Despite the growing body of literatures about the microfinance and its impact on poverty, there are counter growing criticisms against microfinance in issues such as reaching the poor, unchanged poverty level, high interest rate, brutality in repayment processes, financial sustainability, and women empowerment. (Hossain, 2010).
In terms of poverty reduction and reaching the poor people, the studies edited by (Hulme & Mosley, 1996) on the impact of microfinance on poverty found that poor people do not benefit from microfinance; it is only non-poor people who do well with microfinance and achieve positive impacts. (Morduch & Haley , 2002) points out that studies that have been conducted to examine the microfinance targeting and impact illustrate that MFIs show considerable diversity in their ability to reach poor people and the MFIs that have excellent financial performance do not imply excellence in outreach to poor people. However, (Odell, 2010) thinks it’s impossible to answer the question, does the microfinance work? (Odell, 2010) argues that the microfinance is a collection of tools and there are different types of MFIs, clients, and offered services .MFIs work in different environments, in different countries and it’s not correct to generalize the findings of a single impact study on the microfinance on the world. In addition, the measurement of microfinance impact is surprisingly difficult, because it’s not easy to isolate the impact of microfinance from other factors (CGAP). Fore instance, if the clients who got microfinance services are not doing better in their business than those who didn’t, this not means this caused by the microfinance services. There are other factors that could be involved in this impact such as the ...
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... and in the term of physical mobility, ownership and control of productive assets, and their status within the community. A second viewpoint believes that microfinance do little to women empowerment and may contribute to reinforcing existing gender imbalances. (Cheston& Kuhn, 2002) conclude that empowerment is a complex process and MFIs microfinance is not always empowering for all women. MFIs need to improve their services and processes to ensure that they support the empowerment of women.
Critique and criticism against microfinance extended to argue many other issues such as considered microfinance as a tool of economic globalization, or creation of technology dependency. Millions poor women and men in the world need access to microfinance.Hoewver; Microfinance is need to be review and evaluated objectively to improve its services and learn from its mistakes.
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.
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.
Microfinance organizations are helping women in developing countries. Women in developing countries are receiving income based on their husbands job without
Over 1.4 billion people live on less than $1.25 per day (Singer 7). In impoverished nations, the life expectancy is below fifty, compared to the average of seventy-eight years in rich nations. The mortality rate of children is twenty times greater in “least developed” countries than in developed nations. Nearly 18 million people die every year from avoidable, poverty-related causes (UNICEF). On the other side of the spectrum, there were more than 1,100 billionaires in the world in 2007 (Singer 9). According to Singer, “[t]here are about a billion [people] living at a level of affluence never previously known except in the courts of kings and nobles” (9). Peter Singer insists in his book, The Life You Can Save: Acting Now to End World Poverty, that there is no reason why the rich should not give up part of their income to help the poor achieve a sustainable way of life. Looking at these statistics, who could say that he has an extreme viewpoint? With so many resources and so much money to give away, helping those in need takes no more than a simple action. Giving up some unneeded luxuries to potentially save more than one child’s life would not kill anyone. However, would that, in reality, benefit the impoverished? Ignoring the impoverished will leave them in their current situation; helping them excessively will cause them to rely on others. The real solution to this ongoing crisis lies in microloans.
That being said, there are plenty of alternatives to microfinance, many of which I would be glad to endorse as effective means of
Those who struggle with poverty know that there are few opportunities for change and ways to get money. With a growing poverty threshold resulting in massive amounts of poor people living in inadequate living conditions, it makes it hard to obtain the essential life necessities. Many factors lead to this steadily growing tragedy. Many of those who live in poverty have few resources necessary for them to acquire money, resulting in the decision to get cash through payday loans, or quick cash. Despite the amount of money Payday Loan Companies lend to lower classes, they actually cause more harm to those who receive assistance than it actually helps them. ...
Women in developing countries are not empowered by micro-loans because it can exert women further into debt. Not all women are smart and educated enough to be able to profit from these micro-loans and instead they can be quite dumb and irresponsible with the exerting them further into debt. This does not apply to all the women who receive micro-loans, but a decent portion of them it does. Although, micro-loans could be the key success to a family's triumph out of poverty, they can still propel people into a rough and tough situation. Also, if a women’s micro-loan does not work out they will be put to shame by their whole entire community.
Markets & Customers: Cashpor provides microfinance and other credit services to below the poverty line women in Uttar Pradesh, Bihar and
As found by Hartangi (2007) that success of Micro finance depends upon the practices of that specific bank, which finance poor people, by quoting and example of BRI (Bank Rakyat, Indonesia) researcher says that they provide technical and moral support to the people they lend money, and make sure they do good, they also choose different collaterals like motorcycle, cars, cattle, and land etc to secure their loan yet making collateral stronger incase the client fails to repay and credits interesting for lower class community. Beside this, Risk management, internal audit, financial procedures, transparent system, dedicated staff, and clear incentives to staff and clients are the factors which contribute toward the successful lending of micro finances. Obamuyi (2009) says that poor credit culture and low risk management can result in low rate of return, which finally ends with the failure of the scheme. The risk of low rate of return can also be minimized by the assistance provided by the MFIs to develop the small business of clients (Zelealem, Temtime, & Shunda, 2003).
Microfinance loans are usually financial services for low income earner and the poor people given by different organizations commonly known as microfinance institutions. Microfinance loans usually gives services to poor and low earning people who don’t have access to other formal institutions of finance. They are often household entrepreneurs and entrepreneurs who are self-employed. The ultimate objective of the microfinance is to ensure that the low income people in the society are given an opportunity to be self-financing by giving them different ways of borrowing money, insurance and saving money. They gained popularity because they managed to show that poor people can be reliable bank customers. Microfinance institutions are majorly non-profit making institutions with the aim of providing credit loans to the poor people in the society with the aim of crossing them over the poverty line and also improving their economic status. (Mason and Yamaguchi)
The history of the microfinance industry provides a framework for understanding why certain MFIs are successful and others are not.
1.Christen, Robert Peck; Rosenberg, Richard & Jayadeva, Veena “Financial institutions with a double-bottom line: implications for the future of microfinance” (July 2004)
Overall, microcredit has helped millions of people around the world and it continues to have a great impact on poor people, informing them that all they need is a little ‘push’ or start-up money to begin creating a better life and subsequently a better community. Each organization has its own goals and purposes depending on the country where they reside as well as different challenges that have appeared. Microcredit is helping poor people and small business owners to better themselves as well as to their families and have their time, skills, and ideas utilized in an effective and positive way.
Microfinance refers to provision of financial services to poor or low-income clients, including consumers and self-employed.in other words, it refers to a movement that envisions “a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, it includes not just credit but also savings, insurance, and fund transfers.”. Promoter’s microfinance generally believes that such access will help poor people out of poverty.
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