Microfinance: Creating Opportunities for the Poor (original) (raw)
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The Importance of Microfinance Institutions in the Development of Developing Countries
This study intends to provide light on the favourable benefits of microfinance on a variety of social and economic outcomes, such as poverty reduction, job creation, economic independence for women, and long-term societal advancement. By enhancing the availability of financial and nonfinancial services to MSEs, we can increase their impact on the national economy. Microcredit programmes administered by non-governmental organisations (NGOs) have effectively reduced poverty in developing nations by providing loans with low-interest rates and minimal requirements for collateral. This study's methodology is based on a discussion and a review of prior research. However, the study's primary finding demonstrates that microfinance is critically essential. However, it confronts other obstacles that could restrict its contribution to long-term growth and monetary inclusion.
Microfinance Studies: Introduction and Overview
Oxford Development Studies, 2013
Microfinance (MF) has grown over the last two decades into an important sub-field of development studies. This special issue of Oxford Development Studies explores the contributions of MF, drawing particularly on research conducted in India. After a brief overview of the emergence of MF as a research field, this introduction develops three themes. First, we argue that MF interventions generally involve, and assume a process of transformation of, financially excluded people and groups who are not fully dominated by the logic of market exchange but have histories, culture, social relationships and politics structured by other kinds of authority and dynamics. Second, we argue that understanding MF interventions at the local level requires the social and political analysis of global development architecture, while MF may also play a role in consolidating or cementing global political economy at its base. Third, we argue that MF interventions have provided fertile ground for research into the causes and consequences of poverty. The introduction ends with summaries of the contents of the special issue.
2008
With the Muhammad Yunus being recently awarded the Nobel Peace Prize for his pioneering approach and sustained effort in addressing the problem of poverty, microfinance programs have continued to grow in usage and popularity. There are numerous studies that demonstrate the tremendous successes of such programs throughout much of the underdeveloped world. However, the universal effectiveness of microfinance institutions in alleviating poverty is still in question, and not free from debate. Much of the evidence cited for the successes of microfinance and microcredit are merely anecdotal or involve in-depth case-study approaches, which provide vivid examples and rich details of the impact and effectiveness of specific programs in specific locations at a specific time, but generally fail to achieve a more rigorous standard that would allow for research findings to be widely generalized. Some more rigorous studies have been conducted and more are surely to follow, but in the meantime, NGO leaders and government policy makers must exercise caution and restraint in applying the microfinance approach universally as a means of alleviating poverty. This article reviews some of the recent research into the effectiveness of microfinance programs and proposes areas for future directions in the continued research of microfinance programs.
Microfinance and Poverty Alleviation
The Nobel Prize winning model of micro-lending to the poor has triggered the rapid growth of microfinance industry and it is largely projected as a key enabler for poverty alleviation and supports macro economic growth for the poor regions. This view is challenged by many academic scholars and the press, based on analysis and empirical evidence to support their arguments. Some even argue that microfinance is counterproductive and works against global poverty programs. Based on studying some of these reports, I present a summary view of the concept, growth and the evolution of the microfinance industry and submit that while microfinance initiatives do support the poor and provide a safety-net, these alone cannot provide the benefits in the long run and may even be counterproductive, unless they are implemented and managed as part of other state-driven poverty programmes.
Beyond Lending: How Microfinance Creates New Forms of Capital to Fight Poverty
Innovations: Technology, Governance, Globalization, 2007
The very idea of microfinance has changed banking as we knew it. Providing small loans to the poor, mostly women, replaces physical collateral with collective responsibility. Today, microfinance is an established way to provide financial services to the poor. It can be scaled up in widely different environments around the world, and can deeply benefit the people it serves. It allows the poor both to take advantage of opportunities and to manage their vulnerabilities. The focus of the innovations in microfinance has itself evolved. In the early days of microfinance, the focus was much more "social:" how to form groups in ways that would most effectively enforce collective responsibility? How to motivate women to form their own groups? How to motivate people to save for a period before lending them money? How to respond to negative responses from the better-off and the religious groups in a community? Then, as the focus shifted from social questions, microfinance began to become more professionalized and was scaled up. Soon, innovations related to basic loan management followed. Along with the focus on financial sustainability, innovations in microfinance included better management information systems, and management systems that could increase productivity and internal control. During the middle 1990s, the pendulum began to swing back to the client end, as criticisms of one-size-fits-all types of microcredit gained ground. The initial focus on product innovations in the credit domain was soon followed by a call to expand innovations to a whole range of financial services beyond credit, including savings, insurance, and money transfers. In this article, we focus on a different source of innovations in microfinance: using the process capital of microfinance to design innovations that can address a far wider range of constraints facing the poor. We will also discuss the strategic linkages between microfinance and other approaches that innovators must consciously design into the package if microfinance is to be truly inclusive. To illustrate our argument we provide some examples from Building Resources Across Communities (BRAC) in Bangladesh.
Microfinance and Third World Development: A Critical Analysis
Microfinance is emerging as an integral part of the new development paradigm, described by the phrase "participation and development. "Although the idea has become quite popular among donor agencies, development practitioners, and academicians, theoretical premises on which this idea is founded seem entirely unexamined. Accordingly, this article investigates the academic merits, as well as potential consequences, ofthis popular poverty alleviating model from the supplyside perspective and asks a provocative question: Do the microfinance ventures have features which suggest that the establishment ofthis new finance industry in the Third World countries might further complicate their pervasive poverty problems? The answer to this question appears affirmative to be affirmative. First, the microfinance idea is founded on two theoretical premises, both ofwhich are very controversial. Second, the lack ofmicrocredit is not the cause ofthe Third World's deplorable poverty situation--a fact that suggests that the supply of microcredit cannot alleviate poverty in these countries. Finally, the promotion of the microfinance ventures in the Third World has potentials to create private groups, which have vested interests in perpetuating their prevailing poverty situation.
Microfinance and Poverty Alleviation- a Multi-Dimensional Literature Review
TIJ's Research Journal of Social Science & Management - RJSSM, 2020
This paper aims to offer a review of literature on microfinance for poverty alleviation, focusing on the different dimensions of how microfinance plays a positive role in alleviating poverty. A narrative-contextual method was used to review the relevant literature. In total, 53 relevant articles on microfinance and the role it plays in alleviating poverty were reviewed and synthesized in different dimensions to provide a holistic picture of the positive relationship. Findings support Microfinance indeed plays a significant role in improving the living standards of its beneficiaries but there is room for improvement in microfinance program-design. Findings suggest that in addition to micro-loans, the poor population need access to non-financial support to complement them in the hope to uplift them out of poverty. There is a need for matching of demand and supply sides in terms of products and delivery mechanisms. Research implications – The findings can be used by microfinance practi...
Microfinance: Dreams and Reality
Microfinance is an area of research whose popularity is reflected by the unique potential for wide ranging socioeconomic outcomes which support political goals unmatched by alternative avenues for financial support. However, despite the large amounts of financial resources funding microfinance across the world, and glorious potential economic benefits, there is no consensus regarding the success or failure of microfinance in achieving socioeconomic political goals. This paper examines the empirical literature on microfinance to establish where microfinance has developed from, the organisation of MFI’s, the success or failure of microfinance, and future research methodological possibilities. It has been found that the success or failure of microfinance depends on the benchmarks to which it is measured. From a social empowerment perspective, microfinance success has been observed. However, from an economic development perspective the results are equivocal. The success of microfinance ...
Microfinance: A magic bullet for poverty alleviation and empowerment?
2018
In contemporary times microfinance is promoted by powerful organisations such as the United Nations (UN) and the World Bank as a cutting-edge financial innovation that has the potential to meet certain development ends and goals, including poverty alleviation and women's empowerment. Indeed, the UN officially declared 2005 the International Year of Microfinance. However, research on the impact of microfinance is often conf licting, with certain studies providing evidence of the empowering effects of microfinance, and other studies analysing its disempowering potentials. Such conflicting perspectives challenge the 'magic bullet' notion of microfinance and illustrate the richness of research in this field. In light of these conflicting viewpoints, the purpose of this special issue is to set out a platform for these debates, and to introduce papers appearing in this special issue on microfinance. This is a discussion paper exploring key issues theoretically. The paper finds...
Impact of Microfinance on Poverty Reduction: Critical Perspectives from Literature
Journal of Rural and Industrial Development, 2020
Microfinance has progressively become a panacea of the evils that inflict the contemporary economies especially the developing ones. There are studies on record that reflect that it helps in alleviating poverty by providing the poor funds through which they are in a position to commence their own business venture and hence it promotes the income-generating activities of the beneficiaries. This all results in promotion of earning of beneficiaries and helps in enhancing social capital in poor nations. The studies that emphasize the poverty alleviation are also gaining momentum in the literature and other scholarly works. As a result, more recently concerns have been raised about the real worth and impact of microfinance. In this direction, the present study is a stride that aims to ascertain the impact of microfinance on the much talked macroeconomic objective of poverty alleviation. For this purpose, the existing literature has been investigated both nationally and internationally. The extensive analysis of literature shows mixed results. Some reveal positive impact of microfinance on its beneficiaries while others clearly reject it. The studies that negate the positive role of microfinance emphasize that very poor are still outside the ambit of microfinance. Thus, based on critical perspectives from literature, it can be concluded that microfinance is one of the tools of poverty alleviation. However, it cannot alleviate the poverty from the grassroots level of society unless supplemented by other socioeconomic initiatives where the government, NGOs and microfinance institutions would play a vital role.