This is a story of two women. In New York, a successful young woman in finance spends her days at a major investment bank structuring billion dollar loans to finance telecom deals. In Calcutta, a poor young woman who spends her days as a street sweeper takes out a $50 loan to buy enough supplies to open a grocery stand, and in doing so, builds a business that can feed her family of four.

What do these two women have in common? They are both involved in microfinance lending. The woman in Calcutta took out a loan from the SEWA Bank of India, which specializes in providing small loans to the poorest women. The woman in New York used her skills and knowledge of global financial markets and the economics of structuring debt to volunteer for a micro-credit lending organization in Ghana, where she spent her vacation advising local women’s cooperatives about the benefits of microfinance.

What is microfinance lending? The practice was pioneered in Bangladesh by Nobel Prize winner Muhammad Yunus, founder of the Grameen Bank and author of the recent book “Banker to the Poor: Micro-Lending and the Battle Against World Poverty.” The micro-finance lending model works by providing small loans without collateral to poor people, most of whom are women. In order to increase repayment of loans, institutions like the Grameen bank facilitate voluntary formation of small groups of five people to provide mutual, morally binding group guarantees in lieu of the collateral required by conventional banks. In this way, women who would not otherwise have access to credit can engage in income-generating activities, business ownership and entrepreneurship. This simple but powerful model has spread around the world, and has provided millions of dollars of capital to the poorest of the poor, in addition to providing auxiliary services including job and financial training, literacy classes, and empowerment workshops for women.

Read more