Essay On Microfinance Sector

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.

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).

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

Many families in developing nations do not have sustainability in their lives. In her article, “Microfinance Empowering Female Entrepreneurs”, Elizabeth Matsangou writes, “starting and growing a business is virtually impossible without access to financial services.” Basically, Matsangou is saying that in order to start a business, you need help with the use of micro-loans. Further proving the point that micro-loans that empower women and women need these loans. Many women in developing countries start micro-enterprises to help raise money for their family. With this in mind, it is obvious to see what kind of positive impact micro-loans can have on women. Starting businesses are nearly impossible without the use of micro-loans, proving that they can help empower

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,

Background: For years since the rise of microfinance in the contemporary discourse of development, Chotacredit, a nationwide Microfinance institution, has been playing a leading role in the XXX region in providing accessible finance to low-income households as a catalyst for employment creation, poverty reduction, and gender equality. However, in recent practice, Chotacredit has found that the current loan-signing rule which requires co-signature by spouse may potentially limit female participation in the microloan program and program impact. A few valid assumptions have been made: 1. As currently, a loan contract must be co-signed by both husband and wife, and a significant share of the husbands of our female clients are truck drivers, the

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.

In this documentary, Tom Heinemann (the director) provides a sharp critique of microfinance in the world. The documentary pertains critically to the work of Muhammad Yunus and the Grameen Bank in Bangladesh. Tom Heinemann tells an unpopular and confronting story about how microfinance, although innovative, leaves few to prosper and the many poor being financially “strapped”. This documentary has caused a flood of criticism about microfinance, while diminishing the reputation of Grameen Bank’s founder, Muhammad Yunus. I feel that The Micro Debt does not shed the full light onto microfinance, yet it is becoming increasingly hard to ignore its effects.

Microcredit undoubtedly is easily sustainable to the public. For example suppose you had poor credit or no credit at all, you can still receive a lone (The Pros and Cons of Microloans). Because of this anyone can get a small lone. This show that no matter their position, microfinance can help. In addition the program targets under privileged citizens (What are the pros and cons of microfinance?). This shows that microcredit can help people in the toughest situations. As a result people can provide better for themselves and their family. However some claim borrowers can’t make a living because people can’t afford to pay back lones. Lastly microcredit is used all over the

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

Host a potluck dinner for your friends instead of an expensive dinner or night on the town.

Microcredit can be defined as small loans, or microloans, for people around the world in extreme poverty to help spur entrepreneurship. The issue of microcredit is extremely important in the world’s economy. Poverty alleviation and economic development are the primary goals of microcredit programs, that is why they began in the developing countries of Asia and Latin America, economist Muhammad Yunus and his Grameen Bank in Bangladesh are credited of pioneering this financial innovation (Smith, Thurman, 2007). After acquiring a loan, impoverished people get involved in self-employment projects that help them to start a business and begin generating income and in many cases leave poverty. Microcredit offers loans to poor people without

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

The generation of self-employment in non-farm activities requires investment in working capital. However, at low levels of income, the accumulation of such capital may be difficult. Under such circumstances, loans, by increasing family income, can help the poor to accumulate their own capital and invest in employment-generating activities (Hossain, 1988). Commercial banks and other formal institutions fail to cater for the credit needs of smallholders, however, mainly due to their lending terms and conditions. It is generally the rules and regulations of the formal financial institutions that have created the myth that the poor are not bankable, and since they can’t afford the required collateral, they are considered uncreditworthy (Adera, 1995). Hence despite efforts to overcome the widespread lack of financial services, especially among smallholders in developing countries, and the expansion of credit in the rural areas of these countries, the majority still have only limited access to bank services to support their private initiatives (Braverman and Guasch, 1986). In the recent past, there has been an increased tendency to fund credit programmes in the developing countries aimed at small-scale enterprises. In Kenya, despite emphasis on increasing the availability of credit to small and microenterprises (SMEs), access to credit by such enterprises remains one of the major constraints they face. A 1995 survey of small and