by Brian Taylor

Created on: May 25, 2010   Last Updated: June 05, 2010

The power of micro loans, also known as micro credit, continues to be proven as the practice spreads success to entrepreneurs in the developing world. Since the initial inception of micro loans in Bangladesh, the concept has evolved from the localized phenomenon it was in the 1970s to what it is today, a leading source of empowerment to women and children stricken by poverty, worldwide. The success of micro loaning is in it's philosophy, which is a reality based approach to reasonable requests for the funding of good entrepreneurial ideas, from hardworking people. The fact that micro loaning has become successful should be of no surprise. However, no one could have predicted how well and how quickly the idea has spread.

Micro loans began in Bangladesh at the Grameen Bank by founder Muhammad Yunus, who was awarded the Nobel Peace Prize in 2006 for his work. Yunus observed that the extremely impoverished people in his community could not engage in the economy, lacking the collateral they needed to start (or perhaps maintain) a business. The people Yunus wanted to help couldn't generate income or leave their poverty behind them and the only thing standing in their way was, in banking terms, a few bucks. The solution he developed gave people the opportunity to borrow small loans with very flexible payments for specific action plans, particularly with immediate payoffs. For example, if someone needed some new tools to work as a Mechanic, they could borrow only what they needed to purchase those tools, based on the collateral that they had the skills to use them. Once the mechanic went to work, it wouldn't take long for him to pay off his small loan. Due to the success of micro loans, many in traditional banking have also expanded their services to include similar plans. Organizations have also sprung up online where you can help fund particular enterprises by becoming a private micro lender.

Borrowers use their micro loans for different purposes. Charity Kulola is the single mother of seven daughters in Kenya. When she was sixteen, her father married her off to a man, who eventually became angry when he blamed Charity for being incapable of bearing him a son. Charity's husband expelled her and their seven daughters, she didn't know what to do. When Charity’s brother took her in, his wife told her about Yehu Micro finance Trust, Grameen Foundation’s partner in Kenya. Charity borrowed three loans: her first for $62 to open a stall where she could sell

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