Last semester, AU introduced its first course dedicated to the study of microfinance from a business perspective.
The class, called "Microfinance in Business Development," is taught by Ghiyath Nakshbendi, a Kogod School of Business professor. It gave students the opportunity to delve into a formal study of the microfinance industry.
The class utilized Nakshbendi's experience working with microfinance initiatives in over a dozen countries and looked at approaches from the World Bank and the Grameen Foundation.
Microfinance is a development tool that aims to reduce poverty and empower the poor with the skills and means to generate sustainable development. Microfinance operations exist in a variety of countries, including the United States. However, because efforts are usually aimed at servicing the poorest populations, microfinance institutions are more predominate in low-income countries.
The market-based approach of microfinance involves providing small "micro-loans," averaging from less than $100 to upwards of $1500 depending on the country and the institution, according to Forbes magazine. Loans are granted to low-income entrepreneurs who lack access to the formal banking sector but require liquidity for their occupations, which may include small farming, market-selling and craft and handiwork, among other trades. Money from loans may, for example, be used to purchase new tools and technology that help sustain or expand the borrower's business.
In 2006, the industry consisted of 704 microfinance institutions (MFIs) that provided more than $23 billion in outstanding loans to 52 million borrowers worldwide, according to the MicroBanking Bulletin.
Last semester's class included a diverse body of students, including undergraduate and graduate students, as well as AU alumni working in the microfinance field.
"In microfinance operations, you need different talents and expertise, from accountants, financial analysts, economists, marketing specialists and IT people, just to name a few, and that's what makes the field attractive to students from different disciplines," Nakshbendi said.
As a final project, students formed groups and presented research proposals for the development of their own microfinance institutions in Peru, Israel, Ghana and Indonesia. At the conclusion of the semester, the class decided to make a $100 loan through Kiva.org, a person-to-person microfinance organization. The money went to assist Amelia Leonidas, a Peruvian micro-entrepreneur who had requested financial assistance for her small grocery store. The students will be able to keep track of the status of their loan recipient through Kiva.org.
"I was really touched when the [students in the class], decided to 'invest' the $100 subsidy, that I get every semester from AU, in a microfinance venture to help somebody in Peru," Nakshbendi said. "I used to utilize the subsidy to cover part of the end of class's lunch, but not this time."
Some students in the class said they plan to stay involved in the cause by participating in internships with MFIs this summer, and some said they hope to make microfinance part of their careers after graduation.
"What originally got me interested in microfinance was the ability of [microfinance institutions] to generate social and economic development while also producing a return on investment for the providers of capital," said Hector Benavides, a 2008 graduate from Kogod.
To find out more information about microfinance, visit the Web site for the Consultative Group to Assist the Poor (www.cgap.org) or visit Kiva.org to loan to a micro-entrepreneur.
Shan Fernando, Jacob Luque, Bennett Reiss and Amanda Spielberg contributed to this report.
You can reach this writer at news@theeagleonline.com.
