Microfinance and Its Delivery Models

Typically, they have fixed workshop and capital investments but the character is still small and most of the production is meant for local markets. It is important to note that the number of employees is not the only measure of the size of micro credit enterprises. Other factors such as output, sales and asset levels may be equally appropriate indicators of the size of the firm’s operation. Currently, most of the loans to micro-entrepreneurs are provided primarily through the government, foreign aid assisted non-governmental agencies or informal money lenders. Financial institutions must recover their cost of servicing loans by interest charges and they must be confident borrower’s intent ability to repay. Financial institutions are also hampered by lack of formal collateral. This means the standard criteria used by the financial institutions are inappropriate for micro enterprise lending. To over-come this problem the government established a channel to direct their own programs with the objective of achieving social welfare and micro enterprise development. The Samurdhi Development Credit Scheme developed by the Ministry of Nation Building in Sri Lanka. This scheme was intended to serve the rural community through village level task forces called “Samurdhi Task Forces” which operated as a social intermediary. The task force used its members called “Samurdhi Development Officer” to select recipients of the

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).

Poverty has stricken many developing nations. However, there are many ways to limit things like this from occurring, micro-loans being one of those things. It is apparent that women in developing countries are empowered by micro-loans. Micro-loans are a small amount of money given to small businesses. Micro-loans help make women more independent and help them not rely on their husbands for money. It helps these women in poverty get their kids and themselves an education with the money they receive. Additionally, micro-loans make it possible for women starting a business, in order to make more money. There are many benefits for women receiving micro-loans.

For Victoria’s case, she needs the money to buy more potatoes and quinoa to make sure her shop has all the proper vegetables (Kiva.org). If Victoria can keep her shop well stocked, she may attract more customers and make more money. By earning more money, Victoria can improve her quality of life. According to Plan Canada “microfinancing can lead to improved access to clean water and better sanitation while also providing better access to health care” (plancanada.ca). Research shows that microfinance loans are better suited for women because they are less likely to miss payments on their loan and it helps them feel empowered (plancanada.ca). By lending to Victoria, she will feel empowered and will be able to support herself and her family. Also, because she is a woman, she is less likely to miss

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).

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,

So, it is mostly similar with the finance from the bank, but instead of borrowing one greater sum of money from one bank can be borrowed lesser sums of money from multiple individuals.

Lack of trust by the poor themselves who believe that the microfinance banks are just like the unregulated community banks and unregulated finance houses. Going by the antecedents of the banking industry in general, no one would blame the people for lack of trust. Only effective and far-reaching campaigns and exhibited trust in the microfinance banks by the government and the regulators can achieve this desirable confidence.

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.

I believe that the real message of the film is that, after about thirty year since microfinance came into view; there is no substantial evidence that microcredit actually does anything for the poor. One man in this film, whose name escapes me, discussed that 90-95 academic have shown no positive correlation between the poor and decreased poverty coming from microfinancing. Heinemann’s main points for this film to inform western

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

Poverty, hunger, and malnutrition remain rampant across the world today. Countries such as Africa and Asia are struggling with high numbers of poverty and malnutrition, which is causing millions of men, women, and children to face death under the everlasting shadow of poverty. In order to eradicate the darkness of poverty, companies and institutions are taking up different initiatives to help those in poverty stricken countries. One such initiative is known as micro financing, which was created by a Bangladeshi economist, Muhammad Yunus. Micro financing are small loans given to people in poor countries who want to start a business or need some financial assistance. A famous website for micro financing is Kiva.org, which has been lending money to people since 2005 and has witnessed great success in doing so. The website has made the process of lending money to individual extremely simple and it is something that any individual can partake in. For example, If I wanted to lend some money to any of the numerous entrepreneurs on the website than I would first begin by choosing the lend category. After this, the website will list some of the most popular buyers on the right hand side and as of now, Emperatriz De América Group, which is a group of women who want to borrow money to buy fish. The website lets the lenders sort through different types of borrowers based upon how much money they are in need of. The one thing I liked the most about the website is

In recent months a new concept of micro financing has created intrigue. Micro financing has many definitions but the most popular reference these days is the practice of informal loans between individuals rather than institutions (peer to peer Micro loans). Micro financing first became popular in third world countries where entrepreneurs were able to start businesses for as little as twenty-five dollars. Many were able to quickly repay their loans and often times become grantors of other peoples loans. This created a formula for prosperity though admittedly on a small scale. As micro financing web sites began to pop up for use in more industrialized nations one question became obvious. The maximum request is capped at ten thousand dollars with most micro financing organizations. So what enterprises would actually benefit from the loan? There are not a large number of start up businesses that can be built in the modern world for a mere ten thousand dollars. Most franchise opportunities require well over a twenty-five thousand dollar initial investment. Even legitimate home based businesses are not cheap. Surprisingly entrepreneurs seem to be able to do a lot with limited funds. A little research on one of the more popular micro loan web sites www.kiva.org turned up a large number of people with success stories based on loan amounts far less than the maximum. No one had plans to start up a franchise but there were many people with clear and realistic goals. A large number of

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