The most debatable topic in microcredit has always been interest rates, especially that prices paid by low-income clients tend to be higher than conventional banks’ rates, and interest rates for some MFIs have exceeded annual rate of 100 percent on effective basis. In Egypt, microcredit rates are increasingly being criticized and viewed as unreasonably high, while it is immoral to set high prices on the poor. At least once a year, an article must be found in an Egyptian newspaper urging for the need to create “a bank for the poor”. Driven by religious perspective and long history of subsidized policies, the longing for a bank for the poor in Egypt have always been spinning around the idea of providing credit to low-income households “without interest rates or collaterals”.
Interests shall be perceived as the price for an ordinary and important service, and the unpleasant news that everyone already know, is that there have never been or will exist a sustainable priceless lending, yet the debate in Egypt continuous. In their brilliant book “Portfolios of The Poor”, Collins et al. (2006) explain that; “interest rates may often be better understood as fees for a service than a rate for the use of money for a specific period”. Well, demands in Egypt for priceless loans distract our attention from what should be really done, “attention should be focused on how to reduce costs per client”, (Roy and Øystein, 2010). Thus, the question of what determines microcredit interest rates in Egypt became increasingly important. The study tries to analyze effective interest rates charged by microcredit providers in Egypt, key factors that determine these rates, and prospects to provide reasonably-priced credit for low-income Egyptians.
Why the Poo...
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... outstanding portfolio. The five years average loan portfolio of a first tier NGO-MFI is more than EGP15 million and the Average Number of Active Borrowers is above 7,000 clients. Data for first tier NGO-MFIs covers the period from 2007 to 2011, while as the SFD’s funding requirements is the submission of only three years financial statements, data for the second tier NGO-MFIs covers only the period from 2009 to 2011.
The selection of second tier NGO-MFIs included in the study was based on data availability and quality of the financial statements. As few NGO-MFIs in Egypt regularly report data to the MIX market, the additional data were composed from financial statements reported to the SFD. In addition, the study used NGO-MFIs’ monitoring and evaluation reports related to SFDs’ funded projects to assume NGO-MFIs “average loan size” and “number of active borrowers”.
In order to sustain a vibrant economy, the government needs to help the poor with their resources. The poor are poor not because they don’t work, but because government has failed to provide wages that American families can survive on. Cost can be an issue but the cost to subsidize the workers with low-wage jobs are higher (Kukathus 49). Acknowledging ethical and reli...
... middle of paper ... ... 1. What is the difference between a. and a. What are MCI's needs for future external funds likely to be?
Microcredit, as described by Isserles, is a development “scam” which destroys the lives of Third World peoples. To her, these small loans falsely identify women, and others, as being worthy of credit, but the agreement’s terms subjugate them to continued financial dependency on microcredit loans. The First world hails this program as a success because aid is just a handout while microloans are a way of creating self-reliance through the market. Isserles states that the market becomes the solution to the “temporary” state of poverty, and this idea is due to a disconnect between the First World and the Third World. Projects claim to support women through finance, yet they refuse to alter the labor and domestic conditions of women across the world.
One cold morning Sam Black woke up with aching chest pain. Troubled by this new condition he went to see his Heart Doctor. Little did Sam know that hours later he would be lying on the operating table in route for a triple bypass surgery. The surgery went as planned, but it was not the last of them. Sam was sent to many specialists and rehabilitation centers, building a large bill, which they had no money to pay them with. He still pays several grand a year for the medication he is prescribed. Years after the operation Sam and his wife, Elsie, have narrowly escaped foreclose, however the most problematic debt they have is the hundreds of small term loans with interest rates in the triple digits. Elsie once said in an interview regarding the loans they had to take out, “You can’t really keep up with them” (Wright, 2011). Almost a decade later Sam has trouble speaking and has to carry around an oxygen tank. This is a normal couple that got caught in the continuous cycle of payday loans. Like other millions of Americans The Black family settled for shady overpriced short-term loans.
In addition to low earnings, the prime reason for the inability to increase funds and thus increase security of income is that profits or potential savings are often pocketed by moneylenders who charge lofty interest rates, by formal and informal regulatory and enforcement agents/organizations who demand bribes or extort protection money, and by middlemen or other stronger business partners who exploit the poor because they lack market information or the ability to use the market information to increase their own incomes. Another key that prevents the poor from raising capital is that they are often forced to purchase public goods and services at a much higher cost that are readily available to other groups in society at market or below market prices(6).
This is a short paper that uses the annual reports and form 990 for the past three years for Habitat for Humanity International (HFHI) in order illustrate and explain their financial information: two pie charts from last year annual report represent HFHI’s expenses and revenue and their relationship, does HFHI last reports satisfy FASB’s SFAS 117 (why or why not) and three years financial ratios (liquidity – current ration, capital – cash flow to total debt and profitability – total margin) to evaluate and analyze the changes in HFHI in the past three years.
Microfinance organizations are helping women in developing countries. Women in developing countries are receiving income based on their husbands job without
The Economic Lives of the Poor, written by Abhijit V. Banerjee and Esther Duflo is an essay about the lives of the extremely poor. The Economic Lives of the Poor exhibits the patterns of how the poor live around the world and the troubles they confront on a daily basis. The article talks about various aspects of life of the poor, including, money, savings, assets, education, and infrastructure. The extremely poor are defined as the people of the world who make less than $1/day. To analyze this, Banerjee and Duflo conducted surveys in 13 different countries (Cote d’Ivoire, Guatemala, India, Indonesia, Mexico, Nicaragua, Pakistan, Papua New Guinea, Peru, South Africa, Tanzania, and Timor Leste). The article talks about how the poor people
The problems that Microcredit programs attempt to solve are the problems of moral hazard, asymmetric information, and adverse selection.
Women all over the world suffer from poverty and unfair treatment. Almost half of these women in poverty come from Africa, being paid barely a dollar a day. These women can barely feed themselves let alone their family. In order to feed and take care of their family they need micro-loans to either start a business and continue their business. Women are not empowered by micro-loans because of gender-based division of labor, their husbands and men in their family, and the women being shamed for not being able to repay the loan and be in debt.
In the beginning of the short story, Hashim is not a religious. He claims that he’s “not a godly man,” but he sets great store by “living honorably in the world.” Although he isn’t religious, he feels that he holds himself morally accountable. However, by charging an outrageously high interest rate of 71 percent, Hashim is not what many would consider noble. He justifies this standard by saying he is teaching the poor “the value of money: let them only learn that, and they will be cured of this fever of borrowing, borrowing all the time.” Despite Hashim’s claim that he is helping the poor, what he is actually doing is pushing them further into debt. Although he claims that if his plans succeed, he will put himself out of business, I don’t think that as Hashim is sitting in his large house surrounded by signs of his wealth that he is very worried about losing his
The lifestyle of people across the world is developing rapidly. As there is a growing concern for people about the lifestyle and way of living, the scope for the microfinance industry is also at a growing pace. A large number of people across the world prefer finance for the purpose of purchase of consumer durables as well as lifestyle products. As the credit card EMI options are more expensive, people prefer NBFCs for the purpose of consumer durable loans. The project done in bajaj finserv explains the role of NBFCs in the consumer durable loans and the procedure undertaken in order to disburse the consumer durable loans.
Since its emergence, microcredit has been viewed as a very important tool for development. Many around the world believe microcredit is the antidote for global poverty. Although the Grameen Bank focuses only on people from Bangladesh, different microfinance institutions had been established around the world. Accion International is one example of these institutions in Latin America, which started providing loans in 1973 (The history of microfinance, 2005). These financial institutions started to grow rapidly due to high demands of small loans. Poor people around the world started to lose faith to their countries’ authorities to provide for their well being and started to tur...
The first and arguably most common effect of poverty on society is its financial impact (Veritta, 2008). In many of the societies that experienced significantly high levels of poverty, debt was increasingly common, and especially debt accrued from moneylenders (Hatcher, 2016). For many individuals living in poverty, access to financial services such as banking is often stifled and rudimentary, making it difficult for such individuals to access self-improvement loans at standard and fair rates (Yoshikawa, Aber, & Beardslee, 2012). For these individuals, moneylenders are the best option available, which results in them paying exorbitant interest rates. The interconnection between poverty and finance, however, is cyclic in nature. The lack of finances or access to financial services causes poverty, which in turn causes an isolation of individuals from finances and financial services (Hickey & du Toit, 2013). This makes poverty a fairly complex problem to
A microfinance institution (MFI) is an organization that provides microfinance services, ranging from small non-profit organizations to large commercial banks. “An MFI can be broadly defined as any organization such as credit union, down-scaled commercial bank, financial NGO, or credit cooperative, etc. that provides financial services for the poor."