Microfinance

 

Microfinance is a special form of impact investment that has a long and very unusual history, since it originated in the developing countries and was later “imported” by the industrialized countries. The basic idea of microfinance is to make unbankable people bankable, e.g. without demanding collateral. Thus, microfinance originated in those countries where a considerable part of the population had no bank access implying that they were denied loans and saving opportunities. In 1974, Muhammad Yunus founded the Grameen Bank in Bangladesh to provide microfinance products to the “unbankable”. By proving that the unbankable are indeed bankable, Muhammad Yunus was awarded the Nobel Prize for Peace in 2005.

In the last decades, the idea of microfinance has paved its way from developing and transforming countries into industrialized countries, e.g. by providing loans to jobless people in order to bring them back into work life. With the import of microfinance, investment opportunities rose. Today, microfinance investments are a special niche product on capital markets providing investment opportunities for impact investors that strive for financial and social returns of their investment simultaneously.

 

Nadler, C. (2018): Take a Loss and Like It – Nudging Selfish Investors to Finance Social Change

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