Microfinance

In the reading Banker To The Poor : Micro-Lending and the Battle Against World Poverty by Yunus, Grameen sets their interest rates at 20% per year. In my vague understanding of banks and economics, such high interest rates makes loans more expansive, therefore fewer people can borrow the money. I think that also encourages the people that do borrow to save up. Rising rates tends to point to strengthening economy, but I am not sure how this will effect the situation in the poor villages mentioned in the book. With such a high interest rates, the bank may be able to continue supporting the poor people and since 98% of loans are repaid, I guess it is working. I’m sure as the bank grows larger, it could afford to lower the rates.

Financial opportunities like this can help poor communities to grow and lessen the burden of poverty. These opportunities helps them to take chances such as starting a business or pursing educations and those are necessary in fighting poverty. It is about empowering poor communities to break out of poverty.