The Model Of Microcredit Lending

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While the spread of microcredit as a development practice has enabled borrowers in many developing countries to access credit, not all experiences with microcredit have been positive. The original model of microcredit lending was not effective in alleviating poverty. To remedy this, an “improved” lending model was introduced; however, this model, too, has failed the impoverished citizens of the developing world because of its exclusivity. Traditional microcredit loaning systems require some form of material collateral to ensure that a borrower will repay their loan. This excludes the ultra-poor due to their lack of possessions to use as collateral (Schurmann and Johnston 2009, 521). To solve this issue and provide the poorest citizens with…show more content…
The access to and inequality of microcredit loans needs to be remedied in order for the system to be effective in alleviating poverty. To be eligible for some microcredit programs, there are strict requirements that must be met: some programs require that all children in a household receiving funds be in good health (Ott and Hauville 2004, 558), and some have a maximum land allowance, meaning that families with greater than 0.5 acres of land are ineligible to receive a microcredit loan (Ahmed 2005, 96). These requirements are unfair because families may be applying for a loan to care for their sick child, or may be unable to maximize the use of their land without a loan to be used to obtain the tools needed to work their land. This inaccessibility to and inequality in the distribution of microcredit loans has not allowed the impoverished citizens of the developing world to better their economic situation and rise out of poverty. For those people, most often women, able to access loans through any form of microcredit, the poverty that initially brought them to seek a loan is perpetuated by high interest rates and large payments required to the community. Some microcredit institutions, though claiming to be supporting women in their business ventures and seeking to decrease poverty in
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