Pros and Cons of Microfinance Essay

Poverty is a major global issue in today’s society. It also has a broad definition as it is very complex and cannot be specifically defined. Poverty is circumstance-dependent. According to Sharif Mohammed, author of Poverty Reduction - An Effective Means of Population Control, “Poverty is a multidimensional condition of human survival, not just a measure of deficiency in income. It is generally defined in relation to a minimum standard of decent living. The levels of living below this are referred to as survival standards. Failure to attain and enjoy the standard is called absolute poverty.” Millions around the world are affected by poverty and it’s an issue that has plagued the globe for centuries. Different

There have many attempts to solve the problem of world poverty in recent years. Average people have begun to care and are willing to help with the age old problem. However, the world is making little progress toward the eradication of poverty. Many of the things we are doing, out of the goodness of our hearts, just aren't helping. For various reasons, the typical response to poverty of donating vast sums of money to hurting countries doesn't help the poor near as much as other solutions and sometimes may even make the problem worse.

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

I have chosen to research about poverty. From the research I have gathered poverty still exists in today’s society. Poverty is inability to be able to get certain needs such us; food, water, clothing, choices and opportunities, not having enough food or not having food at all. Not getting the opportunity to go a clinic, it also means not being able to afford basic needs of the family. Poverty also brings bad health and bad education compared to people who have better life than, people who are in poverty. People who are living in poverty cannot afford the necessary clothing or school supplies, they might not have a way for their children to get to school. Gaining a basic education could bring 171 million people out of poverty (Poverty, 2002). Poverty can make

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

Poverty has been a long-lasting economic crisis in the world. The effects are drastic not only on the world’s economic stability but the stability and well-being of many people as well. Change is needed. True change is the hope many citizens have living in poverty due to a broken, damaged system regarding poverty. To make the world a better, suitable place to live, immediate action must be taken to finally resolve this issue.

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,

80% of micro-loans in developing countries are made to women. A large majority of people living in developing countries are in poverty. Most of these people were living off of a dollar a day. Micro-loans have been created to help the people that need them. Women in developing countries are empowered by micro loans and they use that power to help their families, economy and ,gain more recognition in their culture.

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

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.

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

continue to be a road block to financial inclusion in many states. Apart from this there are certain in Current model which is followed. There is inadequate legal and financial structure. India being a mostly agrarian economy hardly has schemes which lend for agriculture. Along with Microfinance we need to focus on Micro insurance too.