan PLUS an obscene interest, then it is not SHE that is held responsible, but rather her eldest male relative. Ask yourselves why THIS fact is not in the Grameen literature?

    2. I and my associates PERSONALLY provided the US consulate with the BRIBE prices for EVERY SINGLE Inspector General approved CPA in ALL OF BANGLADESH. Given this FACT, whom exactly has ever undertaken a serious audit of this operation? No one.

    3. The field/grass roots operation of the "micro-finance" activities of Grameen bank is indistinguishable from a loan sharking operation. Conplete with thugs breaking bones and beating up poor people who can’t pay the usurous interest on their "micro" loans. Just because this "leg breaking" is outsourced does excuse the upper level mangers of guilt, as they know perfectly well how their entire operations function.

    4. Because there has NEVER been an honest audit, it is of course impossible to determine what the actual return rate on the Grameen micro loan program is. This said, if the return on capital were remotely close to the 97%% claimed by Grameen, then WHY isn’t YUNUS running the GOVERNMENT Bank in Bangladesh???? What IN FACT occurs is that defaults are covered up with illicit monies from elsewhere as a means to launder "black money" collected by corrupt bureaucrats, swindlers, and gangsters.

    5. Grameen ALSO managed to secure a VERY lucrative contract TO PROVIDE cell phone access. This is no remotely possible in Bangladesh without the payment of vast sums of bribes to successive corrupt governments. It should occur to western readers that a Grameen mobile phone balance sheet that has never been independently audited cannot possibly claim that it’s revenue’s from the micro-finance portions of it’s business are legitimate.


    Honestly. If Jesus were alive today, do any sincere Christians believe he would PAY someone else to wash the feet of lepers? Or is it more likely that he would go to where the leper colony was and actually WASH their feet himself. When it comes time to be judged, as all of us will learn for ourselves, there is NO excuse for ignoring the teachings of our savior because some slick hustler tells us what we want to hear. God have Mercy on your Souls!

  • Matt Goldseth

    Micro-finance may epitomize the religion of good intentions…consequences be damned.

    There are numerous contrarian resources which attempt to consider the actual merits and financial performance of micro-finance, including the Grameen Bank.

    The Mises Institute has some quality references and the New Yorker, the Guardian and Wall Street Journal have done some work…there are many similar articles which allude to the murky specifics regarding the funding of the "bank" and the fact that there is no real financial transparency. I think many would be suprised and disappointed.

    I would encourage interested parties to explore with a sound mind and not just a bleeding heart.

  • Patricia

    This is such a fine article….I am including a donation to Food for the Poor as my Christmas present to my two brothers and including a copy of this fine article. Food for the Poor does just this….chickens to those in Central and South America, 3 pigs, money for a simple house, money for clean water…..they are doing what the UN and other BIG organizations apparently are not doing.

  • Mir Arzland

    Norway has a population of less than 5 (five) million. Bangladesh’s population is more than 145 million. Grameen Phone (GP), a subsidiary of Telenor of Norway has 10 (ten) million subscribers in Bangladesh alone. Just think of the money in foreign currency that is siphoned out of Bangladesh through the courtesy of Yunus of Grameen Bank (GB). GP (the Grameen Phone company) does more business than Grameen Bank.

    The Grameen bank is just a decoy to cover up Telenor’s unfair corrupt practices in Bangladesh. Yunus and the past government of Khaleda Zia and her cronies should be held accountable for conspiring with Telenor to cheat the Bangladesh Exchequer of billions of dollars since the inception of GP in 1997.

    No doubt Bangladesh has repeatedly become the most corrupt of all nations over the last five years (2001-2006). Telenor of Norway has taken full advantage of the shady under the table practices in Bangladesh for the last five years through enormous amounts of tax evasion.

    No wonder Telenor’s mother country had Yunus prized at Oslo for ripping off Bangladesh’s poor. It’s piracy at high seas! And now the two pirates are quarreling over the share of the booty looted.