Microcredit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment and a verifiable credit history. It is designed not only to support entrepreneurship and alleviate poverty, but also in many cases to empower women and uplift entire communities by extension. In many communities (especially third world countries), women lack the highly stable employment histories that traditional lenders (bank, financial institutions etc.) tend to require. Many are illiterate, and therefore unable to complete paperwork required to get conventional loans. As of 2009 an estimated 74 million men and women held microloans that totaled US$38 billion. Grameen Bank reports that repayment success rates are between 95 and 98 per cent.
Microcredit is part of microfinance, which provides a wider range of financial services, especially savings accounts, to the poor. Modern microcredit is generally considered to have originated with the Grameen Bank founded in Bangladesh in 1983. Many traditional banks subsequently introduced microcredit despite initial misgivings. The United Nations declared 2005 the International Year of Microcredit. As of 2012, microcredit is widely used in developing countries and is presented as having “enormous potential as a tool for poverty alleviation.”
The origins of microcredit in its current practical incarnation can be linked to several organizations founded in Bangladesh, especially the Grameen Bank; which was followed by organizations such as BRAC in 1972 and ASA in 1978. Later in 1995, PRISM Bangladesh became a member of the PKSF (Palli Karma-Sahayak Foundation), which is the only Government of the People’s Republic of Bangladesh (GoB) Financial Institute for providing credit support to NGOs in Bangladesh. PKSF has been financing PRISM Bangladesh to operate the more modernized and region specific microcredit facilities in the coastal areas conforming all guidelines and rules of PKSF.
The micro-credit program is gradually being expanded in the rural areas particularly in most vulnerable villages to assist the poor groups towards self-reliance in our working areas. At present, PRISM Bangladesh is launching microcredit programs in three coastal districts (Noakhali, Lakshmipur and Feni Districts) providing credit services to almost 40,000 beneficiaries. The modern more researched approach by PRISM Bangladesh breaks down its microcredit facilities provided into different categories:
1) Individual Credit Entrepreneur Credit
2) Ultra Poor Credit
3) Regional Microcredit
4) Seasonal Microcredit
These credit facilities are being distributed through PRISM BD’s twenty-one branches with fully furnished offices and highly trained and skilled staff. Our main goal is to ensure long-term economic development of the target beneficiaries in coastal areas and promote viable/sustainable Income Generating Activities (IGA), through increased production, employment generation, assisting in capital formation (especially for women) etc.