Developing A Small Enterprises And Micro Leasing

10. In class we briefly discussed Micro Finance institutions (MFIs). What markets do MFIs typically serve? What are the major criticisms of MFIs? What financial institutions in the US closely resemble MFIs?

Micro-loans are essentially the same as traditional loans, just on a much smaller scale. Families living in extreme poverty usually don’t have good enough credit to obtain a traditional

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

269). There is no easy way for those with little money to begin earning interest on savings or obtain loans with reasonable interest rates: the banking community is failing the poorest people (Banerjee & Duflo, 2012, p. 269). Also, Banerjee and Duflo (2012) assert that medical and agricultural insurance are not favored by the poor in spite of the fact that they could benefit greatly from such products (269). Their proposed solutions come in the form of microcredit (to provide access to more reasonable loans), electronic money transfer systems (to reduce the fixed costs of saving), and rewarding people for making good financial decisions (either via markets or the government if needed) (Banerjee & Duflo, 2012, p. 270). The incentives could even be something unrelated, such as bed nets, which then help the recipients in more than one way (Banerjee & Duflo, 2012, p. 270). This would need to be coupled with government regulation so that unscrupulous individuals wouldn’t have a way to easily game the system (Banerjee & Duflo, 2012, p. 270).

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).

‘The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.’(Extract of Article 2 of the annex to Recommendation 2003/361/EC).

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

Cody Marti 12/1/2016 Film and literature Thomas L.D. ‘Angelo, associate professor Eng. 251/c2 Analytic film essay The magic of a shoeless man’s idol When you’re a child you always believe in some type of magic that isn’t real. Trying so hard to believe the fantasy you undermine what people tell you and you know the faith is there.

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

'Micro credit is about much more than access to money. It is about women gaining control over the means to make a living. It is about women lifting themselves out of poverty and vulnerability. It is

In the country of India there are many creative programmes, one of their projects are ‘the solar electric rickshaw.’ When new technological inventions are being made, the consumer market also changes accordingly. Hence the factors of technology, market and needs of public are to be considered. So these new inventions target a market, where there’s already a product which has a foothold. The lower group of the pyramid are targetted to buy this new innovation. Since the concept of micro financing has evolved, it gave rise to micro – consumers, micro – producers, micro – entrepreneurs, micro – firms, micro – entrepreneurs and lastly even micro – innovators.

Another major characteristic of microfinance is that they have numerous loans to informally-organised businesses which are often in small amounts over a short-term period with turnover of the aggregate loan portfolio maturing several times during the year. These are unsecure loans with simple repayment structure and documentation, but interest rates are generally higher than those in the formal sector (Anderson, 2002).

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,

The importance of small and Micro Enterprises (SMEs) in the economy of any country cannot be overlooked. In fact for nearly 15 years, most researchers dealing with economic planning have highlighted the significance of these enterprises stating that they are a key player in realizing any country’s economic goals. As such, governments as well as other organizations with interest in development are laying plans and strategies to promote the establishment of Small and Micro Enterprises. This is seen as a move to ensure that there is full participation of SMEs in the country’s economy. The Small and Micro Enterprises have been known to contribute to a large extend as a source of innovation, entrepreneurial skills as well as source of employment. For example, statistics in 25countries of the European Union show that 99% of the jobs provided to its citizens come from the micro, small and medium-sized enterprises. Rowe (2008) points out that the British economy relies heavily on the participation of SMEs. On the other hand, 99% of the UK’s economy is composed of small and micro enterprises.

Sometimes these microloans are given to those who are not successful for credit or larger bank financing. However the down part of this microloans are it is not sufficient for some business owners as their capital might be higher than planned. Microloans are more flexible in terms starting a business without paying a higher rent and higher liability. It is more suitable for businesses such as home based and basic business needs. The loan is designed in a way that the entrepreneurs will not feel burdened with a heavy debts on their shoulders and they are able to pay back the loans at the agreed time without additional issues. For example, if the entrepreneur is to open a small bakery shop based in their own shop house, with expected turn around less than RM10000 per month, then microloans would be