Breaking the Cycle of Poverty: Micro-Loans

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.

The book, Microfinance and its Discontent: Women in Debt in Bangladesh written by Lamia Karim, gives us account on what causes a culture to be known as “economy of shame” status, such as in the case of Bangladesh. She writes on a subject that is a top list priority in the economical world these days, the corrupt ways NGO’s lenders do business not only in Bangladesh but across the world, however, she centralizes her views on Bangladesh and only a handful of NGO’s. Even though this was primarily a look at Bangladesh, it has resulted in capturing the attention of people across the globe not only with the NGO’s mention in the book but resulting in a closer look at all NGO’s and how they serve the people. Karim shares with the readers how the 1980’s nongovernmental organizations (NGOs) led in the way of microfinance institutions and claimed that they were providing women with an empowerment tool by issuing them loans. We find that over 80% of borrows are women and most are economically challenged already. With that being stated Karim also takes a look at how and why that is, she discusses the long term effects it is having on women and how it is furthering the exploitation of women in Bangladesh. She looked at how this type of exploitation has not only weakened further women’s economy in Bangladesh but has also strengthen the power NGO’s have over the people (mainly women) at the same time. It takes a look at this type of expansion and brands NGO’s use as a “shadow state

Micro-loans aid women in developing countries to become more independent from their husbands. Men in poor areas of the world, such as Africa are responsible for working and earning the money for their families. With the use of micro-loans, women become more independent and are viewed differently by their families. Rupert Scofield, Founder and CEO of microfinance institution Finca, insists, “The most empowering thing for women in the developing world is having

The concept of microfinance is not something new. In fact, the history of the microfinance goes back as early as the 15th century. It was in Europe where the concept of pawn shops – an institution by the Catholic Church against the people who were charging exorbitant

Unlike the big banks, the funding that goes into the micro credit programs all comes from locality. They don’t have shortages of money or any finical hardships due vast amount of braches in participation. Each branch

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,

The organisation helps impoverished communities; they manage to assist people by the donations made to the organisation. These donations provide shelter for the homeless, babies and children with HIV and AIDS and they also run feeding

Women in developing countries are heavily empowered by micro-loans. These women normally aren’t able to provide income for their family because of a lack of education due to low funds. On top of that, husbands are considered the money makers of the family, while women are expected to stay home and tend to their house and children. But micro-loans change all of this, as it gives women the power to start their own businesses. In full, micro-loans are very influential, and can help with women that struggle, and assist them in making more money.

“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.

Muhammad Yunus, Founder of the Grameen Bank is often hailed as the architect of microfinance lending and has been praised around the world for his work and even awarded the Nobel Peace prize in 2006. The concept of microfinance is to lend small portions of money to poor people who could not have otherwise acquired a loan from a regular bank. Microfinance banks give the poor a small loan with incredibly high interest rates in the hope that the borrower will create a business or some form of income creating venture to sustain themselves and pay back their loans. Not only is that person left with a way to support themselves, but it also creates jobs in the community. These banks have noticed that when the money was lent to a family through the woman of the household, it went a longer way than if the man of the household received the loan. Yunus has noticed even within the Grameen Bank that “Poor women [have] an amazing skill, the skill of managing a scarce resource.” (12) Studies have shown that if a mother is receiving income the first beneficiaries are her children. The effects of this are amazing, many communities have seen a rise in school enrollment and improved child survival rates because women are more likely to spend money on food for their children and health care than are fathers. There is a saying, “If you give a man a fish, he will eat

Through the commercial bank, SMEs, or small and medium-sized enterprises, can benefit from credit funds where the bank is able to use funds to provide loans to small businesses. More low-income citizens can also have access to insurance through the bank in which households can obtain health insurance without paying lump sum, allowing them to work and live better to promote a better lifestyle. Ultimately, the Rwandan government and the National Bank established Vision 2020, in which they hope to reach “80 percent financial inclusion by 2017 and 90 percent by 2020” as a way of achieving poverty reduction. Throughout the country, the National Bank created saving groups, which are social groups promoting the idea of lifting Rwandan citizens out of poverty by forming little groups in provinces with the goal of saving the same amount of money weekly; from 2010 to 2014, the National Bank was able to create more than 28,000 saving groups with the support of local partners and international governmental and non-governmental organizations, (NGOs) including USAID, the leading U.S. government agency that is working on global issues such as poverty; through the saving groups project, USAID has developed 1,028 saving groups, and all the NGOs were able to help Rwandans save about 14 billion Rwandan francs, which is equivalent to approximately $16.5 million.

Every week our national news media announce the latest unemployment figures and it is never good news. Every week the percentage grows and the speculation of future forecasts are always the same: unemployment is expected to continue to rise. Current economic times are extremely dismal for the working class; however, that has not caused the creditors of the ever-increasing unemployment rolls to turn a blind eye to their credit obligations. Payments are still expected on a timely basis and repercussions will ensue if the now unemployed borrower is unable to meet their obligation. What is a person to do? Loans for the unemployed may be a solution. Loans for the unemployed are unsecured loans that do not require a credit check. The provider does not require the borrower to have any type of collateral to qualify. The fees for this type of loan are higher than conventional bank loans. The terms of service for loans for the unemployed vary, depending on the borrower 's need and ability. They can range from one year up to 10 years for loan amounts from a low $500 to as much as $20,000. Unemployment status generally creates a new budgetary mindset that the individual never had before. New and better ways to utilize the money now available materialize, enabling them to do more with less. Over time these new practices become new habits that are carried over after the unemployment crisis has passed. Things that were once thought to be unbearable are now feasible and not as bad a

Microfinance is grown to one of the biggest areas in fighting again poverty, it can be discussed, if microcredits are the best option to help people out of poverty. In the past it was almost impossible for the poor population of the world to get a loan with acceptable conditions. Banks would not lend to the poor, because the risk of losing the money was too high for them, which meant poor people in Africa had no chance of getting a loan from big banks. The so called “money lenders” would take advantage of this situation, and give the poor an opportunity to receive a loan. The “money lenders” were not trying to help the poor, they just wanted to earn money, thinking on their own personal benefit. That’s why their loans have insane conditions with interest payments of a couple hundred percent. If someone could not pay back the loan in time, they would take everything from the customers, and maybe even kill them. This was the only opportunity for poor people to get a loan until microfinance was born. Another problem is, that women have been excluded from the banking system in general in some regions of the world, because that was nothing women would do in their culture. In most cultures it was implemented, that women are staying at home, taking care of the house, children, and food. Men would go to work and earn the money for the family needed for the cost of living. It would also be more complicated for women to get a loan, because they traditionally work less than men, and

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

In 1995 James Wolfensohn was appointed president of the World Bank. With this new opportunity he designed a plan in hopes of reducing poverty through debt forgiveness. The plan was called the highly indebted poor countries (HIPC) initiative Countries would be eligible for this plan if they had unsustainable debt, debt ranging from 200-250% of their export earnings. The first stage of HIPC involved a structural adjustment for 3 years until the Decision Point was reached, if the debt was still unsustainable there would be a 67% cancellation. The country would then enter stage two which included another 3 years of adjustment until the completion point, 80% debt reduction and debt owed to the IMF would be cancelled by taking out of the HIPC