In the country where poor people income not sufficient to fulfill the basic needs including provision of foods or nutrition, slack of health and medication facility, lack of better education facility, lack of sanitation system and poor household conditions such country is called third world country (Adewole, 2008). Growth, stability, survival and increasing in income all these objectives can be achieved through the various financial services that are offered by the microfinance institutions. To prove this a data have been collected from Bangladesh, Sri Lanka, Indonesia and used counter factual approach to find out the impact of microfinance on poverty. He observed positive impact of microfinance on poverty through the study in all countries from where he collected data (Hulme & Mosley,
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 is about building permanen... ... middle of paper ... ...rganizations have also shown that the key to success lies in the evolution and participation of community based organizations at the grass-root level. 1.3.1 Micro-finance and Poverty Alleviation: Most poor people manage to mobilize resources to develop their enterprises and their dwellings slowly over time. Financial services could enable the poor to leverage their initiative, accelerating the process of building incomes, assets and economic security. However, conventional financial institutions seldom lend down-market to serve the needs of low-income families and women-headed households. They are very often denied access to credit for any purpose, making the discussion of the level of interest rate and other terms of finance irrelevant.
THE RESEARCH PROBLEMS There has been a lot of emphasis on the importance of access to financial services by the poor and marginalized as a means of reducing poverty in many forms. Microfinance Institutions (MFIs) have been said to reach the population living below the poverty line with valuable financial services and mostly targeting a large number of poor. Has microfinance, therefore, contributed in the reduction of poverty in the rural Gambia? 3. PURPOSE OF THE RESEARCH Microfinance institutions as a body of delivering financial services to a previously ignored, excluded and disadvantaged population, who are also the poor, is expected to make changes in the lives of the poor.
Although they are more or less financially sustainable, without a viable business operation such as the Grameen bank, most of them offer microcredits for productive purposes that are used for consumption. Since the high repayment rates are based on the loans that generate new income, they are not actually reducing the poverty and supporting health care services. It will be small to consume their loans in medical expense and basically as micro-borrowers, not as entrepreneurs, they are not able to utilize its subsistence for their new business. Focused on basic activities that includes rice husking, cattle fattening and petty trading to get out of absolute poverty, the Grameen Bank loans cannot be used in further improvement. The PIH’s work is to improve the lives of others, especially in developing countries, not oneself as Paul argues that “it’s not about the quest for personal efficacy”.
The financial market fails to provide access to poor. The high cost of small scale lending are constraint to poor to access to formal finance, this push them to informal financial sector or to the extreme financial exclusion. When the access to financial services is improved, this enables to build up productive assets (Kirk Patrick, 2006). Microfinance institutions may correct the market failure left by formal baking system and help small businesses to access fund and creates economic growth and lifting poor out of poverty.It is normally asserted that MFIs are not reaching the poorest in society. However, despite some commentators’ disbelief of the impact of microfinance on poverty, studies have shown that microfinance has been successful in many situations.
Our proposal seeks to facilitate the transfer of credit from people who are willing to provide such credit to those who are in need, especially those poor who make up most of the developing and non-developing economies of the world. Lack of credit is one of the major barriers preventing people from making the necessary investments to expand their means of livelihood. Our goal is to help encourage the growth of businesses, especially small and local ones. This can help alleviate poverty, by not just providing people with more means to sustain themselves, but by providing more meaningful employment. In a lot of low income countries, like those of sub-Saharan African nations, many people, especially among rural populations, still engage in self-subsistence agriculture.
Chapter 1: INTRODUCTION & RESEARCH DESIGN Microfinance refers to a variety of financial services that target clients such as particularly women and low-income groups. Since the clients of microfinance institutions (MFIs) have lower incomes and often have limited access to financial services microfinance products that are for smaller monetary amounts than traditional financial services. These financial services include loans, insurance, savings, and remittances. Microfinance is also the idea that low-income individuals are capable of lifting themselves out of poverty if given access to financial services. Microloans are given for different purposes and most frequently for microenterprise development.
In addition, the members of society said to be well off financially contribute to programs designed to help people get out of poverty and the social situations that accompany poverty. Gans (1971) explains that the "terms and labels" used to depict the poor as second class citizens may be contributing to their inability break away from poverty. He also provides an understanding of the perseverance of poverty in American. Without the poor underpaid members of society, there are many types of enterprises that would cease to successfully operate because they currently rely on the under paid workers for their profits and continued
Besides, The Economist (2000) states that the governments have pushed forward the policy to control the MFIs and restrain the interest rate so that the progress of microfinance is on the right track. Another reason that people suspect whether microfinance can help to reduce poverty is the high risk of it. According to The Economist (1998), the main idea of microfinance is to offer the poor a small loan without their credit or pledge under which the MFIs may have the risk of not receiving the money back and going bankrupt. In addition, due to lackin... ... middle of paper ... ... each year’ in Bangladesh because of microfinance (The Economist, 2009). Even though there is no evidence which can verify that microfinance will absolutely reduce the poverty around the world, it is believed that there can be positive influence on poverty if more time is given.