Can Micro Loans Help Reduce Poverty in Developing Countries? Essay

Poverty is the state of living without the basic necessities of life - for example, money or a reliable supply of food. People living in poverty might be lacking a steady income, the ability to feed their families, or access to education and healthcare. In 2015, there were 43.1 million people living in poverty in the USA.

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.

In the same way Khandker state that, microfinance reduces poverty by increasing consumption among participants and their families. Degree of poverty reduction evaluate on the based on consumption impacts of credit show that about 5% of program participants can improved their families out of poverty each year by participating and borrowing from microfinance programs. (Khandker S. R., 1998, p.

Poverty is a widespread deficiency, scarcity, or the status of one who requires a certain amount of stuff holds or money. It is a multifaceted idea, which includes racial, economic, and governmental factors. Poverty may be defined as either absolute or relative. Absolute need or destitution refers to the lack of means needed to meet basic needs such as food, clothing, and shelter. Human beings rarely think about others which are morose. What Doctor Abdurrahman Al-Summit has done is beyond mankind task. Africa wanted to be taught how to fish, not given a fish; Al Summit did that. Africa experienced a lot over the years. The UN Food and Agriculture Association figures that 233 million people in sub-Saharan Africa were hungry/undernourished in 2014-6 (its most recent estimate). Notwithstanding, the currency of undernourishment in sub-Saharan Africa has declined from 33.2 percent in 1990– 92 to 23.2 percent in 2014–16, while the number of undernourished people has risen somewhat. The principal causes of poverty are bad economic systems, conflict, environmental circumstances such as dehydration and climate change, and community growth.

Over 1.4 billion people live on less than $1.25 per day (Singer 7). In impoverished nations, the life expectancy is below fifty, compared to the average of seventy-eight years in rich nations. The mortality rate of children is twenty times greater in “least developed” countries than in developed nations. Nearly 18 million people die every year from avoidable, poverty-related causes (UNICEF). On the other side of the spectrum, there were more than 1,100 billionaires in the world in 2007 (Singer 9). According to Singer, “[t]here are about a billion [people] living at a level of affluence never previously known except in the courts of kings and nobles” (9). Peter Singer insists in his book, The Life You Can Save: Acting Now to End World

Microcredit is based on a separate set of principles, which are distinguished from general financing or credit. The savings-ed microfinance has gained recognition as an effective way to bring very poor families low-cost financial services. It’s not only provided in poor countries, but also in one of the world’s richest country USA, where 37 million people live below the poverty line (Grameen Bank). In Grameen Bank even a beggar gets special attention. A beggar comes under a campaign from Grameen Bank, which is designed to convince to join Grameen programme. The bank explains how she can carry some merchandise with her when she goes out to beg from door to door and earn money, or she can display some merchandise by her side when she is begging in a fixed place. Grameen's idea is to graduate her to a noble livelihood rather than continue with begging. Such a programme would not be a part of a conventional bank's work.

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 is a complex but important issue for both the average person, and the financial sector to understand. While the financial instruments used may be similar, the demographics of the users of microfinance is important to understand. The main purpose of the paper is to give the reader a better understanding of microfinance and provide a researched opinion on the overall impact of the practice.

Despite the growing body of literatures about the microfinance and its impact on poverty, there are counter growing criticisms against microfinance in issues such as reaching the poor, unchanged poverty level, high interest rate, brutality in repayment processes, financial sustainability, and women empowerment. (Hossain, 2010).

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

It is said that a good deed can brighten even the darkest of worlds. Opportunities to help others can come in a variety of ways and each is important, in its own respect. While microfinancing and charitable programs both have their respective benefits, in certain circumstances one may be more appropriate than the other. Charity should be implemented in times of emergency because it provides short term aid with no strings, prevents banks from capitalizing on tragedy and provides massive aid, whereas microfinancing loans should be utilized so that individual borrowers experience long term assistance and so that jobs can be created in impoverished areas.

Since it is now a near universal reality that locally owned small and medium sized enterprises can rarely expand at a level that supports sustainable growth over a long period of time, microfinance has become a most sought after option that should be considered in Nigeria due to the cumbersome process involved in acquired loans from commercial banks and in the end only credit worthy clients loans are approved leaving the poor majority of the population unenthusiastic in entrepreneurship. There are many

High-efficiency technology has higher startup costs, but loans on a far smaller scale than historic stimulus packages can offset these costs. Currently, private investors fund microloans, though in the future they could come from the governments of developed nations. They are given to low-income individuals, generally have low-income rates, and are often given to those who operated small-scale industries. They range from twenty dollars to tens of thousands of dollars, depending on the institution the loan comes from and its intended purpose. Microentrepreneurship is a key factor in building economies from the small scale up. Environmentally, this prevents the large-scale environmental devastation more commonly associated with large-scale industrial economic development. In the past, large loans to governments to address this need have often resulted in misuse of funds from a social and environmental perspective. Microloans assist in the purchase of drip irrigation systems and the provision of funds to train labor in low/no-till farming practices allow the advancement of farming in an ecological way. Guy Vincent focuses on sustainable development relative to individuals who are caught within the cycle of poverty, arguing that micro financing is a way of empowering the poor and reducing debt. By focusing on individuals and communities, Vincent predicts that small-scale loans will create a more sustainable future. The assistance from other nations and from centralized power is

A majority of the Indian population lacks opportunities such as financial resources and thereby the ability to get jobs. They are stuck in an endless cycle which provides them with no opportunities to lift themselves out of poverty. Microcredit has been seen as a lifeline and as an opportunity by governments in developing countries, international funding organizations and donor agencies, in order to help the poor attain money since the 1950’s. It was in the 1950s and1960s, for the first time Indian Government started giving out loans to families in rural areas those who worked in the agricultural sector as well as city-dwelling families who were working in the unskilled sector to promote economic growth throughout India. Households in

Microcredit is the one of the best way to reduce poverty in rural Asian countries. Microcredit also known as microfinance, here talked about Bangladesh has arisen as a new darling of international aid community.