Research Topics: Microfinance

The Impact Of Micro Finance On Women Empowerment

THE IMPACT OF MICRO FINANCE ON WOMEN EMPOWERMENT       Micro-financing is usually for everyone who has the needs to expand their business and willing to pay their obligation on a timely manner but usually men go out and look for a job while most women stay at home and take care of their children or look for a living that usually can be done at home or nearby area in order to take care of their family and earn as well to be able to make ends meet. This has been the reason why most micro-financing caters mostly to women especially in Asian and African Community, they have found most of enterprising housewives for sustainable participation in the economy.       In Latin America about 40% of women produce food and other business to sell while in Asia there are about 60% of them develop their own business at home a small store, grocery, food business and more and in Africa about 70% to 80% of women produce food through land cultivation, livestock, small fishery and other livelihood from their backyard and selling it to their neighbors or directly to the market. These activities created a good participation in their economy that there are also successful women in this kind of business although it is hard to expand usually they start in modesty and earn a little. They find it fulfilling and satisfying to do the work they love while they can still divide their time to take care of their children.       This is where micro-financing company sets-in they have considered these women’s activities to group themselves to be eligible for micro-financing loan to improve, innovate and later expand their business using a small loan from the beginning and later on grow their small business. Micro-financing companies like Kiva, Micro Finance Africa and others does not just usually give funds they also look for ways to train, inform and encourage them the best ways to expand their business so that women can gain control over their livelihood by helping themselves and others. If they are willing and able to demonstrate their best interest usually they achieve economic and social gain, they empower themselves within the community to earn a decent life with the help of micro-financing, they have found a way to climb out of poverty.       In India the Self Employed Women’s Association (SEWA) concerns are equality and human rights of Indian Women. Their micro-financing scheme also provide opportunity through linking them with basic services, labor savings, food processing, information and communication technology and other self help training that will provide them with the basic framework in business creation thus necessary for their success and empowerment. The knowledge and experience they can gain from this training is beneficial as a good entry point to uplift the low morality and dignity of women that has been a part of their tradition that usually women should only stay at home.       In Sub Saharan, South Africa and most parts of the region they have serve the women more than 20 years of empowerment by giving them loans and micro-credits resulting in business opportunity and expansion, poverty eradication, maximization of their resources, self reliance and efficiency of not just women but the participation of the family to maximize their business. Given the complexity and poverty that they have experienced during the last few decades the women can say that they are more enterprising and they have the courage to take advantage of the program set by micro-finance banks to further strengthen their little home-based business.          In Asia particularly the Philippines ABS-CBN one of the most trusted media broadcast is a sister company of Bayan Foundation Micro finance Foundation Inc. started out in 1993 by giving funds to 25 poor women. Reorganized in 2006 to further strengthen their mission to become a full pledge Micro Enterprise Development program that usually caters for women who would like to create a more sustainable livelihood, they do not just give loan but they also provide entrepreneurship training education and values formation to strengthen the family. Opportunity Microfinance Bank, (OMB) also provide a real time training and Christian values formation beside the loan.       Most of Micro Financing Companies has helped most women not just to empower themselves through financial and material gain but they also give them back the pride to become the women of the century who no longer stays at home. Microfinance is an accepted strategy to reach women. According to Global Micro Credit Summit held in Spain that there are about 137.5 million families who have received loans most of them are held by women who has the access to loans and financial services and usually they cater to the poorest community. Most Micro Financing Organizations have followed the rule of the proverbs “give a man a fish and you feed him for a day but teach a man to fish and you feed him for a lifetime” but this time it is the women.  References: http://wikigender.org/index.php/Empowering_Women_through_Microfinance:_Evidence_from_India  / http://www.microfinancecouncil.org/   / http://en.wikipilipinas.org/index.php?title=ABS-CBN_Bayan_Foundation%2C_Inc. / http://www.chs.ubc.ca/srilanka/PDFs/Empowering%20women%20through%20microfinance.pdf  / http://www.microcreditsummit.org/papers/+5cheston_kuhn.pdf Credit:ivythesis.typepad.com

The Impact Of Micro Finance On Women Empowerment

THE IMPACT OF MICRO FINANCE ON WOMEN EMPOWERMENT Micro-financing is usually for everyone who has the needs to expand their busines...

Impact of microfinance on self help groups in coimbatore district

Impact of microfinance on self help groups in coimbatore district   Review of Literature   Microfinance is the provision of financial services, primarily savings and credit, to poor households that do not have access to formal financial institutions and that, microfinance has captured the imagination of opinion leaders, governments and donor agencies as key strategy for poverty reduction. At the same time, however, significant differences of opinion have emerged between the supporters of the microfinance movement and various critics, who have become increasingly numerous and vocal. Self Help Groups (SHGs) is being used in India to refer to unregistered groups of 10 to 20 members involved primarily in savings and credit activities. As in the case of the typical Accumulating Savings and Credit Associations described by  (1995), noted that members save periodically in the group and the savings are lent out to members who require loans at a fixed rate of interest. SHGs however differ from typical ASCAs in their small size, their being promoted1 among the poor by external agencies, most importantly in their obtaining loans from banks. Over 90 percent of these groups have only women members as  (2002) provides an overview of microfinance SHGs in India. Microfinance has captured the imaginations of many people working to reduce poverty as the premise is simple rather than giving handouts to poor households, microfinance programs offer small loans to foster small-scale entrepreneurial activities. Such credit would otherwise not be available or would be only available at the very high interest rates charged by moneylenders. Moneylenders operate with little competition since potential entrants quickly find that costs and risks are high and borrowers are usually unable to offer standard forms of collateral (1993). However, the emerging microfinance movement demonstrates institutional innovations that appear to greatly reduce the risk and cost of providing financial services to poor households. Innovations include contracts that give borrowers incentives to exclude bad credit risks and monitor other borrowers’ activities, schedules of loans that increase over time conditional on successful performance, weekly or semi-weekly loan repayment requirements (1999).   Questionnaire   The questionnaire will cater to survey questionnaire method that focusers towards Self help groups and details on microfinance thus, linking to case study inquiry from wherein research subjects or respondents are located. The survey will be distributed in Coimbatore District in India. The questionnaire will be in a form of survey related statements that uses a five point scaling system function to rank responses of the subjects on each of the statement items that ranges from 1 to 5 classification of strongly disagree, disagree, neutral, agree and strongly agree respectively.  Furthermore, methodology adheres to case study approach in comprehensive and spontaneous manner to be gathered and collated by means of primary and secondary research sources as supporting literature is a vital factor for the research process to achieve a unified degree of research validity and reliability posits, as the latter may serve as one important research method at hand. Through this method, first hand information will be achieved as there uses in research participants to give in ideal response known in case study assimilation.  A total of 50 respondents will be in random sample, this will comprise of self help group members relating to microfinance indication of the Coimbatore District in India. The survey statements will deal to the impact of microfinance in self help groups of the district. (refer to below format of what the survey will be like) as the following survey questionnaire (statement) formation are to be adopted in the whole duration of the research investigation as one core method to utilize.       1 Strongly Disagree 2 Disagree 3 Neutral 4 Agree 5 Strongly Agree     No STATEMENTS           1 Microfinance has reduced the incidence of poverty through increase in income, enabled the poor to build assets and thereby reduce their vulnerability 1 2 3 4 5 2 Enabled households that have access to it to spend more on education than non-client households. Families participating in the program have reported better school attendance and lower drop out rates 1 2 3 4 5 3 Empowered women by enhancing their contribution to household income, increasing the value of their assets and generally by giving them better control over decisions that affect their lives 1 2 3 4 5 4 Contributed to a reduced dependency on informal money lenders and other non-institutional sources 1 2 3 4 5 5 Facilitated significant research into the provision of financial services for the poor and helped in building capacity at self help group level 1 2 3 4 5                 Credit:ivythesis.typepad.com

Impact of microfinance on self help groups in coimbatore district

Impact of microfinance on self help groups in coimbatore district Review of Literature Microfinance is the provision of finan...

The Role the Co-operative Credit Unions in Contemporary Ghana and Beyond

The Role the Co-operative Credit Unions in Contemporary Ghana and Beyond Introduction In the idea of promoting the economic and social growth, the introduction of other alternative is necessary. The role of the financial institutions became more emphasized in the introduction of livelihood programs. In this event, Ghana as one of the developing countries in South Africa has the opportunity to link the practices in credit unions towards the economic growth. However, the money transactions in the credit unions might be different as compared to the banking institutions. What is Credit Union? Credit unions along with the other cooperative activities evolved from the traditional practice, same as the commercial banking did. The idea and concept of the credit unions is to aid the poor people most especially the people who reside in developing countries. By simply providing them money and making loan transactions, the relationship between the people and the financial institutions are understandably beneficial (Scott, 2009). From the past decades, the activities involved in credit unions in developing countries gained considerable interest from development theorists and practitioners. Thus the same mechanism is applied in Ghana. Co-operative Credit Unions in Ghana Credit unions, like the other financial institutions are also regulated and commonly administered by the government. This is done through ensuring that all of the support given by various credit unions leads to the common good of the society (Scott, 2009). In Ghana it is identified that the microfinance system is being regulated by the commercial banks laws. On the other hand, there are a separate laws for the cooperative and non-bank financial institutions. The credit unions in Ghana is performed under the rural microfinance (RMF) and found to be more beneficial to the customers because of the recorded improvement that reflects in the new era of financial institutions. Through the wise combination of a more commercial approach, reconstruction on the sector and recapitalization and building capacity, and lastly strengthening the regulation, the credit unions seems more admirable. The weak performance that mostly identified under the welfare focus and policies of low interest is reportedly became the center of the idea in focusing for a better management and satisfying the services of the credit unions. Albeit there are many limitations in the credit unions, still it is viewed to resist the impacts of changes in financial stream. In addition, there are no stipulated specific provisions regarding the capital requirement on the users but as long as the members can manage and be responsible on their roles, the credit unions will continue to be strong (Basu, Blavy, and Yulek, 2004). In commercial banking, it is still a debate for some developed countries unto how to compensate the arising problems in banking as well as the insurance of the members whenever the financial crises hit them hard. The only answer that they found is through providing stability which may seem impossible because of the financial conditions and uncertainties (Starr and Yilmaz, 2007). Effectiveness In the economic liberation of the financial sector of Ghana, there is a strong and competitive financial that can make significant impact in mobilizing the domestic savings in Ghana. In order to manage the new challenges involves in the credit unions and the associations, new policies and institutional mechanisms are needed to transform the credit union movement to a new credit union model (Ofei, 2001). Through this, it is expected that the economy can experience further growth. The role of traditional banking system in Ghana is, however, managed to support the continuous growth in micro and small enterprises (MSEs). Based on the approaches of the business sectors in strengthening the facilitation of MSEs, the assessments can be traced on the investments of the financial institutions which can be both commercial banking and credit unions. It is suggested that the collectors of loans and investments must be insured to regulate their operations. Through the Credit Union Scheme and GCCUA system that is implemented in the country, the fraudulent individuals can be identified and educate the people in supporting the MSEs for the future growth of the nation’s economy (Alabi, Alabi, & Akrobo, 2007). Conclusion In the contemporary situation on Ghana, the credit unions became the sole provider of loans and investments for the organizations which only needs a small capital and yet struggles in paying high interest. Since Ghana already recognized the areas in which they can gain the advantages and therefore promote the growth, it is not impossible for Ghana to continue its development.   References: Alabi, G., Alabi, J., & Akrobo, S.T., (2007) The Role Of “Susu” A Traditional Informal Banking System In The Development Of Micro And Small Scale Enterprises (MSEs) In Ghana, International Business & Economics Research Journal, 6(12) [Online] Available at: http://www.cluteinstitute-onlinejournals.com/PDFs/2007222.pdf [Accessed 17 September 2010]. Basu, A., Blavy, R., & Yulek, M., (2004) Microfinance in Africa: Experience and Lessons from Selected African Countries, (IMF) International Monetary Fund [Online] Available at: http://www.imf.org/external/pubs/ft/wp/2004/wp04174.pdf [Accessed 17 September 2010] Ofei, K.A., (2001) Retooling Credit Unions: The Case of Credit Union Association of Ghana [Online] Available at: http://www.ilo.org/wcmsp5/groups/public/—ed_emp/documents/publication/wcm_041869.pdf [Accessed 17 September 2010]. Scott, J.A., (2009) Commander and Installation Bank and Credit Unions Liaison Officer Desk Guide, (DFAS) Defense Finance and Accounting Services, [Online] Available at: http://www.dfas.mil/more/referencelibrary/MDA_210-02-D-0003.pdf [Accessed 17 September 2010] Starr, M.A., & Yilmaz, R., (2007) Bank Runs in Emerging-Market Economies: Evidence from Turkey’s Special Finance Houses, Southern Economic Journal, 73(4):1112. Credit:ivythesis.typepad.com

The Role the Co-operative Credit Unions in Contemporary Ghana and Beyond

The Role the Co-operative Credit Unions in Contemporary Ghana and Beyond Introduction In the idea of promoting the economic and social gro...

TO DEVELOP A MICROFINANCE PROPOSAL AT MY NGO FOR A DONOR

TO DEVELOP A MICROFINANCE PROPOSAL AT MY NGO FOR A DONOR Date:______________- Dear (Non-Governmental Organization); I am writing to you in the hope that you will lend us a helping hand in the establishment  and implementation of  our  program. Our program is all about giving free lessons to public school children in the elementary years who are currently having a hard time understanding their lessons. It is in the form of tutoring with the objective to help these children cope in their classroom lessons and activities. Aside from academics, we also aim to act as a guiding force to guide these children in the right path regardless of their color, religion, beliefs, and family history. Many of these children just need listening ears to which their parents and family cannot provide as they are busy looking for a way to live. I am not in the position to know if our public school system  have provided  other  measures to aid these children academically and emotionally. For all intents and purposes, there may even be programs already in effect. But based on observations, it might not be  implemented efficiently due in part to overly large population in any public school especially in the NCR regions. Conversing with students, I found out that tutoring is available for certain subjects whose teachers are willing to extend an additional hour or two but this comes with a corresponding fee. Most parents cannot afford or are not willing to add additional expenses for tutors as they feel their limited income will go a long way if they will spend it on food and other necessities instead of feeding the tutor. Even if we know they are partly wrong, we cannot blame them. Most of the times, survival is their topmost priority.                 Ninety percent of our program will focus on academics. There will be no segregation of grade level as this is not a formal schooling. No subject matter is assigned. Rather, each children will be given time to ask questions about their lesson in school that they do not understand; and each children will also have the opportunity to explain, even to teach the lesson that their group member finds difficult.   The tutor’s main role is to act as buffer to the children, explain further the lessons, or correct discreetly the explanation or the teaching of the student.             The remaining ten percent will be allotted for making products to be sold on special occasions as during the Christmas season, Valentine’s day, and Graduation period. Part of the earnings will be divided equally among the children while another part will be used to subsidize activities that will boost rapport and solidarity. This will teach them the value of earning money through hard work as well as the usefulness of team spirit. In this regard, we would like to ask you to participate in our program by sending tutors to mentor these children, and to contribute the amount of Php ______   to finance our program. Your tutors will also be asked to help train other people in the act of tutoring and dealing with children. The financing will cover the cost of operational expenses as: -           writing materials -          light snacks -          materials to be used for crafts to be sold on occasions -          graduation get-together -          other incremental expenses We know that you will welcome this opportunity to help our children to  better understand their lessons, raising the level of literacy in our country. As a start, we will only start within Metro Manila but our aim is to spread this advocacy to all the Philippine islands. We trust that our advocacy Is in line to what your organization aims for. Should you need to know more about our program, please feel free to contact us. You can reach us through our contact number of ———- or you can send us an email through our account at ______.  We are also available to meet with you to discuss our agenda at your most convenient time and place. We hope to receive a reply before the start of the school year 2012-13 as we plan on implementing our program before the first quarterly exam.                                                                    In good faith, we remain                                                                      ______________________                                                                    Name and Signature Association of ___________                                                                                     Credit:ivythesis.typepad.com

TO DEVELOP A MICROFINANCE PROPOSAL AT MY NGO FOR A DONOR

TO DEVELOP A MICROFINANCE PROPOSAL AT MY NGO FOR A DONOR Date:______________- Dear (Non-Governmental Organization); I am writing to ...

THE ROLE OF THE CENTRAL BANK OF NIGERIA IN THE REDUCTION OF THE UNEMPLOYMENT RATE IN NIGERIA FROM 2000 TO PRESENT

THE ROLE OF THE CENTRAL BANK OF NIGERIA IN THE REDUCTION OF THE UNEMPLOYMENT RATE IN NIGERIA FROM 2000 TO PRESENT             Unemployment is one of the major macroeconomic problems faced by Nigeria. Unemployment rate in 2000 was 18.1 percent, this was reduced to 12.2% in 2002 and 11.9% in 2005 (Akintoye, 2008). Although the figures have reduced in five years, the 11.5% is still a considerable number of the Nigerian population.             There are many definitions of unemployment one of which is the definition given by the International Labor Organization (ILO). Their definition is limited and may not at all perfectly apply to the cultural constraints in Nigeria but nevertheless it is perceived to be encompassing. The unemployed according to the definition, are the economically active population who have no work because they lost their jobs and or have left work, they are thus available to work and are looking for employment. (Akintoye, 2008)             Just very recently, the Central Bank of Nigeria (CBN) urged the state governments to partner and support the Entrepreneurship Development Center (EDC). EDC is one of CBN’s initiatives to reduce the incidence of poverty and the rate of unemployment. EDC offers entrepreneurial training in enterprise development to include basic principles in management, developing a business, growing a business, and creating employment through the business. (People’s Daily, 2011)             This recent initiative is in line with the microfinance program of the Federal Government through the CBN. The CBN Act 24 of 1991 [as amended] and the Bank and Other Financial Institutions Act [BOFIA] 25 of 1991 [as amended] confer to the CBN the key role in the microfinance program for the informal sector (CBN, n.d.).             Microfinance is the provision of access to micro-credit to the poor who do not have the means to access the same from conventional financial institutions (CBN, n.d.) because of lack of assets for collateral. The microfinancing program is aimed to reduce unemployment to the poor especially the informal sector and provide them with access of small loans or credits. The microfinancing program can reduce unemployment through the informal sector provided that it is well-managed and supported (Akintoye, 2008).             The Informal Sector includes those who create their own employment but are not accounted in the statistics of the employment (Todaro 1997 cited by Akintoye, 2008). They are engaged in the production and distribution of goods and services to generate for themselves some income inspite of the fact that they are constrained in terms of capital, technical know-how and physical and human capability (Sethuraman, 1981 in Akintoye, 2008). The economic activities of the informal sector are not included in the GDP (Farrel in Akintoye, 2008) which brings us to the legality issue, that is, if they comply with the “judicial, regulatory and institutional framework” (Feige 1990 in Akintoye, 2008).             The roles of the CBN in microfinance are multifaceted. These includes an establishment of a National Microfinance Consultative Committee (NMCC); crafting of clear microfinance policy; periodic review of the microfinance policy and guideline; mainstreaming micro financing and promoting harmony and a level playing field; interlinking micro financing programs with development banks, financial institutions and microfinance banks; channeling of microfinance funds to microfinance banks; advocating of interest rates that is determined by the market; and implementing training programs to all involved stakeholders. (Akintoye, 2008).             Microfinancing has a role in reducing unemployment and combating poverty. In the case of Nigeria microfinance is pushed as a strategy by the Federal government to reduce unemployment through the Central Bank of Nigeria however there are problems and issues that hamper the effective implementation of the project and the efficient distribution of micro credit to the unemployed.              The CBN’s microfinancing program has attracted 439,902 borrowers in 2009. (Mix Market, n.d.). This is a staggering number and is less than one million out of the 40 million that need the microfinance service. This is even worsened by the fact that micro-credit facilities are only a meager .20 percent of Nigeria’s GDP. Lending and pay rates are also a mad contradiction, with 100% interest for lending and 5% for savings. Micro-credit goes to the commercial sector (78.4%) instead of the agricultural (14.1%) and manufacturing sector (3.5%) which are more vital sectors of the economy. The problem of distribution is that microfinance is concentrated on the south and eastern part neglecting the northern part consisting of the Muslims who are the poor majority of the population. (Aliyu-Dahinu and Zubair, 2008)             If the issues above are addressed through the concerted efforts of the Federal Government and the CBN and also through a focused implementation of CBN of its mandate in microfinancing, more unemployed and the poor will have access to credit and remove them from the drudgery of unemployment and poverty. REFERENCES Akintoye, IR., 2008. Reducing Unemployment Through the Informal Sector. A Case Study of Nigeria. European Journal of Economics, Finance and Administrative Science. Issue 11 (2008). [online] Available at: < http://www.eurojournals.com/ejefas_11_10.pdf> [Accessed 6 May 2011].   Aliyu-Dahinu M., and Zubair, H., 2008. Microfinance in Nigeria and the prospects of introducing its Islamic version there in the light of selected Muslim countries’ experience. MPRA Paper No. 8127. [online] Available at: < http://mpra.ub.uni-muenchen.de/8127/1/MPRA_paper_8127.pdf> [Accessed 6 May 2011].   Central Bank of Nigeria, n.d., Microfinance. [online] Available at: <http://www.cenbank.org/devfin/microfinance.asp> [Accessed 6 May 2011]. Mix Market, n.d. Microfinance in Nigeria. [online] Available at: <http://www.mixmarket.org/mfi/country/Nigeria?gclid=CMPNheq-06gCFdMQHAodQz0DhQ> [Accessed 6 May 2011]. People’s Daily, 2011. Poverty alleviation: CBN calls for partnership with states. [online] Available at: <http://www.peoplesdaily-online.com/business/economy/8224-poverty-alleviation-cbn-calls-for-partnership-with-states-> [Accessed 6 May 2011].   Credit:ivythesis.typepad.com

THE ROLE OF THE CENTRAL BANK OF NIGERIA IN THE REDUCTION OF THE UNEMPLOYMENT RATE IN NIGERIA FROM 2000 TO PRESENT

THE ROLE OF THE CENTRAL BANK OF NIGERIA IN THE REDUCTION OF THE UNEMPLOYMENT RATE IN NIGERIA FROM 2000 TO PRESENT Unempl...

The Contribution of Microfinance Institutions to Poverty Reduction

The Contribution of Microfinance Institutions to Poverty Reduction  Nowadays there are many microfinance institutions that help rural people to avail financial services and loans to low income clients or to lending groups.  The microfinance is very helpful to those consumers and self-employed individuals who do not have access to banking loans and other financial services.  Generally, microfinance is a cooperative which has an objective to provide varied high quality financial services top the many poor and near-poor households.  And, the most interesting part of it is microfinance not only offers loans but as well as savings account, insurance and money transfers with a very low maintaining balance that poor people can really afford to invest or save money regularly.    In this connection, microfinance, has offered a wide range of services which includes also the micro credit.  Microcredit refers to the condition of credit or loan services to poor clients.  Typically, banks do not allow their clients to avail financial loans or credit who are in below income bracket.  The banks always make sure that their clients have a permanent job as well as sufficient monthly income and have enough   assets as collateral before the bank approves loan applications.   They always consider the fact that the clients have the financial capability and stability to pay for the amortization of the credit or loan.  In contrast, poor people do not have many assets that can be secured by a bank as collateral.  And, because of these circumstances, poor people more often borrow from moneylenders who give high interest rates in exchange of quick release of loans.  In fact, moneylenders are always there for any loan emergency.  They are always flexible with the borrowers who run into their lending shops for financial problems or emergency cases.  (http://www.idrc.ca/cp/ev-115786-201-1-DO_TOPIC.html)  Nevertheless, the founders of the microcredit movement in the 1970s have built financial institutions that can provide financial assistance to the poor people with a very minimal interest.  Correspondingly, microfinance institutions have the basic principles and goals for the poor clients aside from providing loans, savings, insurance and money transfer services.    First goal of microfinance institutions is to further assist the poor households to increase their income and build up their assets.  Second is to integrate or to manage the loans of the poor clients in such a way that the loans will be paid for itself continuously under any circumstance.  Third is the microfinance institution aims to build permanent local institutions.  There are various donor funds from a number of  non- government organizations as well as the government   that both aim to provide financial services as giving donations and donor funds that aligned with the private capital.  As a matter of fact, microfinance is currently considered as an effective tool for socio-economic development through the great help of various charity institutions.  This is the reason that poor clients who could no longer repay a loan, must have a charitable donor that willing to pay the whole amount of loan.  (http://en.wikipedia.org/wiki/Microfinance) Furthermore, there are many professionals and donors from charitable institutions who limit or restrict microcredit to loans for only important and productive purposes. There are many small time entrepreneurs now who are given chances by these microfinance institutions to start any business that requires only small amount of capital.  And, as poor people gained access to loans from microcredit institutions it is very apparent that it is needed in every part of the globe.  It is also great evidence that a lot of people are applying for any financial services because the poor clients know very well that micro finance services truly help them to elevate their low economic status.  In the same fashion,   poor people want to get out from poverty situation by borrowing, putting up business and increasing their profit.  More than that, many poor borrowers are really reducing their poor burdens through engaging themselves into business ventures.  These people are strongly motivated to use the money that they have loaned in the useful consumption as for micro enterprise.  This is   a safest form of saving money and money withdrawal if in case the member needs it for emergency.  At present time, microfinance is already operated through a financial system and approach that provide high quality of loans to urban and near urban areas as well as with entrepreneurial households.  It has been steadily improved in delivering ad providing financial services to the poor clients. Subsequently, many people all over the world are already aware of microcredit program that especially promoted for the improvement of the life of the world’s poorest people.  At the same time, to help these people to have bread and butter in order to live decently and fruitfully.  (http://en.wikipedia.org/wiki/Microfinance) References: (http://www.idrc.ca/cp/ev-115786-201-1-DO_TOPIC.html) (http://en.wikipedia.org/wiki/Microfinance) (http://en.wikipedia.org/wiki/Microfinance)   Credit:ivythesis.typepad.com

The Contribution of Microfinance Institutions to Poverty Reduction

The Contribution of Microfinance Institutions to Poverty Reduction Nowadays there are many microfinance institutions that help rural pe...

An Econometric Model on the Contribution of Micro-finance Institutions to Poverty Reduction

Contribution of Micro-finance Institutions to Poverty  Micro-finance Institutions are viewed as a means to end poverty in many developing nations.  Microfinance is the provision of a broad range of financial services such as <ul type="disc" style="margin-bottom: 0in"> <li class="MsoNormal" style="line-height: 200%"> 	 	deposits</li> <li class="MsoNormal" style="line-height: 200%"> 	 	loans</li> <li class="MsoNormal" style="line-height: 200%"> 	 	payment services</li> <li class="MsoNormal" style="line-height: 200%"> 	 	money transfers</li> <li class="MsoNormal" style="line-height: 200%"> 	 	insurance to poor and low-income households and their microenterprises</li> </ul> The three types of sources for micro-finance are: <ul type="disc" style="margin-bottom: 0in"> <li class="MsoNormal" style="line-height: 200%"> 	 	formal institutions – i.e. rural banks and cooperatives</li> <li class="MsoNormal" style="line-height: 200%"> 	 	semiformal institutions – i.e. nongovernment organizations</li> <li class="MsoNormal" style="line-height: 200%"> 	 	informal sources – i.e. money lenders and shopkeepers</li> </ul> Institutional microfinance includes microfinance services provided by both formal and semiformal institutions. Microfinance institutions are institutions whose major business is the provision of microfinance services. About 90% of the 180 million poor households in the region still lack access to institutional financial services. (ADB) Most formal financial institutions deny the poor financial services because of <ul type="disc" style="margin-bottom: 0in"> <li class="MsoNormal" style="line-height: 200%"> 	 	perceived high risks</li> <li class="MsoNormal" style="line-height: 200%"> 	 	high costs involved in small transactions</li> <li class="MsoNormal" style="line-height: 200%"> 	 	the poor’s inability to provide marketable collateral for loans</li> </ul> ADB, through its Microfinance Development Strategy, aims to ensure permanent access to institutional financial services for the region’s poor people and their small businesses.  To achieve this objective, ADB will focus on <ul type="disc" style="margin-bottom: 0in"> <li class="MsoNormal" style="line-height: 200%"> 	 	creating a microfinance-friendly policy environment</li> <li class="MsoNormal" style="line-height: 200%"> 	 	developing financial infrastructure</li> <li class="MsoNormal" style="line-height: 200%"> 	 	building viable retail institutions</li> <li class="MsoNormal" style="line-height: 200%"> 	 	supporting pro-poor innovations</li> <li class="MsoNormal" style="line-height: 200%"> 	 	supporting social intermediation</li> </ul> Providing the poor with improved facilities to save and to have better access to credit and insurance helps them manage risk, build assets, increase income, and enjoy a better life.  (ADB) The majorities of poor people live in rural areas and have very little opportunity.  Microfinance helps these people who have no collateral.  The economic environments provide business opportunities.  In Nepal for instance, most Nepalese micro entrepreneurs are economically isolated, which means that their market is often local, small and does not offer any demand growth prospects.  Commercial banks and other financial institutions normally do not like to go in that area because of the geographical constraints, underdeveloped infrastructures and other physical constraints. (Sapkota) However, these rural areas have a substantial demand for micro-credit.  If rural people are not brought into the mainstream for economic and social change, there will be no change in rural development.  (Sapkota) Asian Development Bank’s Vision is a region free of poverty.  They know and acknowledge that expanding access to financial services is critical for eliminating poverty and for realizing the Millennium Development Goals.  Recent estimates by the Consultative Group to Assist the Poor (CGAP) indicate that microfinance institutions in Asia have about 41 million loan accounts and 98 million deposit accounts.  (ADB)  The microfinance industry has been evolving over the last 3 decades.  In the early part of the 1980’s, the industry was dominated by nongovernment organizations (NGOs) that created various programs which attempted to address the failure of markets and governments to provide financial services for the poor which relied heavily on external grant funding. (ADB)  ADB’s first microfinance project supported the NGO microfinance institutions in the Philippines.  Some of these programs became flagship operations.  One such operation is the Grameen Bank in Bangladesh.  BRAC’s impressive results generated a lot of interest in microfinance in the broader development community.  (ADB) ADB has supported microfinance for many years. From 1988 to 1999, ADB approved 14 microfinance projects totaling 0.10 million, 13 projects with microfinance components valued at about 6.79 million, and 45 technical assistance projects for about .42 million. Recognizing that the industry landscape has changed over the years, ADB began to formulate a microfinance development strategy in 1999 that was approved in May 2000. (ADB) After the strategy was adopted, ADB’s assistance shifted from providing support for narrowly defined microcredit projects to building financial systems for the poor. From 2000 to 2004, 10 microfinance loan projects totaling 0.80 million and 16 projects with microfinance components of about 1.02 million were approved. ADB also provided financial assistance to 7 governments to prepare microfinance projects and for 21 advisory technical assistance projects for capacity building at various levels in 12 countries.  (ADB) Another significant change is that microfinance services are no longer considered a niche market activity that should be confined largely to the development community and carried out solely by specialized microfinance institutions. Today, it is believed that if microfinance is to achieve its full potential, it must be fully integrated into a developing country’s financial system with access to vast amounts of human, physical, and financial resources and management know-how. (ADB) According to a study by ADB, a paradigm shift toward market-based approaches to poverty reduction is also taking place. In the larger business world, a growing number of established companies including some multinational corporations have achieved impressive results in reaching the poor in innovative ways with their products and services. This reaffirms the feasibility of large-scale commercial microfinance and strengthens private sector interest. (ADB) References: Asian Development Bank.  Microfinance:  Financial Services for the Poor.  12 November, 2009.  Retrieved 22 June, 2011 from http://www.adb.org/microfinance/default.asp Asian Development Bank.  Special Theme: The Changing Face of the Microfinance Industry.  Building Financial Systems for the Poor.  ADB Report 2004.  Retrieved 22 June, 2011 from http://www.adb.org/Documents/Reports/Annual_Report/2004/special-theme.pdf Sapkota, Shanti.  Micro Finance Institutions and It’s Role in Alleviating Rural Poverty in Nepal:  A Socio-economic Analysis.  South Asian Network of Economic Research Institutes (SANEI) Pakistan Institute of Development Economics.  July 2008.  Pp 1-56.  Retrieved 22 June, 2011 from http://www.saneinetwork.net/research/sanei9/Study%2012/Abstract.pdf Credit:ivythesis.typepad.com

An Econometric Model on the Contribution of Micro-finance Institutions to Poverty Reduction

Contribution of Micro-finance Institutions to Poverty Micro-finance Institutions are viewed as a means to end poverty in many develop...

Micro Finance Role towards Poverty Alleviation

The Role of Micro Finance in Poverty Alleviation   Microfinance refers to a broad category of financial services including microcredit, savings, insurance and fund transfers given to low-income clients or solidarity lending groups such as consumers and the self-employed, who due to circumstances, lack access to banking and related services. In rural areas of developing economies, many activities usually classified as financial are not monetized, because poor people have very little money, but may need it or the things it can buy as circumstances arise. Promoters of the service believe that such access will help alleviate poverty in poor  people. Microfinance is seen as a means for socio-economic development, as separate from charity and as more effective if focused on women because they are less likely to default on loans than men. The microfinance program has the objective of getting poor people out of poverty through borrowing, establishing microenterprises and increasing income. It emphasizes the need for poor people to reduce their money vulnerabilities by retaining more earnings and building up their assets, and to have a safe place for saving and withdrawing money as needed, in order to better manage household and family risk.[1]   Microfinancing is also tapped in promoting renewable energy technologies to alleviate poverty and sustain development in the rural areas of the world. The introduction of green and eco-friendly technologies such as renewable energy from wind, water and solar sources, bio-fuels development from natural resources and bio-waste recycling in the underdeveloped villages of India can be implemented by microfinancing through public and private sector agencies.[2]   Microfinance as a tool for poverty alleviation in developing countries has been recognized since the1990s as shown by the formation of microfinance institutions (MFIs) worldwide and the increased participation of non-governmental organizations (NGOs) in this program. The World Bank and UN Development Programme have also recognized its potential and have contributed to its development. Microfinance eliminates conventional banking bureaucracies by simplification of paperwork and the building of banking centers in villages. It enables small loan sizes, emphasizes on using loans to start employment-generating microenterprises, does not need tangible collateral, but asks borrowers to open savings accounts and build financial assets. Microfinance also requires MFI loan borrowers to attend training and group meetings to build capacity for entrepreneurship.[3] Microfinance empowers women in rural communities by upgrading their decision-making in the household because of their acquisition of entrepreneurial and financial management skills, and also promotes a sense of self-respect and dignity to its poor clients.[4]   The focus on credit at the expense of microsavings and the desire to invite Western investors to the program have caused peer-to-peer platforms to emerge in expanding microcredit through individual lenders in the developed world. These funds will be sourced locally in these countries to lessen transaction costs and exchange rate risks, although the use of flat rate methodology instead of the familiar banking Annual Percentage Rate in the reporting of some of the borrowers’ interest rates can lead lenders to believe that their borrower is paying a lower interest rate than what they are really paying.[5]   However, according to critics, the real impact of microfinance on poverty alleviation at the global level is not supported by rigorous research, that the MFIs’ charging of high interest rates affects poor borrowers and that it must adapt new approaches in serving clients in developed countries because of the more complicated economic structures there. The usual reliance of MFIs on donations from various organizations, foundations and governmental agencies also does not make them self-sustainable, because the frequency and amount of donations cannot be relied on.[6] Microlenders have also been criticized for not looking after the working conditions of poor households, specifically when borrowers turn into laborers, marketing their products through an MFI-controlled organization. There have also been reports of the diversion of foreign aid intended for  MFIs in underdeveloped countries for entirely different uses.[7] 	   		 		 		 		[1] “Microfinance”, Wikipedia, 		25 May 2011, <http://en.wikipedia.org/wiki/Microfinance> 		[accessed 31 May 2011] 		 		 		 		[2] Neeta Aurangabadkar and A. D. 		Diwan, “Role of Microfinance for Promoting Integrated Rural Development 		and Poverty Alleviation”, Articlesbase, 2011, <http://www.articlesbase.com/wealth-building-articles/role-of-microfinance-for-promoting-integrated-rural-dev>  		[accessed 31 May 2011] 		 		 		 		[3] Kathryn Mordeno, “Microfinance: 		The Path to Poverty Alleviation”, 19 April 2010, 		<http://stjliblog.wordpress.com/2010/04/19/microfinance-the-path-to-poverty-alleviation-by-kathryn-mordeno/>  		[accessed 31 May 2011] 		 		 		 		[4] ibid 		 		 		 		[5] “Microfinance” 		 		 		 		[6] Kathryn Mordeno 		 		 		 		[7] “Microfinance” Credit:ivythesis.typepad.com

Micro Finance Role towards Poverty Alleviation

The Role of Micro Finance in Poverty Alleviation Microfinance refers to a broad category of financial services including microcredit,...

Loan Assessment and Repayment Rates among different Agribusiness Enterprises

LOAN ASSESSMENT AMONG AGRIBUSINESS ENTERPRISE         In most African nations where their way of living is mostly agricultural and fishing where individual and organizations are limited to their own knowledge and skills, their resources and capital may not be enough to handle the growing demand of customers.  The expansion of such enterprise is locked by their own limits, these groups and individuals need a highly remote assistance from the government, banks and other Non Government Organizations (NGO) to build a stronger business enterprise, for them to be able to cope up with the continuous growth that is highly needed for them to survive they will eventually resort into something like loans and government assistance.       This has been some of the common practices in Ghana. It can become a major disadvantage for people if they are not qualified in such activities and credits for they will usually be dependent on their self even if they do not have the capacity. Their business enterprise if not taken consideration by the government or banks usually closed or bankrupt. They may not be qualified if they find out that the business do not have the potential to produce or to grow.         The Micro-financing agencies   All in all, the borrower who qualifies to financing should go to the following process of training and strategy to make their credits work for them, basically this is a very advantageous activity on the part of the borrower although it may be hard for the borrowers due to lack of education.       ADB or Agricultural Development Bank have opened their finance to agricultural sector during the early 70’s but poor repayment of borrowers makes them more strict in lending to restructured their program only to qualified individuals.  Most of this financing institution would only require a minimum basic requirement depending on the ability of the borrower to pay, thus their credit limit will be based upon.              Farmers and agribusiness sectors tend to gain capital to informal lenders or “susu” these are people or organizations that allows the farmers an easy loan for their agricultural activities without getting to the process like the banks but most of the time they are the ones who have a bigger interest rates upon payment. They can also be neighbors or relatives that agreed to lend loans for immediate needs of farmers or agribusiness. These susu collectors can transact or compromise collection according to the farmer’s capacity to pay.       Micro-financing loans like (GHAMFIN) Ghana Micro-financing Institutions Network. For farmers and agribusiness groups in order to borrow must form themselves at least 25 to 40 members. These groups should have their own individual responsibility to paid but they also have a group participation responsibility which means that if a certain member or individual do not have the chance to pay would mean that all members must contribute to the group in order to fulfill their organization obligation. This is called a co workers collateral. On a typical scenario which sometimes provoke an argument or a fight between members in order to pay such amount. However this micro-financing calls for cooperation among group members so that loans can easily be released upon application.       Inventory Credit Scheme by RMFI or Rural Micro-Financing Institution of World bank for farmers who want to generate funds can use their inventories like high value crops, oil palm, cashew etc. as collateral. They use their crops in exchange for loan for security purpose since they do not have the ability to show financial statement. This process allows them to clear their debt and easily allow them for a re-loan upon completion of various crops submission to the warehouse of RMFI.       Government Credit Programs are generated for farmers, fisherman and agribusiness livestock owner a number or ways to give loans for poverty alleviation scheme. This are politically motivated funds disburse through NGO who are the one to decide who will be qualified. The government uses a so called relief and highly distributed to enterprising individuals but the interest rate is ranging from 20 percent which is quiet fair to agribusiness. The recovery rate of payment only reaches to 60 to 70 percent annually. The credit or loan given by the government or banks may only be given to qualified organization if they have the qualification to repay the amount they receive, if they have the character and skills to incorporate the responsibility to the community. That is why it is so hard to believe that the mission of such agencies is to alleviate poverty and uplift the moral of Small and Medium Enterprise because it is not easy to borrow such loans.        In fairness to most financing organizations, all of them have their own unique ways and means to lend such amount. That is why we can say that the difficulty or process of acquiring loans from these groups can be entirely based upon the borrower’s accountability and honesty to pay.                      Credit:ivythesis.typepad.com

Loan Assessment and Repayment Rates among different Agribusiness Enterprises

LOAN ASSESSMENT AMONG AGRIBUSINESS ENTERPRISE In most African nations where their way of living is mostly agricultural and fishing...

Finance costs and microfinance outreach in Rwanda

MICROFINANCE IN RWANDA         There are many microfinance organizations in Rwanda. These are UOB or Unwego Opportunity Bank, Amasezerano Community Bank,  RML or Rwanda Microfinance Limited, CFE or Center Financier aux Entrepreneurs S.A. agasake and many others. Their total loan grosses to 20.5 million in USD combined and their active combined members reaches to 45,571 about 72 USD on individual initial loan or depending on micro-financing scheme as of the latest report of 2009 (www.themix.org).       Microfinance organizations are loan or funders who lend money to low income individual so that they can use it to re establish and expand their own individual or group business. They lend to people who usually do not have access or not qualified to borrow to the bank or other formal financial agency. The statistic above shows an increasing numbers of borrowers who simply want to have a good living condition and Microfinance organization has been very successful in lending these people their primary purpose is not just business but mainly to alleviate poverty in Rwanda.       It is quite obvious that Rwanda need this kind of services that the government can’t provide because of lack of funds. The Consultative Group to Assist the Poor or CGAP addresses the challenge of poverty by giving a specific information to organization and individual the current trend and the mix market that you can usually find on the MIX market or www.themix.org this website is very useful to organizations and borrowers because of the organized reports according to their need and an immediate availability of information from the internet. In fact they have reach more than 300 microfinance institution including banks, NGO’s, credit unions and other financial agency that helps the nation building and poverty alleviation in Sub Sahara Africa.       As of today Rwanda is a peaceful place to live although you can see poverty stricken community that shows the reality of this country that is why Micro finance organization find its way to help them although they can only do so much and only a little portion of Rwanda are covered attracting only more than 2000 clients per year this is just a small figure and their country has more needs. Some people may not be qualified to borrow money because of their low socio economic standing; low education and skills are also the reasons why they may not able to borrow money from this institution. Micro finance companies doubted how they are able to pay such loans. More so the effects of “genocide” or mass killing created a division between people in Rwanda and other neighboring countries in Africa individuals themselves are frightened to join such organizations or groups.       Usually is it a common practice in Micro Financing to form a group accordingly and meet together weekly or bi monthly and through this they spend a series of learning various topics and after that is the payment process. During the pre operation they are trained to cooperate with each other and pay their loan through a mutual concern or co borrower’s agreement to pay. But people dislike group meeting and traveling and they are reluctant to pay the amount of money that others have borrowed this create more burden rather than help in their business. Through this system their clients may sometimes do not agree to repay the group guarantee.         Some members are willing to pay and some are not, this setting sometimes even creates a fight involving non payments from their members. Some would suggest that they will only pay the loans through individual concern, but in the part of the Microfinance organizations it is too risky to lend money through individual loan process since they cannot provide collateral. Group loans sometimes delay the process or disbursement and they do not want to wait too long for their group members although they are not even qualify to borrow from banks.       This is not always the case there are groups who are courageous and willing to pay, they choose members that are well trusted by their community and if by chance some members did not pay their loan in time some members are cooperative enough to help. This setting creates harmony and cooperation among members and they themselves strengthens each other and helping their members to grow their business.       If only all groups would only learn to develop this kind of activity so they themselves help each other then they will all be successful. After they have reach the maturity of their loan and paid all their group balances, they will renew the process into another cycle of borrowing loans from micro-financing organization and by this time they will thank the agency by getting a bigger amount.                               Credit:ivythesis.typepad.com

Finance costs and microfinance outreach in Rwanda

MICROFINANCE IN RWANDA There are many microfinance organizations in Rwanda. These are UOB or Unwego Opportunity Bank, Amasezeran...