Microfinance for Rural Entrepreneurs

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.

“Microcredit is about giving hope” Natalie Portman, (Natalie Portman Quote). Microcredit or microfinance, is the lending of small amounts of money at low interest to new businesses in the developing world, (David Siegel). People argue that microcredit I ineffective. But others disagree and say it’s the best way to win the fight against global poverty. Microcredit is an effective way to fight poverty because it’s easy to obtain, provides stability, and helps people build a new path for themselves.

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

Almost half of the world lives on less than $2.50. At least 80% of humanity lives on less than $10 a day. According to UNICEF, 22,000 children die each day due to poverty. Poverty is an ever-present issue that affects the lives of billions of people each day. There are many government subsidies that come into impoverished areas, but does money solve the issue of poverty? No, money alone cannot solve the world’s issue of poverty. In this paper, I want to discuss the role of microfinance in the developing world. Microfinance can be done poorly, which will continue to stunt the economic growth of an area, but if done properly microfinance can being human flourishment to a developing area. In order to take a closer look into microfinance, I will highlight the efforts that Kiva, an online lending company, has done to improve the economic horizon for many areas of the world.

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

“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 has achieved growing significance as a tool for poverty alleviation with the year 2005 marked as the United Nations International Year of Microcredit. Over the years, the world has witnessed a remarkable growth in the number of institutions offering microfinance and the number of clients reached. Figures reported to the Microcredit Summit Campaign show that as at 2007, 3,352 institutions offered microfinance to about 155 million clients, 68 percent of which were defined as poor clients.

The World Bank (WB) - National Council of Applied Economic Research (NCAER) Rural Finance Access Survey (RFAS 2003) shows that rural banks serve the richer rural clientele. Where, around 66% of large farmers had a deposit account, only 44% had access to credit. 87% of the poorest households mainly the small farmers did not have access to credit, whereas 71% did not have a savings account. It is extremely difficult for the poor to get credit from banks because they lack of collateral and also because of their inexperience in formal finance since they usually borrow money from moneylenders and shopkeepers (informal finance). Out of the

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).

Microfinance is an emerging important financial factor which supply the basic financial services to poor and low-income households and micro-enterprises. Microfinance comprises several tools such as savings, credit, leasing, insurance and cash transfers. It 's role is to improve financial access of the poor and small economic players and thus help them to build assets, which means a contribution to poverty alleviation. These services are provided by a variety of institution, which can be divided into credit and saving cooperatives and association, banks, NGOs and non-financial and informal sources. . Providing financial services helps rural households to plan and manage consumption and investments, able deal with risks and improve their living conditions, health and education by smoothing household cash flow and increasing disposable family income.This paper presents an assessment of informal borrowing and lending in rural finance with a focus in its advantages and disadvantages as well as how it would relate to microfinance.

There are two types of enterprises in the slums:- individual enterprises and family or group enterprises. Around 176 micro enterprises are individual led microenterprises, 99 microenterprises are either family based or group based. Out of 275 enterprises, 133 are less than five years old, 78 are more than five years old but less than 10 years old, rest 63 enterprises are more than ten years old. These enterprises are operating from different places. For example, 188 of the enterprises are operating from private place and 45 from rented place and the rest 42 from public place.

This chapter reviews some of the studies and literatures on the role of Micro-finance and women empowerment to help get grasp of their experience, challenges and to find out measures put in place to deal with the various huddles. The chapter is presented as follows:

2.1.2 Justification of Microfinance …………………………………………………………………. 24 2.2.3 Products and Services of MFIs ………………………………………………………………… 27 2.4 Impacts of Microfinance …………………………………………………………………………….. 30 2.2.0 Empirical Literature Review ……………………………………………………………………….32 2.2.1 Microfinance in Ghana ……………………………………………………………………………… 33 2.3 Revolution of Microfinance …………………………………………………………………………. 34 2.4 Criticism of Microfinance …………………………………………………………………………….. 37 CHAPTER THREE METHODOLOGY ……………………………………………………………………… 38 3.0 Introduction ………………………………………………………………………………………………… 38 3.1 Choice of Study Area ………………………………………………………………………………………38 3.2 Population and Sampling ……………………………………………………………………………… 38 3.3 Data Collection Procedure …………………………………………………………………………… 39 3.4 Research Instruments …………………………………………………………………………………. 40 3.5 Research Design ……………………………………………………………………………………………41 3.6 Data Analysis ……………………………………………………………………………………………… 41 3.7 Limitations ………………………………………………………………………………………………… 42 CHAPTER FOUR METHODOLOGY…………………………..………………………………………… 43 4.0 Introduction …………………………………………………………………………………………………43 4.1 MFIs Operating in the Ketu North District ……………………………………………………43

Poverty is the main problem of everywhere. For the last thee decades several developing and developed countries taken several steps to alleviate the poverty. In the world %??(how much %) people are living life below the poverty line their daily or monthly income is less than $ xxx(how much) . One main step is the establishment of Microfinance Institutions which are providing micro credits to the poor people without any collateral. The performance of these institutions is very attractive even some commercial banks also started micro financing on commercial basis.