Encyclopedia Britannica will tell you that microfinance is “a means of extending credit, usually in the form of small loans with no collateral, to nontraditional borrowers such as the poor in rural or undeveloped areas.” It was a concept institutionalized in 1976 by Bangladeshi economist Muhammad Yunus and adopted by SKI Charities founder, Shyam K. Iyer.
Shyam describes microfinance as “basically a bank for people who have little to no income, probably no collateral, definitely not a formal job maybe not even an informal job.” Microfinance enables those who don’t have a track record or resume to get small microloans. In general, “it’s impossible for them to get a loan from anybody else,” Shyam contends.
Treating otherwise disenfranchised individuals as mainstream clients who could obtain a loan if they so desire is SKI Charities’ way of empowering their participants. It is not only a way of leveling the playing field but also of spurring entrepreneurship, self-initiative, and responsibility in rural and/or impoverished communities. “We treat them on an equal level, just like you or I going to a bank,” says Shyam. They pay an interest rate, just like anyone else, but work with more manageable sums of money and with a shorter timeframe. SKI Charities beneficiaries have an average of three months to pay back their loans.
SKI Charities is “not in the business of providing aid, we’re providing people with access to finance. We’re able to provide low cost finance to them and then we’re able to help them run their businesses. Like any businessperson!”
