Targeting Microfinance as a Tool to Alleviate Poverty

2012 Words9 Pages
Microcredit lending (aka microfinance) is an economic policy that has become a particularly popular tool as a means to alleviate poverty in developing countries. A large majority of microfinance is focused towards low income individuals in Latin American countries. The idea of microfinance is such that a non-governmental organization, financial institution, or a private lender gives an individual with entrepreneurial aspirations a small loan as start-up capital for their business. The amount of the loan is typically between 25 USD and 200 USD. The recipient is charged an interest rate in return for the loan. Some microfinance programs incorporate educational workshops to individuals in areas of business management, accounting, investments and banking, as well as specialized courses to their business type (such as culinary, crafts, and agriculture).

The goal of microfinance is to give individuals opportunities to raise their standard of living that they would not otherwise have, which in turn will spread to the community and increase overall development. Many programs target lending to women with the idea that as opposed to men, women will be more likely to succeed in using this policy to increase development.

Traditionally women in Latin America assumed the role of the family caretaker; staying in the home, looking after the children, preparing food and carrying out other household duties. Traditionally the women would forego education to assume this role early on in life, forfeiting the opportunity to earn a living for themselves and seek higher education. Gender roles are slowly changing in developing countries as women are beginning to enter the labor market. Microfinance is a policy that empowers women to make...

... middle of paper ...

...velopment 18 (7): 1017-030.

Miller, Hillary. 2003. “Why Microfinance Institutions in Bolivia Have Virtually Ignored Savings.” Small Enterprise Development, 13(3): 47-55.

Robinson, Marguerite. 2001. The Microfinance Revolution: Sustainable Finance for the Poor. Washington, D.C.: World Bank.

Sapovadia, Vrajlal. 2006. "Micro Finance: The Pillars of a Tool to Socio-Economic Development.” Development Gateway.

Silverman, Rachel. 2007. “A New Generation Reinvents Philanthropy” The Wall Street Journal. August 21.

The Economist. 2010. Microfinance: Leave Well Alone.

United Nations. 2005. Investing in Development: A Practical Plan to Achieve the Millennium Development Goals.

More about Targeting Microfinance as a Tool to Alleviate Poverty

Open Document