The term ‘Microfinancing’ was first used in the 1970s during the development of Grameen Bank of Bangladesh, which was founded by ________.

Correct — B. Grameen Bank of Bangladesh was founded by the economist Muhammad Yunus, who began lending tiny sums to villagers in Jobra in 1976 and had the project chartered as an independent bank in 1983.

The loans were collateral-free, went mostly to women, and used group liability in place of security — the model the word microfinance now describes.

Yunus and Grameen Bank shared the Nobel Peace Prize in 2006, and option (b) is the founder the blank asks for.

Why the others are wrong

• (a)
  Alfred Marshall — Alfred Marshall was a British neoclassical economist of the late nineteenth century, remembered for Principles of Economics and supply-and-demand analysis. He founded no bank.
• (c)
  Adam Smith — Adam Smith wrote The Wealth of Nations in 1776 and belongs to the eighteenth century, two hundred years before Grameen Bank existed.
• (d)
  Jeremy Bentham — Jeremy Bentham was the philosopher of utilitarianism — the greatest happiness of the greatest number. His work was in law and ethics, not rural credit.

Microfinance is the supply of very small loans, savings and insurance to people banks treat as unbankable: no collateral, no credit record, often no documented income.

The Grameen model replaced collateral with a borrowing group. Members stand behind each other, so repayment is enforced by neighbours rather than by a mortgage, and that is what made lending to the assetless workable.

India runs the same idea through two channels — the SHG-bank linkage programme and NBFC-MFIs — which is why SSC asks microfinance under banking and under rural development alike.

Key facts

• Muhammad Yunus founded Grameen Bank in Bangladesh.
• Yunus began the lending experiment in the village of Jobra in 1976.
• Grameen Bank was chartered as an independent bank in 1983.
• Muhammad Yunus and Grameen Bank shared the Nobel Peace Prize in 2006.

Common traps

• Reaching for a famous economist because the stem sounds like economic theory, when it asks for a bank's founder.
• Blurring microcredit into microfinance — credit is one product, microfinance also covers savings and insurance.

No directly related past PYQ was found.