MARJINA BEGUM lives in Raidokkhin, a tiny impoverished village about two hours’ drive from Dhaka, the rapidly expanding capital of Bangladesh. She was forced into an arranged marriage when she was just 11 years old and was homeless in all but name, lodging with a relative for the first three years of her married life. The newlyweds slept on hard ground without even a pillow to their name. They had no possessions and survived on a meagre diet of tiny helpings of rice, lentils and wild plants.

Yet today, 20 years later, Marjina is a successful businesswoman, owning three shops and a four-roomed home — a palace by local standards. All three of her children have had primary and secondary education and her son is taking a master’s degree.

How did this extraordinary turnabout in her fortunes come about? No, she didn’t win the Bangladeshi equivalent of the National Lottery: the path out of extreme poverty came when she heard about the Grameen Bank.

She had seen how some of the women in her village had benefited from their relationship with Grameen and finally, with her living conditions at rock bottom, Marjina decided to risk it and take out a loan of 2,500 taka (about £20). She used the money to start her own sewing business and began to produce and sell bags.

A year later, having repaid her initial borrowing, she took out a larger loan, which she used to buy a goat, some hens and other livestock.

Subsequently she took out a housing loan and built a home for herself and her family. A series of small microfinance loans, combined with determination and hard work, have lifted the Begum family out of poverty: “It feels good to earn money; I am no longer dependent on my husband. I now have self-confidence,” Marjina told me.

I met Marjina on a recent visit to Bangladesh to see the difference that microcredit can make for some of the poorest people on the planet. The Grameen Bank was founded in the 1970s by Muhammad Yunus, who pioneered the microfinance movement that is making such a contribution to alleviating international poverty. While he was teaching the theories of economics at Chittagong University, his country was plunged into crisis with famine affecting more than 80 per cent of the population.

In the village of Jobra, Dr Yunus met a woman who made bamboo stools. Because she had no assets and was unable to borrow from conventional sources, she had to resort to the money lenders. For each stool, she borrowed the equivalent of 15p to buy the raw bamboo. After repaying at extortionate rates of interest she made barely 1p on each stool. This woman was hard-working and talented but was being held back by a lack of access to finance.

Inspired by her story, Dr Yunus started a series of experiments and lent tiny sums of his own money to villagers. They used the money to set up small businesses such as basket weaving and raising chickens. He found that his borrowers — mainly women — repaid in full and on time. As he developed this concept, the Grameen Bank was born.

Today Grameen has 6.4 million borrowers, 96 per cent being women. There are more than 2,000 branches and about £2.5 billion has been lent. The loan recovery rate is more than 98 per cent. And this achieved in a country unusually susceptible to flooding and national disasters, which can make repayment even more difficult.

The underlying philosophy of microfinance is to help the poor to help themselves. Lacking collateral, they are considered “unbankable” by conventional banks. So microfinance has enabled the poor to build up assets and businesses and generate income and employment opportunities.

It has also been an extremely effective tool for the empowerment of poor people — especially women — because it places control in the hands of the poor themselves and the wealth created can be spent directly where it is most needed, on food, housing, healthcare and education.

When I visited the Grameen Bank, I was impressed to hear that offers of money from development banks, NGOs and national development organisations had been turned down by the bank. The last instalment of donor funding was received in 1998.

But while microfinance institutions should aim to achieve financial independence — covering costs through interest paid — aid agencies ought also to try to identify and promote microfinance bodies with potential and offer them support and technical assistance to enable them to reach self-sufficiency. In most developing countries microfinance is not yet as evolved as in Bangladesh.

Capacity building for budding microfinance suppliers is a worthy use of aid and development funding. We should use it for developing innovative microfinance initiatives that target specific communities such as the extreme poor: Grameen has loans on concessionary terms out to nearly 10,000 Bangladeshi beggars.

Microfinance is no panacea for the reduction of poverty. But the Grameen Bank and other Bangladeshi organisations such as the Bangladesh Rural Advancement Committee (BRAC, the largest NGO in the world) have led the way. Lifting people out of poverty is not just about giving aid and a handout. It is about offering opportunity and hope. Marjina Begum had that opportunity. We should ensure that many others do too.

Andrew Mitchell MP is the Shadow Secretary of State for International Development.

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