How IFAD helped spark a global microfinance revolution

IFAD has been active in microfinance since the early 1980s, positioning itself among the first international institutions to support the Grameen Bank, a microfinance initiative in Bangladesh. 

IFAD recognised the transformative potential of small, community-based lending to empower rural people and catalyse sustainable development.

This is the story of how a pioneering idea took root in Bangladesh and how IFAD’s early investment helped shape a global model for inclusive finance. 

Redefining access to finance 

In 1976, Dr. Muhammad Yunus founded the Grameen Bank in Bangladesh. Motivated by the economic challenges he witnessed during the 1974 famine, Yunus demonstrated that small-scale lending could be an effective tool for reducing rural poverty. 

The Bank's mission was to provide credit to those traditionally excluded from formal banking systems, particularly women in rural communities. By enabling borrowers to establish or expand income-generating activities, the initiative supported economic resilience. 

Key innovations of the Grameen Bank model included: 

• No physical collateral required – replaced by “social collateral” based on mutual trust
• Self-forming borrower groups – encouraging collective accountability
• Focus on women borrowers – promoting gender equality and empowerment 

This approach represented a shift in how development institutions viewed financial access for low-income people.

Recognising the potential of this model, IFAD provided catalytic funding, enabling Grameen Bank to scale its outreach and impact.

Over the decades, IFAD has supported Grameen Bank’s efforts to reach millions of rural people, creating a pathway for employment, entrepreneurship and long-term socio-economic improvements.

In 2006, global recognition followed:

• Muhammad Yunus and the Grameen Bank were awarded the Nobel Peace Prize for their efforts to create economic and social development from the ground up. 
• The recognition highlighted the transformative potential of microfinance in advancing stability and opportunity.

Today, Grameen Bank’s achievements include:

• Providing loans to over 10 million people, 97% of whom are women
• More than 45 million individuals reached through its services
• Loan repayment rate of over 95%. 

These achievements illustrate how access to appropriately designed financial services can strengthen rural livelihoods and promote inclusive and sustainable economic growth.

IFAD’s early financing was part of this story, helping to finance a movement that proved microfinance is a catalyst for impactful change. 

Continuing the mission 

Today, IFAD continues to promote innovative rural finance as a core component of its mission to transform rural economies. Through targeted investments in microfinance institutions, rural financial cooperatives and blended finance facilities, IFAD works to expand access to credit for:

• Small-scale producers
• Rural women
• Young entrepreneurs

These initiatives build on lessons from early partnerships such as Grameen Bank, demonstrating how inclusive financial systems can strengthen resilience and unlock economic potential in rural areas. 

  The Grameen Bank serves as a model of microfinance across the world, proof that investing in rural people is an investment in creating the conditions for peace, stability and sustainable progress.

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