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.
However, despite some commentators’ disbelief of the impact of microfinance on poverty, studies have shown that microfinance has been successful in many situations. Mayoux (2001: 52) states that while microfinance has much potential, the main effects on poverty have been: • Credit making a significant contribution to increasing incomes of the better-off poor, including
It allows the poor to participate in services such as, credit, venture capital, savings, and insurance. The provision of financial services to the poor helps to increase household income and economic security, build assets and reduce vulnerability, creates demand for other goods and services for example education and health care; and stimulates local economies. 1.1 Definition. In the previous study of David Sloan (2013), Microfinance is providing small loans, primarily to women in poverty, and to who without collateral are unable to receive services from the formal financial sector. Generally, without access to capital, people cannot invest in activities such as existing businesses or new microenterprises, and it significantly reduces the chances of many to emerge from poverty.
S (2005) Micro finance is a form of financial development that has primarily focused on alleviating poverty and improving the living standard by providing financial services to the poor. Haroon and Jamal (2008) Most people think of micro finance as Micro Credit i.e. lending small amounts of money to the poor. Micro finance is not only Micro Credit, but it also has a broader perspective which includes insurance, transactional services and savings. When a person earn less than two dollar per day he will be considered poor or if a person income not sufficient to fulfill foodstuff for healthy and productive life is called poor.
“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." 1.1.1 Principles Poor people need a variety of financial services, not just loans. Microfinance can pay for itself, and must do so if it is to reach very large numbers of poor people. 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.
The usage generally focus on the difficulties that microfinance facing, the benefit of small business loans (SML) for lenders and borrowers and study of microcredit stimulating microfinance. The se... ... middle of paper ... ...he women. Women, the largest group on consumption, may have a great effect on medical, education after obtaining the loan. Positive political shifts lead to an MFI’s being supplied with cheaper credit, though not with more financing overall (Mark J. Garmaise and Gabriel Natividad 2013). A cheap credit does not have an influence on the overall quantity of lending by MLIs, but it does lead to a shift in favor of noncommercial loans.
Grameen’s rapid success lead to the popularization of microfinance’s ability to alleviate poverty and, consequently, provides valuable insights in effective microfinance business strategies,... ... middle of paper ... ...that future competition would force Compartamos to reduce rates eventually if it was egregious. Compartamos leveraged its organizational structure to accomplish its goal of growth and financial sustainability. Compartamos’s emphasis on profitability and bank-chartered organizational structure produced high quality reporting, rapid growth, and, through its IPO, provided proof that microfinance could provide meaningful returns to investors while helping the poor. However, Compartamos’s financial success is argued to exploit the poor through high interest rates and mission drift of microfinance. These strengths and weaknesses highlight the limitations on pursuing financial performance over social impact in the industry of microfinance.
“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." 1.1.1 Principles Poor people need a variety of financial services, not just loans. Microfinance can pay for itself, and must do so if it is to reach very large numbers of poor people. Microfinance is about building permanen... ... middle of paper ... ... productively.
Developing countries are closely linked to debt. This is because developing countries needs to allocate more funds to resolve debt crises. Debt can create a negative effect to the host country’s economy and the social condition of a country. This issue of indebtedness is usually solved using domestic capital. Since developing countries have low income, therefore they have low level of savings.
They instead tend to put their trust in more informal systems of financial management. This is a problem, and finding a solution to the problem would go a long way to helping increase the livelihoods of the impoverished inhabitants of the world. The poor already have a minimal amount of financial tools available to them, as many formal financial groups do not trust the poor, worried they will not be paid what they lend. In... ... middle of paper ... ...ny value (158)”. Also offered in Grameen II were improved rates of interest, over longer time periods, and the availability of more savings opportunities.