Microfinance, Mega Impact

Microfinance is lauded as an innovative scheme to provide loans to poor people, but it is much more.

At its core, it fosters individual empowerment and human dignity.

Consider Pankajam, a beneficiary of Kudumbashree, the innovative microfinance programme in South India. Ten years ago, Kudumbashree gave Pankajam a $15 loan and training in starting a microenterprise: lease farming.

In a flurry of entrepreneurial activity, Pankajam moved from lease farming into dairy, then poultry, and then expanded her operations in all three. She put one daughter through college; that daughter became a teacher.

Another daughter is now in college, studying to become an accountant, and a third daughter in high school aspires to become a doctor. Though her initial loan was tiny, Pankajam has successfully transformed her daughters’ lives.

While most people would define poverty according to income, I define it as marginalization: powerlessness, voicelessness, lack of freedom. No doubt Kudumbashree gave Pankajam financial freedom, but it did much more for her and her family. Dr Muhammad Yunus, the father of microfinance, won the Nobel Peace Prize in 2006 not because microfinance is an ingenious finance scheme, but because it gives poor people dignity and voice.

Since its beginning with Dr Yunus in Bangladesh, the microcredit banking model has spread to more than 100 countries. Today, in an instance of reverse innovation from a developing nation to a developed nation, it has gained a foothold in New York City’s poorer neighborhoods.

Pankajam’s quick success serves as a reminder that poverty is imposed on people, due to institutional failure: Poor people are denied access to education, financial services and health care.

In some sense, therefore, all of us are collectively responsible for building institutions that will bring marginalized individuals into the mainstream.

Distributed by The New York Times Syndicate