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Microfinance
- 1. By Emily Zender & Suhn Lee “ G ive a man a fish, he eats for a day. Teach a man to fish, he eats for a lifetime.” Chinese Proverb
- 5. The Extreme Poor The extreme poor are considered “unbankable” and left to survive in the slums
Hinweis der Redaktion
- How many of you in here aspired to start or own your own company? Can you imagine building your company off of just $10? How about with no modern technology, capital savings, research or target markets? I know you all have seen or spent a ten dollar bill before but today I want you to look at it in a different way. What was the last thing you bought for $10? Think back to what you ate for lunch yesterday, did anything you ate cost less than $1? Everyday billions of people are doing business—roughly 154 million of them are building their business off of a $10 investment while they themselves struggle to survive off of $1 dollar a day. Welcome to Microfinancing.
- The act of loaning to the poorest people in the world just $10-$50 so they can begin to build a business.
- Founded by Muhammad Yunus Donation of $27 to 42 poor female bamboo stool makers
- * Define normal financial institutions: large and small government lending agencies and commercial banks.
- The dreams of the poor. The poor have dreams too Unsafe walking to school Had to care for a siblings
- Small loans do not allow MFIs to return a large enough profit to sustain their company Low interest rates are required to service the poor but again does not allow a large enough profit for the MFI to work efficiently As discussed previously, there are extremely high accessibility costs which raise the cost of operating an MFI even more Loan risks are higher because there is really no way of screening an individual therefore defaults on loans harm MFIs just like regular banks MFIs must take time to establish a relationship with the poor so they will trust them If an MFI moves to a ‘for profit’ establishment, they lost much credibility and trust with the community which causes them to lose clients Solutions: Most MFI’s main goal is on returning a profit Without a return in profit the money cannot be re-invested and used to help more clients Most MFIs rely on grants from supporting organizations, government subsidies, grants from the government and support from organization such as the World Bank and the IMF (FDI)
- The sheer numbers of the microfinancing world exemplify its success but how does microfinance work as a poverty alleviation tool? Yes, microfinance increases capital which increases labor and inturn increases capital in the community. Specifically, and most importantly, microfinance allows individuals and families alike to become self-sufficient, independent, proud working individuals who together create cash flow in their economy and cause their communities to be lifted out of poverty.