Microfinance, death bell for communism
Microfinance is widely talked about throughout the world. Through the remote part of Bangladesh it kicked off its journey and gradually flew through the kingdom of light hovering clouds to spread its message. And the target group easily understood and promptly absorbed its mesmerising effect. This way credibility of the system was established within comparatively short span of time. In a World Bank estimate about 160 million from the developing countries at present take assistance through microfinance. However, credit goes to the Bengali economist Dr. Mohammed Yunus who invented in his factory the idea and threw it with a note that it would effectively absorb the shock of poverty and empower the
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It may be granted to individuals or a group. But the amount involved in this connection is always meager.
Why is the amount peanut? The reason may be that he (she) who never counts accumulated amount will be in trauma having loan of a big amount. What will he do with the amount? And if he is at all given the way out he will be in constant fear of losing it in transaction. Yet again, will he be able to provide necessary amount to open an account and who will assist him in transaction matter?
On such background it is easy to conclude micro-credit service is not feasible for them. But who will deny they are already enjoining the service though in a different way. Since ages there remains a practice of private lending in the subcontinent. The lenders provided the poor the service with high interest without any collateral. Names of Muslim Pathans and Hindu Marwaris are referred to in this connection. Not only that the poor makes groups and collect amount from the members of the group/s for keeping it in safe hand though sometimes the safe-hand turns into rogue and leaves no stone unturned to pocket fraudulently their savings. The amount so collected is given to members turn by turn. Further they buy gold, jewelry, animals, buildings etc as investment. In case of need they can be turned into cash.
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
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 deciding how much money to hold for transactions, people are primarily concerned with weighing the inconvenience that results from holding too little money for making regular payments against the interest loss that results from holding too much. This dilemma is addressed by the
Microloan is one of the popular and effective method of reducing the poverty supported by all the countries of the world especially the developing countries. This is an inspirational story started by a common man in late 1970’s looking at the extreme poverty in his country. Micro loans or Micro Financing was first started by Muhammad Yunus in Bangladesh. He started an Organisation called Grameen Bank. The Grameen Bank provides small loans without collateral to small group of borrowers. This small financing group later grew to large micro financing organisation by lending money to thousands of people in the world. With the inspiration of Grameen Banks in Bangladesh several small micro financing institutions sprang up around the world and a new movement called International Microfinance Movement began in all the major continents of the world.
“Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services.”
Microfinance institutions are playing an important role in the delivery of financial services to the poor. Increasingly, these MFIs are for-profit, limited liability companies, the ownership of which is in the hands of multiple shareholders. In most cases, shares are privately held (i.e., not publicly traded). Most such MFIs are licensed financial institutions finance companies and banks. Many are deposit takers. The microfinance industry has directed to change all that by building a financial market to meet diverse financial needs of under-served people (Armendáriz de Aghion and Morduch, 2004; Hermes and Lensink, 2011), and emerged merely with the objective of alleviating poverty, especially in developing countries (Brau, Hiatt, & Woodworth, 2009; Daley-Harris, 2006).
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.
The origin of microfinance started with the founder, Professor Muhammad Yunus who set up the special branch of Bangladesh Central Bank in Jobra Village in 1974. Later in 1983, that bank was renamed as the Grameen Banks and were awarded the Nobel Peace Prize in 2006 "for their efforts to create economic and social development" which provided the attention on microfinance and its power to fight poverty. The term ' 'microfinance" encompasses a broad
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
One of the biggest examples of success of microfinance is Bangladesh. However talking about the Indian context of Micro-finance, as a concept it has made its presence felt in India through several prominent MFIs and NGOs and now Banks are also stepping forward. Microfinance has a great scope in creating sustainable economic development in the economically backward areas of India. Work has already been started in promoting micro-finance and making it a provider of credit and banking facilities for those not covered under the purview of the Indian banking system and the associated benefits. However, apart from its primary function of extending the benefit of credit facility to the rural community and economically backward classes, microfinance also has a huge potential in creating community based entrepreneurship with the ability to create significant employment in the communities.
This critical analysis is done on the journal study titled "Microcredit in Rural Bangladesh: Is It Reaching the Poorest?" which was published by the Journal of ESR. The analysis based on the aim of understanding the why the microcredit programs reached rarely to the poor in rural Bangladesh. They found five reasons behind this: supply, demand, NGDO 's norms and social issues, sustainable financial services and voluntary and non-voluntary dropouts. This paper also argues that microcredit is the not best way to help the poor. This paper used two kinds of primary data of source, firstly they conducted the study in 1999 by World Bank as a part of the study titled "Voices of the Poor". It was organized in 8 rural and 2 urban cities of Bangladesh. (Nabi et. al., 1999) and the second study done in 2 rural and 5 urban cities of Bangladesh from 1999 to 2000 and the title was "Listening to the Poor". They utilized a different method for finding a result of not reaching microcredit facilities to poorest of the poor. This
The idea of microfinance business was pioneered in 1970s by Prof. Yunus in Bangladesh, later on followed by countries such as Bolivia, Indonesia and others. The idea was to setup a financial inclusion system which can benefit the poor and to prove that the poor can be creditworthy and can run productive microenterprises if adequate and applicable system is designed (Callaghan et al. 2007). As a result, microfinance innovation spread to different countries in the world and strongly targeted as tool of poverty alleviation and development priority to empower the poor. The industry has registered a tremendous growth since its emancipation, now it is an industry of more than 10,000 microfinance institutions which mobilize around US$70 billion assets and serves about 150 million customers around the world (Augustine, 2012).
In this section the need for Microfinance is discussed; the emergence and development of microfinance in Nigeria is also reviewed. Finally the chapter discuss the ownership and beneficiaries of microfinance in Nigeria.
Urban Co-Operative banking Sector is a vital constituent of co-operative banking system framework operation in the nation. These organizations assume an imperative part in the financial enrollment of lower and middle salary class of people. The Reserve Bank of India in its yearly provide details regarding patterns and advance in banking expresses that urban banks women urban banks are critical purveyors of credit to small borrowers and to powerless segments of the general public however is not turning out with any steady arrangements that will fortify the part of women UCBs.