Microfinance is the provision of a broad range of financial services to poor and low-income households and their micro enterprises. It consists of making small loans to individuals, usually women. Mfi around the world follow a variety of different methodologies for providing financial services to low-income families.
Microfinance is the provision of a broad range of financial services to poor and low-income households and their micro enterprises. It consists of making small loans to individuals, usually women. Mfi around the world follow a variety of different methodologies for providing financial services to low-income families.
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Microfinance is the provision of a broad range of financial services to poor and low-income households and their micro enterprises. It consists of making small loans to individuals, usually women. Mfi around the world follow a variety of different methodologies for providing financial services to low-income families.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
range of financial services such as deposits loans payment services money transfers insurance to poor and low-income households and their micro enterprises Micro finance An effective poverty reduction strategy Microfinance consists of making small loans to individuals, usually women. Microfinance, the Grameen way, includes several support systems that contribute greatly to its success An equally important part of microfinance is the recycling of funds Three Types of Sources of Microfinance formal institutions - i.e. rural banks and cooperatives
semiformal institutions - i.e.
nongovernmental organizations
informal sources - i.e. money lenders and
shopkeepers Approaches to mFinance The poverty approach Targets very poor clients who are very costly to serve. Like relief efforts, it measures success by how well it fulfills the needs of the poorest in the short term. The self-sustainability approach Targets less-poor clients on the fringes of the Formal financial system. Like development efforts, it measures success by how well it expands the frontier of the mainstream economy in the long term THE BEGINNING OF MICRO FINANCE The idea of microfinance was developed as a survival strategy for the poor. Ela Bhatt established the Self-Employed Women's Association (SEWA) in India in 1974. Ela Bhatt's first loan was $1.50 to a woman who sold herbs In 1976 Mohammed Yunus founded the Grameen Bank project in Bangladash. Mohammed Yunus' initial outlay was a total of $27 to forty-two poor people. Microfinance Models MFI around the world follow a variety of different methodologies for the provision of financial services to low-income families. The focus of such services is on women, based on the observation that in financial matters, they are more responsible than men particularly since their mobility is restricted by family responsibilities. Self-help Group (SHG) The SHG is the dominant microfinance methodology in India.
The operations of 15-25 member SHGs are
based on the principle that savings precede borrowing by the members .
. In many SHG programmes, the volume of
individual borrowing is determined either by the volume of member savings or the savings of the group as a whole. Individual Banking Programmes IBPs entail the provision of financial services to individual clients – though they may sometimes be organized into joint liability groups, credit and savings. The model is increasingly popular for microfinance particularly through cooperatives. Creditworthiness and loan security are a function of cooperative membership within which member savings and peer pressure are assumed to be a key factor Grameen Model This model was initially promoted by the well known Grameen Bank of Bangladesh. These undertake individual lending but all borrowers are members of 5-member joint liability groups which, in turn, get together with 7- 10 other such groups from the same village or neighborhood to form a centre . Savings are a compulsory component of the loan repayment schedule but do not determine the magnitude or timing of the loan. Common Characteristics of Microfinance Models Attendance of regular weekly (fortnightly or monthly) meetings of her group.
Training in ‘loan utilization’ or participation in
discussions of developmentally relevant issues such as social discrimination, gender awareness, health, sanitation and education
Repayment of fixed amounts as instalments on
any loan she obtains from the MFI or from her group. The Benefits of Microfinance Continued access to funding to low income clients Fast and easy procedure Accompanying non financial services Direct contact with clients Product tailored to clients needs The Negative aspects of Microfinance Maintaining a sustainable small loans program is costly, and the high interest rates take their toll on borrowers, Business training and support is important so that loans can be effectively used. Running a business has added to their workload and changed their role in the family, sometimes putting a strain on their marriage Thank u