The modern microfinance movement dates back to the 1970s when experimental programs in Bangladesh, Brazil, and a few other countries began to extend tiny loans to groups of poor women to invest in microenterprises.
By lending to groups of women where every member of the group guaranteed the repayment of all members, these microcredit programs challenged the prevailing conventional wisdom and proved that poor people without collateral could be "creditworthy". When offered the opportunity, they would repay loans with interest, at extraordinary rates of repayment.
As a result, the microfinance institutions providing the services were able to develop business models that were sustainable, no longer needing subsidy. These institutions showed that the poor were "bankable".
Since then, the range of products - credit, savings, money transfers, microinsurance - has increased as we have come to recognize that poor people need a range services to meet different needs. And in recent years, microfinance has attracted the attention of commercial banks, investors, and a host of new service providers. So today microfinance is, quite simply, retail banking for poor people.
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