The Contribution of Microfinance Institutions to Poverty Reduction
In general, millions of poor rural households do not have the privilege to access to the basic savings and credit services in financial institutions. This reason alone even leads them to find other ways and means to elevate their low economic condition. In rural communities, the traditional ways of saving is through investing money in a livestock or jewelry. But these investments are not efficient to help the poor families to get funds for their daily needs. Hence, liquid cash is most convenient way to acquire cash on hand. And, in order to do this better, micro saving facilities are needed in order to provide this rural poor borrower to access this kind of service. This type of micro saving facilities, poor borrower can deposit their money when they have it on hand. In addition, after selling their harvested crops, the money they earned can be deposited in the micro-saving facilities as well as to withdraw it in times of need. Such basic facilities could help the poor families to gradually rise from the poverty. What else, a deposit account can help the rural poor to obtain insurance, giving a sense of security, and it can help them to take out a loan when they need it. Nevertheless, credit facilities are generally not extended to the rural poor at all times, because they have few or no assets to offer as collateral. The people who can borrow are the people who have stable income and have the capacity to repay their loans.
(http://www.ifad.org/media/pack/microfinance.htm)
For the last two decades, there has been a rapid growth of microfinance institutions across the world; this was based on the Rural Poverty Report of 2001. These include community-run rural banks, savings and credit cooperatives, and grass-roots organizations of indigenous areas. However, the saddest part of this, the poorest area were not been reached by that financing programs for poor families because their small amount of money is not enough for a collateral for any loan. Another thing is these poorest regions do not have the chance to comply with the requirements that are being asked by the financing agencies like attendance in the regular meeting. Therefore, the battle against poverty is still a long way to go. This could only be done through enormous effort by the government and micro financing agencies to improve their credit facilities in order to extend their credit services to the poorest people in the community.
(http://www.ifad.org/media/pack/microfinance.htm)
On the positive side, the multilateral lending agencies, bilateral donor agencies, developing and developed country governments, and nongovernment organizations (NGOs) all of them has been supported the development and growth of microfinance services worldwide. And, besides, there is a wide-range of private banking institutions that joined this group over the past years. The result was overwhelming; microfinance services have grown rapidly during the last decade, although from an initial low level, and have come to the forefront of development discussions concerning poverty reduction. In spite of this initiative, there have been still 95 percent of some 180 million poor families in the Asian and Pacific region that have scarcity on the financial services.
(http://www.adb.org/documents/policies/microfinance/microfinance0100.asp?p=policies)
Majority of the policy makers, development professionals, as well as multilateral, so as to bilateral lenders, strongly believe that there is a further need of providing efficient microfinance services to the poor population because of the following reasons:
1. Microfinance is the most efficient and effective
poverty reduction strategy.
2. The savings, credit and insurance facilities are
the financial credit tools that will help the poor households to manage the financial risk better than any other.
3. Microenterprises can help these people to improve their income potential.
At the same time, they help the rural borrowers to enhance their
market, financial allocation, facilitates these poor people to be
equipped with new technology and strategies for small businesses.
4. Microfinance can contribute to the growth and development of the entire
financial system through the joint efforts of financial markets.
5. Micro finance institutions can help the women in the poor household to
become productive and empowered individuals in the society.
(http://www.adb.org/documents/policies/microfinance/microfinance0100.asp?p=policies)
Moreover, in the developing countries in the world, microfinance services have already changed their economic condition, as well as taught them to be productive and competitive. In Bangladesh, there are about 11 percent of the borrowers who already improved their economic condition little by little through the help of Bangladesh Rural Advancement Committee; this is a micro finance NGO. In the same manner, there are about 21 percent of the Grameen Bank borrowers who are in the same cases.
(http://www.adb.org/documents/policies/microfinance/microfinance0100.asp?p=policies)
References:
(http://www.ifad.org/media/pack/microfinance.htm)
(http://www.adb.org/documents/policies/microfinance/microfinance0100.asp?p=policies)
Credit:ivythesis.typepad.com
0 comments:
Post a Comment