Great Expectations: Microfinance and Poverty Reduction in Asia and Latin America

Abstract

Microfinance developed in Asia and Latin America under very different ideological, political and economic conditions. Hence, there are distinctive differences in the microfinance industry in the two regions. A brief look at the history of two of the most famous MFIs: the Grameen Bank in Bangladesh and Banco Sol in Bolivia, gives an informative picture of how the industry in the two regions can be characterized. Modern microfinance was born in Bangladesh in the 1970s, in the aftermath of the country’s war of independence, when Muhammad Yunus, an economics professor at the University of Chittagong, began an experimental research project providing credit to the rural poor of Bangladesh. That experiment driven by a strong sense of developmental idealism developed into what is now the world’s most famous microfinance institution, the Grameen Bank, and institutions that replicate its pioneering methodology worldwide.