THE CONTRIBUTION OF MICROFINANCE TO POVERTY REDUCTION
Microfinance has offered a wide variety of benefits all over the world most especially to the people of Africa. They have brought funds and material benefits to this region especially among women and children who are usually left at home they have also brought personal development and encouragement to their people to develop and expand their business and small livelihood even to their backyard to provide sustainability and income generating capability towards growth that can help the entire family. Microfinance has also brought cooperation among residence in small villages they have learned to depend and help each other because of microfinance. In general it uplift people to discover their own talent and potential to harness creativity, become socially responsible, help themselves and basically get out of the stigma of hopelessness brought about by their poverty experiences in general. Although there are also cases of non successful microfinance group but usually, members are becoming more and more self sufficient and self dependent.
There are thousands of Microfinance organizations in African community in Sub Sahara Care Village Savings and Loans Association movement (VSLA) has also introduce savings in most Microfinance association to reach the poor rural household in different regions. Since 1991they have reached millions of household in the last 20 years of their program and they have also re designed their programs in 2008 they have reached another two million household and entice them to save their money in different Microfinance organizations and currently they have more than four million members usually women and girls who want to save parts of their earnings as well. Presently they have accumulated more than .5 million dollars in asset in savings and other means. Usual members can afford basic health services, education and they can give additional income to their family because of their small business and more so they can also ask for a bigger loan in the next cycle. Successful members can even use their savings as an evidence of their success for expansion.
Microfinance Institution (MFI) has become a powerful tool in poverty alleviation in Africa that from 1993 to 2003 more than 4 million women and girls have access to microfinance in their different location and most of this Microfinance are able to provide assistance to the growth of agriculture and fisheries which is the usual livelihood of their people, they can also provide funds for growing business for small trades, restaurant, handicraft, home based business and other livelihood. Indirectly MFI has also become an avenue to infrastructure that successful members have learned to develop and expand their little business into a more formal business institution and buildings. MFI has also contributed to communication and information technology that most of their members have started to use communication and technology devices to grow and contact their customers.
MFI impacts empowerment for women in Africa and the world that according to the State of the Microcredit Summit Campaign in 2001 report that 14.2 million of women around the world now can access financial services especially designed for women they can look for MFI, Banks, NGO’s and other financial institutions presently more than 20 million poorest people have been served around the world and estimate of 74% of them are women. They have been given the priority because they are usually have good repayment records in spite of difficulties women have shown tremendous courage discipline and commitment to fulfill their obligations and grow their business. Although the loans are not limited to women they have played significant role in Microfinance development.
MFI have targeted the poorest of the poor and members are usually becoming free from debt because they have learned to utilize their resources through cycle of loans which means that their repayment of loans is retained so that it can also be used to be loaned by other new members to make the MFI successful in providing funds and financial services. MFI according to Revolving Savings Credit Associations (ROSCA) that this program provide liquidity of funds, positive returns of investment, enhance outreach sustainability and creates a lasting impact to members so that when they have decided to withdraw from their membership they can be dependent and self sufficient while the MFI can still provide funds for their new members so that Micro financing engagement will continue its commitment towards poverty eradication. Clients are expected to become productive, usual members have attained economic security, professional training and development more than the material provision of food and nutrition for their family, shelter and sanitation. Their success is not just because of MFI but because they have learned to empower themselves to get out of poverty.
References:
http://www.un.org/esa/africa/microfinanceinafrica.pdf
http://www.unescap.org/pdd/calendar/PovDecade/EGM%20papers/Ndiaye_ppt.pdf http://www.microcreditsummit.org/papers/empowerment.pdf
http://etd.aau.edu.et/dspace/bitstream/123456789/721/1/ABEBE%20TIRUNEH.pdf
Credit:ivythesis.typepad.com
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