A Research Study On Micro Finance

In both developing and emerging economies, microfinance has vastly and increasingly been seen as one of the most important means for enhancing the lives of the poor and therefore a major tool for economic and social development mostly in rural areas. Lately, contrary to this widespread belief, critics have raised eyebrows against this growing popularity of microfinance as a major tool for enhancing economic development. Contrary to belief, they are of the opinion that microfinance is a ‘make-belief’ that is hindering economic and social development rather than enhancing it.

Micro credit is the process of helping the “poorest of the poor” obtain loans. Since big time banks rarely help people who need help acquiring loans, micro credit is another source that makes it possible for the lower class to achieve that. They focus on they call the “real economy,” where they are on personal relationships with their clients. They want them to succeed and help their clients change their own life. Compared to the big banks, they are not looking to make huge amount of interest back off their loan (paper chasers).

Microfinancing produces many benefits for poverty stricken, or low- income households. One of the benefits is that it is very accessible. Banks today simply won’t extend loans to those with little to no assets, and generally don’t engage in small size loans typically associated with microfinancing. Through microfinancing small loans are produced and accessible. Microfinancing is based on the philosophy that even small amounts of credit can help end the cycle of poverty. Another benefit produced from the microfinancing initiative is that it presents opportunities, such as extending education and jobs. Families receiving microfinancing are less likely to pull their children out of school for economic reasons. As well, in relation to employment,

“Microcredit is about giving hope” Natalie Portman, (Natalie Portman Quote). Microcredit or microfinance, is the lending of small amounts of money at low interest to new businesses in the developing world, (David Siegel). People argue that microcredit I ineffective. But others disagree and say it’s the best way to win the fight against global poverty. Microcredit is an effective way to fight poverty because it’s easy to obtain, provides stability, and helps people build a new path for themselves.

Jeff was hyped about socks and microfinance loans for startups in developing countries. He traveled to Columbia and heard pitches from trust groups and saw the pride in entrepreneurs who sustained themselves from receiving microloans. Microfinance loans are very small, short-term loans at low interest, especially to a start-up company or self-employed person.

In recent months a new concept of micro financing has created intrigue. Micro financing has many definitions but the most popular reference these days is the practice of informal loans between individuals rather than institutions (peer to peer Micro loans). Micro financing first became popular in third world countries where entrepreneurs were able to start businesses for as little as twenty-five dollars. Many were able to quickly repay their loans and often times become grantors of other peoples loans. This created a formula for prosperity though admittedly on a small scale. As micro financing web sites began to pop up for use in more industrialized nations one question became obvious. The maximum request is capped at ten thousand dollars with most micro financing organizations. So what enterprises would actually benefit from the loan? There are not a large number of start up businesses that can be built in the modern world for a mere ten thousand dollars. Most franchise opportunities require well over a twenty-five thousand dollar initial investment. Even legitimate home based businesses are not cheap. Surprisingly entrepreneurs seem to be able to do a lot with limited funds. A little research on one of the more popular micro loan web sites www.kiva.org turned up a large number of people with success stories based on loan amounts far less than the maximum. No one had plans to start up a franchise but there were many people with clear and realistic goals. A large number of

Undoubtedly, microcredit is a fruitful development intervention. It can enable poor people access to financial systems and meet their basic needs and gradually enhance their economic sustainability (Simanowitz, In the course of time the idea questioned seriously and facing extraordinary challenges as Mulgan, et al. (2007, p. 8) noted social innovation does not happen easily. All innovative ideas have some challenges and criticisms In

Microfinance institutions (MFI) have created intense debates in an industry of traditional banking. Being primarily focused on mission of poverty reduction through economic stimulation of low income areas, MFI have sharpened the credit policy to specification of area of interests. The major distinction is loan interest rate being notably higher in comparison to profit orientated financial institutions (Rosenberg et al. 2009). The reason roots in excessive cost of funds and administrative loses faced by growing industry. As noted in Cull et.al (2009), interest paid by borrowers represents the struggle of MFI to overcome the burden of expenses and achieve financial sustainability. The latter however, can be reached by altering the capital structure of MFI through diversification of source of funding or rejection of capital which can lead to malfunction. As soon as the changes are implemented, institutions can proceed to expansion reaching increasing return to scale and beneficially affecting sustainability. This essay would focus on the role on subsidies in performance of MFI. The rationale behind exploring this form of noncommercial capital is that total amount of subsidized capital in MFI reached almost 16 billion in 2009 (Bloomberg, 2012) posing a question regarding the alternative and probably more efficient use of respective funds to support poor. The second reason derives from the number of researches discussed later,

Finance brings together various segment of economy. With the help of finance economy smoothly function and moves in the direction of achieving the economic goals. If proper finance facilities training and vocational assistance provided by the government through Micro-Finance, we can look forward to solved the problem of poverty and unemployment. In this case study the emphasis is provided to the success of bandhan and how it is facing the challenge and beating the other big players. This case study on Bandhan, a microfinance organization, represents a social business. Bandhan provides micro-loans to poor women for undertaking income generation activities. It aims at empowering its borrowers and their family members to break the cycle of poverty. Further, Bandhan projects that it operates as an independent, self sustainable and profitable organization. It aspires to become a full fledged bank, consequently bringing its borrowers to the financial mainstream. Therefore, this case study explores whether and how, focused poverty eradication and ambitious profits are simultaneously possible and if there are any tradeoffs

In reality, it is generally perceived that small scale fund plans have met constrained triumphs. The capacity of a lady to change her life through access to money related administrations relies on upon her individual circumstance, capacities, environment and the status of ladies as a gathering. Control of capital is one and only measurement of an intricate procedure of strengthening. Tragically, advantages of smaller scale credit are undermined by inconveniences confronted by ladies in getting to data, informal communities, and different assets they have to prevail in business. An investigation of the effect of miniaturized scale credit plots in Bangledesh uncovered consequences of just 21% of respondents getting to be enabled. Out of financial variables investigated, they inferred that ladies institutional cooperation, media presentation and family arrive property were the more critical necessities for ladies strengthening than accessibility of credit. A few faultfinders have contended that the greater part of microfinance projects are organized so as to have their most noteworthy effect in helping ladies perform conventional parts better. They contend that by accentuating the advantages that ladies' families get from their entrance to credit and ensuring this does not meddle altogether with their customary obligations, microfinance foundations may strengthen conventional sex parts as opposed to change

What is microlending? In simplest terms microlending is the lending of very small amounts of money at low interest, to low income people in urban and rural areas. It started forty years ago, when a person named Muhammad Yunus was visiting his family and his country Bangladesh which had recently become an independent country. Muhammad Yunus had left his home country then –East Bengal- when he was a child with his parents in search of a better future. He graduated from Vanderbilt University in Nashville, Tennessee, with a PhD in economics. Muhammad Yunus is the founder of Grameen Bank, the first non-profit organization to offer microfinance services in Bangladesh and in the world (New York Times). This bank showed the world on how little

Microfinance, has to some extent improved and strengthened relations amongst women within communities. Microloans provided to women in groups ensures that the economic burden of repayments is one which women no longer have to bear alone but is instead shared, reducing the anxiety and pressure levels felt by women. The lending of microloans to groups of women, has created a sense of social solidarity, as women who are often in the same financial position can all contribute to creating successful microenterprises monitored and controlled by each other, reducing the risk of financial failure and collapse in addition to the reduction of collateral. This can be viewed as a

One of the most common forms of intervention that is imposed throughout the world to benefit both men and women (though primarily targeted at women) escape from a poverty trap is microfinance. Numerous studies about microfinance have been published, all of which seem to present a different perspective on whether the program is actually effective. One interesting study conducted in 2006 by Mark Pitt, Shahidur

It is commonly argued that the lack of access to capital and financial services functions as a major barrier to attaining and sustaining adequate levels of socio-economic development for numerous communities and households across the world. According to the Global Financial Development Report (2014) by the World Bank, about two billion or 38% of adults in the world do not use formal financial services. This pandemic is even more alarming when contextualized further. Close to 73% of poor people remain unbanked, more than half of adults in the poorest 40% of households in developing countries, and about 80% of the poor living under the $2/day poverty line have no form of bank account due to a plateau of reasons ranging from costs, travel distances, and other burdensome requirements involved in opening financial accounts. To combat this undesirable phenomenon, the overwhelming majority of policy makers, donors, investors, academics, and practitioners enthusiastically welcomed the emergence of microfinance and promoted it as an inclusive, pro-poor, and sustainable form of finance. An alternative to mainstream finance, capable of reaching the most capital deprived enterprises, households, and individuals.

The aim of micro-finance according to Otero (1999) is not just about providing capital to the poor to combat poverty on an individual level, it also has a role at an institutional level. It seeks to create institutions that deliver financial services to the poor, who are continuously ignored by the formal banking sector. Littlefield and Rosenberg (2004) argue that the poor are generally excluded from the financial services sector of the economy so Micro – Finance Institutions (MFIs) have emerged to address this market failure. By addressing this gap in the market in a