Microcredit - 1734 Words

Microcredit can be defined as small loans, or microloans, for people around the world in extreme poverty to help spur entrepreneurship. The issue of microcredit is extremely important in the world’s economy. Poverty alleviation and economic development are the primary goals of microcredit programs, that is why they began in the developing countries of Asia and Latin America, economist Muhammad Yunus and his Grameen Bank in Bangladesh are credited of pioneering this financial innovation (Smith, Thurman, 2007). After acquiring a loan, impoverished people get involved in self-employment projects that help them to start a business and begin generating income and in many cases leave poverty. Microcredit offers loans to poor people without†¦show more content†¦I will compare microcredit in the United States to microcredit in developing world, which includes countries from Asia as well as Latin America. I will discuss about some of the goals, processes, impacts and challenge s of these developing countries. Studies of the impact of microfinance in more than 24 countries have found high improvements in household income levels (Carr, 2002). Access to microfinance allows the borrower to reduce costs with lower interest rates and purchasing of raw materials. Income increases as the number of goods or services offered grows and product costs are reduced. Microcredit was initially created in developing countries where extreme poverty percentages are higher, but it also helps developed countries in a significant way. Even though the United States is one of the world’s greatest economies, microcredit helps micro businesses to develop effective financial plans and have an individual as well as collective growth. In the United States, small businesses with less than 5 employees represent the 18% of employment (Microfinance organizations, 2011). Around the country there is a huge need of microloans, 106 million people have limited access to financial organizations in the United States and 28 million people are completely unbanked. One of the leaders in microfinance organizations in the United States is Accion USA, which empowers small business owners to develop their credit, have greater economicShow MoreRelatedMicrocredit and Social Business1873 Words   |  8 PagesFrom Microcredit to Social Business: Towards Making Poverty History Innovative ideas are not standstill, when ideas works they create attraction and developed gradually that microcredit did. In the process of advancement, idea continue to change, newer ideas emerge, sometimes it may outdo the original ideas and very different from the expectations (Mulgan, 2006, p. 154). In the course of time, Grameen Bank own by the ‘poorest of the poor’ who are mostly women becomes a giant that now has 31 differentRead MoreThe Model Of Microcredit Lending2186 Words   |  9 PagesWhile the spread of microcredit as a development practice has enabled borrowers in many developing countries to access credit, not all experiences with microcredit have been positive. The original model of microcredit lending was not effective in alleviating poverty. To remedy this, an â€Å"improved† lending model was introduced; however, this model, too, has failed the impoverished citizens of the developing world because of its exclusivity. Traditional microcredit l oaning systems require some formRead MoreMicrocredit and Poverty Alleviation Essay example2253 Words   |  10 PagesMicrocredit is a financial innovation that is considered to have originated with the Grameen Bank in Bangladesh, and Muhammad Yunus is its founder. This Bank offers collateral free loan to rural poor women. Women are afforded the opportunity of education and access to health care, reduced unemployment, so that their families and communities prosper. The future of the Microcredit is very bright now because it plays an important role for the development of poor families. This system is being introducedRead MoreMicrofinance As An Opportunity For Sustainable Development1661 Words   |  7 Pages Microcredit in Rural Bangladesh: Is It Reaching the Poorest? Due: 02/10/2015 Student Name: Patel Nimisha Student ID: S2145218 Article Details This critical analysis is done on the journal study titled Microcredit in Rural Bangladesh: Is It Reaching the Poorest? which was published by the Journal of ESR. The analysis based on the aim of understanding the why the microcredit programsRead MoreAdvantages And Disadvantages Of Group Liability1706 Words   |  7 Pagesand disadvantages of group liability. In group liability, a group of individuals are responsible for each other’s loans if one member defaults, versus individual liability, where only the borrower is at risk if they default. Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. (1) Summary of the Article: Researchers examined two trials conductedRead More`` In Rural Bangladesh : Is It Reaching The Poorest?1325 Words   |  6 Pageson journal study titled â€Å"Microcredit in Rural Bangladesh: Is It Reaching the Poorest?† which was published by the Journal of ESR. The analysis was performed with the aim of understanding the why the microcredit programs reached rarely to poorest of the poor in rural Bangladesh. They found five reason behind this: supply, demand, NGDO’s norms and social issues, sustainable financial services and voluntary and non-voluntary dropouts. This paper also argues that microcredit is the not best way to helpRead MoreChallenges for Microfinance Organizations Serving the Poor1525 Words   |  7 Pagesnumber of poor families with a microloan has grown from 7.6 million in 1997 to 137.5 million in 2010. Microcredit has generated significant confidence for fast poverty alleviation; creating a multiplier effect leading to the eradication of poverty and h unger, universal primary education, the promotion of gender equality and empowerment of women in developing nations. It can be argued that microcredit is a â€Å"win-win† opportunity, in which the poor are given the financial capital and means to pull themselvesRead MoreEfficient Credit Market in the Rural Areas of Deveoping Countries1628 Words   |  7 Pagesprevious century saw an enormous boom in these microcredit activities with more and more institutions coming in to the picture reaching towards a large number of poor borrowers. While this phenomena has certainly improved the investment capacity of the borrowers, the academic debate on microcredits influence in protecting poor people from risk and poverty alleviation is far from over. Apart from the fact that researchers has questioned microcredits as a means of consumption smoothing rather thanRead MoreMuhammed Yunus: Banker to the Poor1737 Words   |  7 Pageschapter 9 we are introduced to microcredit programs used in other poverty-stricken countries. ASHI, CARD, and CGAP are just three among the plethora of microcredit programs presented in this chapter. Muhammed Yunus concludes this chapter by stating that â€Å"micro-credit is an essential tool in our search for a property-free world,† (Yunus, Banker to the Poor, 1999). Chapter 10 follows the same outline of Chapter 9; however, in this chapter, we are exposed to microcredit programs in wealthy countriesRead MoreRole of Microfinance:- The micro credit of microfinance program was first initiated in the year600 Words   |  3 Pageson Financial Flows to the Informal Sector (set up by PMO), 2002 †¢ Microfinance Development and Equity Fund, NABARD, 2005 †¢ Working group on Financing NBFCs by Banks- RBI Activities in Microfinance Microcredit: It is a small amount of money loaned to a client by a bank or other institution. Microcredit can be offered, often without collateral, to an individual or through group lending. Micro savings: These are deposit services that allow one to save small amounts of money for future use. Often without