**Micro-Finance in Global Perspectives**
Microfinance, with its roots dating back centuries and its modern evolution driven by pioneers like Dr. Muhammad Yunus, represents a powerful force in global finance. Its historical journey encompasses early community-oriented pawnshops, 19th-century cooperative lending banks in Europe, and the birth of "modern microfinance" in rural Bangladesh. Over the years, microfinance has grown into a global movement, attracting substantial foreign investments and involvement from large banking institutions. With a diverse range of financial services, including small loans, savings, and insurance, microfinance aims to promote financial inclusion and empower low-income individuals, particularly women, across the world. Its adaptability, sustainability, and emphasis on entrepreneurship make it a critical tool in the fight against poverty and a key driver of economic development on a global scale. The global microfinance market continues to expand, offering hope and opportunity to millions of people who lack access to traditional banking services.
Microfinance provides small loans, savings, insurance, and money transfer services to low-income individuals who lack access to traditional banking services. Muhammad Yunus pioneered microfinance through Grameen Bank in Bangladesh in 1983. Key elements of microfinance include microcredit, microsavings, microinsurance, and remittances. While microfinance provides financial opportunities for the impoverished, some argue it can take advantage through high interest rates and may not improve recipients' incomes.
Lesson 1: Introduction to Microfinance (ENTREP-ELEC)AnaDeVilla2
Microfinance, also known as microcredit, refers to a banking
service tailored for individuals or communities with low
income, offering financial access that would otherwise be
unavailable to them (Kagan, 2024).
This document is a presentation on the significance of microfinance in Pakistan. It discusses how microfinance originated in the 1970s to provide small loans to the poor. The purpose of microfinance is to eliminate poverty by increasing incomes and access to financial services for financially excluded groups. The research aim is to review studies on the impact of microfinance (microcredit and microsavings) on incomes, poverty, and other outcomes for the poor in Pakistan. It then discusses the roles of NGOs and different government/international organizations in supporting microfinance initiatives, and the various activities and risks involved in microfinance like microcredit, microsavings, and microinsurance. Finally, it provides an overview of the loan process for microfinance and different types
Microfinance involves providing small loans, savings, insurance, and other financial services to low-income clients who traditionally lack access to banking. It aims to help the poor lift themselves out of poverty through self-employment opportunities and entrepreneurship. Key features include providing small, short-term loans without collateral through group lending models. Microfinance has grown significantly since the 1970s when pioneers like the Grameen Bank in Bangladesh demonstrated that the poor can repay loans and access financial services through market-based approaches. It now serves over 100 million clients worldwide through thousands of microfinance institutions.
Nationalized banks in India play an important role in microfinance in rural areas. Microfinance provides small loans, savings, and insurance to poor individuals and small businesses that lack access to traditional banking. While nationalized banks have expanded access to credit for rural Indians, they face limitations like a lack of experience with microfinance methods. Recommendations to improve microfinance through nationalized banks include developing a uniform legal framework, interest rates that cover costs, and programs that link credit to subsidies.
This is a simple presentation about microfinance and important of it in developing country. I briefly described about service and impact of it.
I prepared it to present in university.
University of Economics in Katowice, Poland.
Suman Bhattarai (Nepal)
Microfinance involves providing small amounts of credit, savings, and insurance services to the poor. The concept originated in the 1970s when Dr. Muhammad Yunus lent money without collateral to groups of poor women in Bangladesh, achieving a 98% repayment rate. Today there are over 7,000 microfinance institutions globally serving 16 million poor households. In India, pioneering microfinance organizations included cooperatives like SEWA Bank. The SHG-Bank linkage model aggregates individual savings and provides loans through self-help groups. While microfinance has increased incomes and reduced vulnerability, issues sometimes arise from high interest rates, unethical collection practices, and uneven geographic growth.
Microfinance provides small loans and other financial services to poor and low-income individuals who traditionally lack access to banking and related services. The document discusses two main approaches to microfinance - the saving-led approach and the credit-led approach. The saving-led approach emphasizes group savings first before lending internally from pooled savings, while the credit-led approach prioritizes getting external capital to groups in the form of individual loans with set repayment terms. Both aim to provide poor communities with needed credit and help accumulate savings, though they differ in their starting point and governance structures.
Microfinance provides small loans, savings, insurance, and money transfer services to low-income individuals who lack access to traditional banking services. Muhammad Yunus pioneered microfinance through Grameen Bank in Bangladesh in 1983. Key elements of microfinance include microcredit, microsavings, microinsurance, and remittances. While microfinance provides financial opportunities for the impoverished, some argue it can take advantage through high interest rates and may not improve recipients' incomes.
Lesson 1: Introduction to Microfinance (ENTREP-ELEC)AnaDeVilla2
Microfinance, also known as microcredit, refers to a banking
service tailored for individuals or communities with low
income, offering financial access that would otherwise be
unavailable to them (Kagan, 2024).
This document is a presentation on the significance of microfinance in Pakistan. It discusses how microfinance originated in the 1970s to provide small loans to the poor. The purpose of microfinance is to eliminate poverty by increasing incomes and access to financial services for financially excluded groups. The research aim is to review studies on the impact of microfinance (microcredit and microsavings) on incomes, poverty, and other outcomes for the poor in Pakistan. It then discusses the roles of NGOs and different government/international organizations in supporting microfinance initiatives, and the various activities and risks involved in microfinance like microcredit, microsavings, and microinsurance. Finally, it provides an overview of the loan process for microfinance and different types
Microfinance involves providing small loans, savings, insurance, and other financial services to low-income clients who traditionally lack access to banking. It aims to help the poor lift themselves out of poverty through self-employment opportunities and entrepreneurship. Key features include providing small, short-term loans without collateral through group lending models. Microfinance has grown significantly since the 1970s when pioneers like the Grameen Bank in Bangladesh demonstrated that the poor can repay loans and access financial services through market-based approaches. It now serves over 100 million clients worldwide through thousands of microfinance institutions.
Nationalized banks in India play an important role in microfinance in rural areas. Microfinance provides small loans, savings, and insurance to poor individuals and small businesses that lack access to traditional banking. While nationalized banks have expanded access to credit for rural Indians, they face limitations like a lack of experience with microfinance methods. Recommendations to improve microfinance through nationalized banks include developing a uniform legal framework, interest rates that cover costs, and programs that link credit to subsidies.
This is a simple presentation about microfinance and important of it in developing country. I briefly described about service and impact of it.
I prepared it to present in university.
University of Economics in Katowice, Poland.
Suman Bhattarai (Nepal)
Microfinance involves providing small amounts of credit, savings, and insurance services to the poor. The concept originated in the 1970s when Dr. Muhammad Yunus lent money without collateral to groups of poor women in Bangladesh, achieving a 98% repayment rate. Today there are over 7,000 microfinance institutions globally serving 16 million poor households. In India, pioneering microfinance organizations included cooperatives like SEWA Bank. The SHG-Bank linkage model aggregates individual savings and provides loans through self-help groups. While microfinance has increased incomes and reduced vulnerability, issues sometimes arise from high interest rates, unethical collection practices, and uneven geographic growth.
Microfinance provides small loans and other financial services to poor and low-income individuals who traditionally lack access to banking and related services. The document discusses two main approaches to microfinance - the saving-led approach and the credit-led approach. The saving-led approach emphasizes group savings first before lending internally from pooled savings, while the credit-led approach prioritizes getting external capital to groups in the form of individual loans with set repayment terms. Both aim to provide poor communities with needed credit and help accumulate savings, though they differ in their starting point and governance structures.
Microfinance aims to provide financial services like loans, savings, and insurance to low-income individuals who lack access to traditional banking. In India, microfinance grew out of efforts to provide credit to the poor, starting in the 1970s with organizations like Grameen Bank. The National Bank for Agriculture and Rural Development (NABARD) spearheaded India's microfinance program through partnerships with non-profits, banks, and cooperatives. Studies show microfinance has empowered women, improved health and education outcomes, and reduced dependency on informal lenders in rural India. However, some argue microfinance needs reforms to foster greater economic growth through support for real businesses and improved infrastructure.
Microfinance, also called microcredit, provides banking services like small loans, savings accounts, and insurance to low-income individuals who lack access to traditional financial services. The goal is to help the poor become self-sufficient by starting or expanding small businesses. Muhammad Yunus pioneered microcredit in the 1970s by making small loans to impoverished people in Bangladesh, leading to the founding of Grameen Bank which has now loaned billions worldwide. Microenterprises refer to very small businesses, typically with fewer than 10 employees, that are financed through microcredit to improve lives and communities.
The document discusses microfinance in India. It defines microfinance as providing financial services like credit, savings, and insurance to low-income individuals. A variety of actors in India provide microfinance using different models. The goal is to create social value through poverty alleviation and improving livelihoods. Common microfinance activities include group lending, individual lending, savings, insurance, and capacity building.
This document provides an overview and history of microfinance. It discusses the evolution of microfinance concepts in the late 1970s and pioneering institutions in microfinance like ACCION International, SEWA Bank, and Grameen Bank. It also outlines the student's learning from their microfinance research project and internship with KDS MFI, including understanding microfinance regulation, models, management, and how microfinance can improve livelihoods. The document contains the student's report outline, which will analyze topics like the need for microfinance in India, strategies for coordinating microfinance efforts, and the future of the industry.
This document discusses women empowerment through microfinance in India. It provides background on microfinance and how it has evolved in India from subsidized credit programs to self-help groups linked to banks to today's more commercial microfinance institutions. Microfinance is seen as a tool for empowering women economically by providing small loans and other financial services. While microfinance has helped increase access to credit for many poor women, there are debates around how much it truly empowers women versus just alleviating poverty. The document also analyzes trends in women's workforce participation in India and finds it has declined significantly in rural areas in recent decades.
Microfinance refers to small-scale financial services like credit and deposits provided to low-income individuals who lack access to traditional banking services. It aims to help the poor become self-sufficient through saving, borrowing, and insurance. While banks are reluctant to serve these clients due to high costs and lack of collateral, microfinance fills this gap by providing small, affordable loans. Groups like self-help groups and microfinance institutions have successfully delivered microcredit in countries like India and Bangladesh, achieving repayment rates over 95% and helping many escape poverty. However, some criticize that microfinance benefits the moderately poor more than the destitute and can lead to over-indebtedness if not implemented responsibly.
This document provides a summary of microfinance in India. It defines microfinance and outlines some of the key strategic policy initiatives taken by the Indian government to promote microfinance. It discusses various microfinance models used in India including self-help groups and analyses several large microfinance institutions operating in the country. The document also examines issues faced by the microfinance sector in India and factors contributing to the success of microfinance. Overall, the document provides a comprehensive overview of the microfinance landscape in India.
This document provides an introduction to the Professional Certificate in Microfinance Module 1. It begins with introductions and house rules from the facilitator. It then provides an overview of the instructor's profile and qualifications. The document outlines the module objectives to understand the nature, history, demand, supply and products of microfinance as well as a new taxonomy. It provides background on defining microfinance by products/needs focus, target market and market focus. It discusses the social mission and performance of microfinance institutions. It then gives a brief history of microfinance globally and the origins and success of Grameen Bank in Bangladesh.
Microfinance provides small loans to poor and low-income individuals without collateral to help them engage in entrepreneurial activities or expand small businesses. It has proven effective at reducing poverty by empowering individuals, especially women, to become self-sufficient. In India, microfinance has grown rapidly in recent decades through self-help groups and microfinance institutions, reaching over 100 million people. However, there is still a large unmet demand and regulatory challenges around interest rates and appropriate legal structures remain.
Microfinance involves providing small loans, savings opportunities, and other financial services to low-income individuals. The term microfinance was coined in the 1970s when organizations like the Grameen Bank in Bangladesh began making small, collateral-free loans to the poor. Microfinance aims to help alleviate poverty by allowing poor and low-income individuals to start small businesses or expand existing ones to increase their earnings. It operates through self-help groups and Grameen model groups and provides not only credit but also savings, insurance, remittances, and training support. While microfinance has helped many, issues still exist like over-indebtedness, multiple lending, and a lack of transparency in pricing. Recommendations to strengthen the
Microfinance involves providing financial services like loans, savings, insurance to low-income individuals. It began in the 1970s when Muhammad Yunus started the Grameen Bank in Bangladesh. Microfinance institutions provide these services through organizations like non-profits and credit unions. They target small business owners, farmers, and traders without access to traditional banks. While microfinance helps reduce poverty, issues still exist like unregulated high interest rates and costs, and many poor people relying on informal lenders. The Indian government and organizations are working to expand access to microfinance and address weaknesses in the system.
This document presents a project on microfinancing by a group of students. It discusses various topics related to microfinancing including introduction, sectors supported through microfinancing like agriculture and healthcare, countries supporting microfinancing like EU, percentage of people in Pakistan accessing microfinancing, rules for microfinancing, and examples of microfinance institutions in Pakistan. The document concludes by discussing strategic objectives of microfinance institutions like increasing outreach, focusing on productivity and efficiency, and providing branchless banking services.
The document discusses the Pradhan Mantri Jan Dhan Yojana (PMJDY), a national financial inclusion mission launched in India in 2014. It aims to provide universal access to banking services like basic savings accounts, need-based credit, remittances and insurance. The key benefits of accounts under PMJDY include interest on deposits, accidental insurance of Rs. 1 lakh, no minimum balance requirement, life insurance of Rs. 30,000 and easy money transfers. Microfinance is also discussed as a tool to provide financial services like credit, savings and insurance to low-income households for self-employment and poverty alleviation. The evolution, key players and models of microfinance in India are outlined.
Microfinance refers to small-scale financial services like credit and deposits provided to low-income individuals who lack access to traditional banking services. It aims to help the poor become self-sufficient through saving, borrowing, and insurance. While banks are reluctant to serve those with little income or collateral, microfinance fills this gap by providing small, collateral-free loans. In many developing countries, over 75% of the population lacks access to financial services apart from money lenders who charge high interest rates. Microfinance helps the poor by increasing incomes, allowing them to better manage cash flows and risks through access to credit. It also supports micro-enterprises and women's empowerment. Common microfinance models include self-help groups, credit
Microfinance provides financial services to low-income individuals who lack access to traditional banking services. It began in the 1970s when Muhammad Yunus pioneered the concept of lending small amounts to groups of poor women in Bangladesh without collateral. This joint liability model produced very high repayment rates. Yunus went on to establish Grameen Bank based on this group lending approach. Microfinance has since expanded globally and within India, supported by the establishment of organizations like NABARD, SEWA, and SIDBI to promote self-help groups and connect them to banking institutions.
This document provides an overview of microfinance, including its key concepts, features, role, and importance. Microfinance involves providing financial services like loans, savings, insurance, and money transfers to low-income households and microenterprises. It aims to help the poor raise their income and standards of living. Key features include dealing in small loans, catering to the poor, supporting women and self-employment opportunities. Microfinance plays an important role in providing credit to the rural poor, alleviating poverty, empowering women, stimulating economic growth, and developing skills. Understanding the country context is also important, as it influences how microfinance is delivered.
MODULE 1: Introduction to Microfinance and Target Groups
The Objectives for this Module are:
-To provide an introduction to basic principles and practices of microfinance
-To introduce participants to the various definitions of microfinance, the evolution of the industry, categories of microfinance and its target group
Microfinance provides loans, savings, and other financial services to poor individuals. It originated in the 1970s in Bangladesh and combines strengths of formal and informal credit systems. NGOs and organizations like NABARD, RMK, and SIDBI regulate microfinance institutions (MFIs) in India and provide funding. MFIs aim to improve lives of poor through financial access and self-employment opportunities. Self-help groups (SHGs) are important for microfinance, allowing members to save, take loans, and start businesses.
Microfinance refers to small-scale financial services like credit and deposits provided to low-income individuals who lack access to traditional banking services. It aims to help the poor become self-sufficient through saving, borrowing, and insurance. Traditional banks are reluctant to serve the poor due to high costs and lack of collateral. As a result, the poor rely on expensive moneylenders. Microfinance helps address this need by providing affordable credit that supports small businesses and empowers women. It has been successful in reducing poverty in countries like Bangladesh and India through high repayment rates of over 95% in many areas. While it benefits the moderately poor more than the destitute, microfinance overall has proven effective in poverty alleviation when designed
Microfinance aims to provide financial services like loans, savings, and insurance to low-income individuals who lack access to traditional banking. In India, microfinance grew out of efforts to provide credit to the poor, starting in the 1970s with organizations like Grameen Bank. The National Bank for Agriculture and Rural Development (NABARD) spearheaded India's microfinance program through partnerships with non-profits, banks, and cooperatives. Studies show microfinance has empowered women, improved health and education outcomes, and reduced dependency on informal lenders in rural India. However, some argue microfinance needs reforms to foster greater economic growth through support for real businesses and improved infrastructure.
Microfinance, also called microcredit, provides banking services like small loans, savings accounts, and insurance to low-income individuals who lack access to traditional financial services. The goal is to help the poor become self-sufficient by starting or expanding small businesses. Muhammad Yunus pioneered microcredit in the 1970s by making small loans to impoverished people in Bangladesh, leading to the founding of Grameen Bank which has now loaned billions worldwide. Microenterprises refer to very small businesses, typically with fewer than 10 employees, that are financed through microcredit to improve lives and communities.
The document discusses microfinance in India. It defines microfinance as providing financial services like credit, savings, and insurance to low-income individuals. A variety of actors in India provide microfinance using different models. The goal is to create social value through poverty alleviation and improving livelihoods. Common microfinance activities include group lending, individual lending, savings, insurance, and capacity building.
This document provides an overview and history of microfinance. It discusses the evolution of microfinance concepts in the late 1970s and pioneering institutions in microfinance like ACCION International, SEWA Bank, and Grameen Bank. It also outlines the student's learning from their microfinance research project and internship with KDS MFI, including understanding microfinance regulation, models, management, and how microfinance can improve livelihoods. The document contains the student's report outline, which will analyze topics like the need for microfinance in India, strategies for coordinating microfinance efforts, and the future of the industry.
This document discusses women empowerment through microfinance in India. It provides background on microfinance and how it has evolved in India from subsidized credit programs to self-help groups linked to banks to today's more commercial microfinance institutions. Microfinance is seen as a tool for empowering women economically by providing small loans and other financial services. While microfinance has helped increase access to credit for many poor women, there are debates around how much it truly empowers women versus just alleviating poverty. The document also analyzes trends in women's workforce participation in India and finds it has declined significantly in rural areas in recent decades.
Microfinance refers to small-scale financial services like credit and deposits provided to low-income individuals who lack access to traditional banking services. It aims to help the poor become self-sufficient through saving, borrowing, and insurance. While banks are reluctant to serve these clients due to high costs and lack of collateral, microfinance fills this gap by providing small, affordable loans. Groups like self-help groups and microfinance institutions have successfully delivered microcredit in countries like India and Bangladesh, achieving repayment rates over 95% and helping many escape poverty. However, some criticize that microfinance benefits the moderately poor more than the destitute and can lead to over-indebtedness if not implemented responsibly.
This document provides a summary of microfinance in India. It defines microfinance and outlines some of the key strategic policy initiatives taken by the Indian government to promote microfinance. It discusses various microfinance models used in India including self-help groups and analyses several large microfinance institutions operating in the country. The document also examines issues faced by the microfinance sector in India and factors contributing to the success of microfinance. Overall, the document provides a comprehensive overview of the microfinance landscape in India.
This document provides an introduction to the Professional Certificate in Microfinance Module 1. It begins with introductions and house rules from the facilitator. It then provides an overview of the instructor's profile and qualifications. The document outlines the module objectives to understand the nature, history, demand, supply and products of microfinance as well as a new taxonomy. It provides background on defining microfinance by products/needs focus, target market and market focus. It discusses the social mission and performance of microfinance institutions. It then gives a brief history of microfinance globally and the origins and success of Grameen Bank in Bangladesh.
Microfinance provides small loans to poor and low-income individuals without collateral to help them engage in entrepreneurial activities or expand small businesses. It has proven effective at reducing poverty by empowering individuals, especially women, to become self-sufficient. In India, microfinance has grown rapidly in recent decades through self-help groups and microfinance institutions, reaching over 100 million people. However, there is still a large unmet demand and regulatory challenges around interest rates and appropriate legal structures remain.
Microfinance involves providing small loans, savings opportunities, and other financial services to low-income individuals. The term microfinance was coined in the 1970s when organizations like the Grameen Bank in Bangladesh began making small, collateral-free loans to the poor. Microfinance aims to help alleviate poverty by allowing poor and low-income individuals to start small businesses or expand existing ones to increase their earnings. It operates through self-help groups and Grameen model groups and provides not only credit but also savings, insurance, remittances, and training support. While microfinance has helped many, issues still exist like over-indebtedness, multiple lending, and a lack of transparency in pricing. Recommendations to strengthen the
Microfinance involves providing financial services like loans, savings, insurance to low-income individuals. It began in the 1970s when Muhammad Yunus started the Grameen Bank in Bangladesh. Microfinance institutions provide these services through organizations like non-profits and credit unions. They target small business owners, farmers, and traders without access to traditional banks. While microfinance helps reduce poverty, issues still exist like unregulated high interest rates and costs, and many poor people relying on informal lenders. The Indian government and organizations are working to expand access to microfinance and address weaknesses in the system.
This document presents a project on microfinancing by a group of students. It discusses various topics related to microfinancing including introduction, sectors supported through microfinancing like agriculture and healthcare, countries supporting microfinancing like EU, percentage of people in Pakistan accessing microfinancing, rules for microfinancing, and examples of microfinance institutions in Pakistan. The document concludes by discussing strategic objectives of microfinance institutions like increasing outreach, focusing on productivity and efficiency, and providing branchless banking services.
The document discusses the Pradhan Mantri Jan Dhan Yojana (PMJDY), a national financial inclusion mission launched in India in 2014. It aims to provide universal access to banking services like basic savings accounts, need-based credit, remittances and insurance. The key benefits of accounts under PMJDY include interest on deposits, accidental insurance of Rs. 1 lakh, no minimum balance requirement, life insurance of Rs. 30,000 and easy money transfers. Microfinance is also discussed as a tool to provide financial services like credit, savings and insurance to low-income households for self-employment and poverty alleviation. The evolution, key players and models of microfinance in India are outlined.
Microfinance refers to small-scale financial services like credit and deposits provided to low-income individuals who lack access to traditional banking services. It aims to help the poor become self-sufficient through saving, borrowing, and insurance. While banks are reluctant to serve those with little income or collateral, microfinance fills this gap by providing small, collateral-free loans. In many developing countries, over 75% of the population lacks access to financial services apart from money lenders who charge high interest rates. Microfinance helps the poor by increasing incomes, allowing them to better manage cash flows and risks through access to credit. It also supports micro-enterprises and women's empowerment. Common microfinance models include self-help groups, credit
Microfinance provides financial services to low-income individuals who lack access to traditional banking services. It began in the 1970s when Muhammad Yunus pioneered the concept of lending small amounts to groups of poor women in Bangladesh without collateral. This joint liability model produced very high repayment rates. Yunus went on to establish Grameen Bank based on this group lending approach. Microfinance has since expanded globally and within India, supported by the establishment of organizations like NABARD, SEWA, and SIDBI to promote self-help groups and connect them to banking institutions.
This document provides an overview of microfinance, including its key concepts, features, role, and importance. Microfinance involves providing financial services like loans, savings, insurance, and money transfers to low-income households and microenterprises. It aims to help the poor raise their income and standards of living. Key features include dealing in small loans, catering to the poor, supporting women and self-employment opportunities. Microfinance plays an important role in providing credit to the rural poor, alleviating poverty, empowering women, stimulating economic growth, and developing skills. Understanding the country context is also important, as it influences how microfinance is delivered.
MODULE 1: Introduction to Microfinance and Target Groups
The Objectives for this Module are:
-To provide an introduction to basic principles and practices of microfinance
-To introduce participants to the various definitions of microfinance, the evolution of the industry, categories of microfinance and its target group
Microfinance provides loans, savings, and other financial services to poor individuals. It originated in the 1970s in Bangladesh and combines strengths of formal and informal credit systems. NGOs and organizations like NABARD, RMK, and SIDBI regulate microfinance institutions (MFIs) in India and provide funding. MFIs aim to improve lives of poor through financial access and self-employment opportunities. Self-help groups (SHGs) are important for microfinance, allowing members to save, take loans, and start businesses.
Microfinance refers to small-scale financial services like credit and deposits provided to low-income individuals who lack access to traditional banking services. It aims to help the poor become self-sufficient through saving, borrowing, and insurance. Traditional banks are reluctant to serve the poor due to high costs and lack of collateral. As a result, the poor rely on expensive moneylenders. Microfinance helps address this need by providing affordable credit that supports small businesses and empowers women. It has been successful in reducing poverty in countries like Bangladesh and India through high repayment rates of over 95% in many areas. While it benefits the moderately poor more than the destitute, microfinance overall has proven effective in poverty alleviation when designed
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1. MICRO-FINANCE
IN GLOBAL PERSPECTIVE
Objectives:
1. To understand the origin of Micro-Finance
2. To understand the Concept of Micro-Finance
3. To identify the Key Components of Micro-Finance
4. To know the Mechanism of delivery of Micro-Finance
5. To differentiate the Micro-Finance and Micro Credit
6. To analyze the Features and Characteristics
7. To evaluate Micro-Finance in Global Perspective
Prepared by
Bijoy Das
Assistant Professor,
DLLE, NBU
Unit-III: Micro Finance and Self Help Group
Course: DSE-3.2: Rural Credit and Banking
MA in Rural Development
Department of Lifelong Learning and Extension
University of North Bengal
2. INTRODUCTION
• Its plays a crucial role in providing financial support to small entrepreneurs,
especially in impoverished regions, enabling them to establish businesses
and improve their livelihoods.
• Money is required for every single step in the business life cycle.
• Microfinance is about providing finance to meet the needs of small
entrepreneurs, enabling them to establish businesses on a small scale and
offering a source of livelihood to people from poor villages.
• It aims to increase the standard of living in an optimistic manner.
3. THE HISTORY OF MICROFINANCE
• The history of microfinance is a testament to humanity's determination to bridge
this gap and empower those in need. The history of microfinance traces its roots
back through various historical milestones.
• 1. Early Origins:
In the 15th century, Franciscan monks founded community-oriented
pawnshops. These early initiatives recognized the need for accessible financial
services.
• 2. Theoretical Foundations:
In the 1800s, the theorist Lysander Spooner wrote about the benefits of small
credits for entrepreneurs and farmers as a means of alleviating poverty.
• 3. 19th Century European Credit Unions:
Figures like Friedrich Wilhelm Raiffeisen played a significant role in founding
cooperative lending banks in rural Germany during the 19th century.
These institutions supported farmers and rural communities, marking a significant
step in the evolution of microfinance.
4. • 4. Birth of Modern Microfinance (1970s):
• The birth of "modern microfinance" is said to have occurred in the mid-1970s in rural
Bangladesh. Dr. Muhammad Yunus, a professor of economics at the University of
Chittagong, and Al Whittaker, tested practices and built institutions designed to bring
opportunities and risk-management tools to the doorsteps of poor people. The success of
the Grameen Bank, which serves over 7 million poor Bangladeshi women, has inspired the
world.
THE HISTORY OF MICROFINANCE
5. • 5. Global Growth and Recognition (1970s-80s):
• The 1970s and 80s witnessed rapid growth in the number of new
microfinance institutions appearing around the world. Many of them
were started by NGOs and funded by grants and subsidies from public
and private sources. These institutions demonstrated that the poor
could be relied upon to repay their loans, even without collateral,
highlighting the potential viability of microfinance as a business.
•
• 6. Transition to Sustainability (1990s):
• During the 1990s, the industry realized that it could not continue to
grow at such rates while relying solely on grant funding. As a result,
many institutions began to restructure themselves to attract
commercial investors. They adopted more formal business practices
and worked to improve efficiency and sustainability.
THE HISTORY OF MICROFINANCE
6. • 7. Emergence of PlaNet Finance (1998):
• In 1998, PlaNet Finance was formed as a not-for-profit organization. Its initial
objective was to use the internet and new communication technologies to
reinforce the capacities of NGOs in various sectors. Over time, it evolved into
PlaNet Finance, an international NGO whose mission is to fight against poverty by
developing microfinance.
• 8. The Grameen Bank Project:
• The Grameen Bank project, known as the "Village Bank," was born and currently
operates in over eighty-thousand villages with more than six million borrowers. In
2006, both Dr. Muhammad Yunus and Grameen were awarded the Nobel Peace
Prize for their work with the poor.
THE HISTORY OF MICROFINANCE
7. CONCEPT OF MICRO FINANCE
The term “micro-finance” has been given a working definition
by the Task Force on Supportive Policy and Regulatory
Framework for Micro-finance set up by NABARD in
November 1998 as:
1. “provision of thrift/Saving,
2. credit and
3. other financial services and products of
4. very small amounts
to the poor in rural, semi-urban and urban areas for enabling
them to raise their income levels and improve living
standards”.
8. DEFINITION OF MICROFINANCE:
• Microfinance is a comprehensive term that encompasses various financial
services and products provided to low-income individuals, particularly
women, who often lack access to traditional banking services.
• These services are aimed at improving their income levels and living
standards.
• Microfinance is defined as the provision of various financial services and products,
including small loans, savings accounts, insurance, and remittances, to low-income
individuals, especially women.
• These services aim to enable the poor to raise their income levels and improve their
living standards.
• The term "microfinance" no longer exclusively refers to small-value loans for the poor. It
increasingly encompasses a wide array of financial products, including payments,
savings, and insurance, tailored to meet the specific needs of low-income individuals.
9. KEY COMPONENTS OF MICROFINANCE
• 1. Saving/Thrift: Encouraging savings among clients to build financial
resilience.
• 2. Credit: Providing small loans to individuals, often for
microenterprise development, without requiring traditional collateral
• 3. Insurance: Offering insurance products to protect against financial
risks.
• 4. Remittances: Facilitating the transfer of funds, especially for
migrant workers sending money back to their families.
10. DELIVERY MECHANISM
Microfinance can be delivered through two primary mechanisms:
• 1.Relationship-based banking: Providing financial services to individual
entrepreneurs and small businesses.
• 2.Group-based models: Allowing groups of entrepreneurs to apply for
loans and other services collectively, often with shared responsibility
for repayment.
11. GOAL OF MICROFINANCE
• The ultimate goal of microfinance is
• to enhance financial inclusion by ensuring that low-income
households have access to a variety of affordable financial
services tailored to their needs.
• This includes savings, credit, insurance, remittances, and other
financial tools.
• Microfinance institutions (MFIs) have emerged as key players in
delivering these services, often using innovative approaches
such as group lending and flexible repayment terms to reach
their clients, who may have limited access to traditional banking.
12. MICROFINANCE VS. MICROCREDIT:
• Microfinance is a broader category of services that includes microcredit,
which specifically refers to providing credit services to poor clients.
• These terms are sometimes used interchangeably, leading to confusion.
• Microcredit is a subset of microfinance and specifically refers to the
provision of credit services to poor clients.
• However, the term "microfinance" is often used more broadly to
encompass a range of financial services beyond credit, including savings
and insurance.
13. FEATURES AND CHARACTERISTICS OF
MICROFINANCE:
• 1.Financial Inclusion: Microfinance aims to include low-income individuals,
particularly women, in the formal financial system. It provides access to a range
of financial services that were traditionally inaccessible to this demographic.
• 2.Small Loan Amounts: Microfinance typically involves providing small loans,
which are well-suited for microenterprises and income-generating activities.
These loans are often too small to be of interest to traditional banks.
• 3.No Traditional Collateral: Microfinance institutions (MFIs) offer loans without
requiring traditional collateral, such as property or assets. Instead, they often use
alternative mechanisms like group guarantees or social collateral
14. • 4.Diverse Financial Products: Beyond credit, microfinance includes a variety
of financial products, including savings accounts, insurance, and remittances.
remittances. This diversity caters to the multifaceted financial needs of
clients.
• 5.Client-Centered Approach: Microfinance is client-focused, considering the
unique circumstances and financial goals of each individual or group. This
personalized approach helps clients make the most of available services.
• 6. Empowerment and Poverty Alleviation: Microfinance is seen as a tool for
poverty reduction and economic empowerment. By providing access to
financial resources, it enables individuals to improve their income, living
standards, and overall quality of life.
FEATURES AND CHARACTERISTICS OF
MICROFINANCE:
15. • 7. Innovative Delivery Mechanisms: Microfinance employs various delivery
mechanisms, including relationship-based banking and group-based models.
These mechanisms help reach clients efficiently and reduce the risks associated
with lending to the poor.
• 8. Sustainability and Commercialization: While microfinance initially relied on
grants and subsidies, it has transitioned toward sustainability. Many MFIs have
adopted more formal business practices to attract commercial investors and
reduce dependency on external funding.
• 9. Global Reach: Microfinance has a global presence, operating in over 100
countries and serving millions of clients worldwide. It adapts to local contexts and
needs while adhering to core principles.
FEATURES AND CHARACTERISTICS OF
MICROFINANCE:
16. • 10. Social Impact: The impact of microfinance extends beyond financial gains. It
can empower women, improve education, and enhance social cohesion within
communities. The Grameen Bank's success, for example, led to Dr. Muhammad
Yunus and the bank itself being awarded the Nobel Peace Prize in 2006.
• 11. Diverse Institutional Types: Microfinance institutions come in various forms,
including commercial, quasi-commercial, and nonprofit organizations. Each type
serves its target population differently, addressing specific financial needs and
goals.
• 12. Adaptation to Changing Needs: Microfinance continually evolves to meet the
changing financial needs of individuals, households, and small businesses,
especially those living in poverty. This adaptability ensures relevance over time.
FEATURES AND CHARACTERISTICS OF
MICROFINANCE:
17. • 13. Global Investment: The microfinance sector has attracted substantial foreign
investment, including from large banking institutions and microfinance investment
firms. This investment has helped expand its reach and impact.
• 14. Promotion of Entrepreneurship: Microfinance encourages entrepreneurship by
providing the necessary financial support for individuals to start or expand small
businesses. It contributes to job creation and economic development.
• In summary, microfinance is characterized by its focus on financial inclusion, small loan
sizes, absence of traditional collateral, a wide range of financial products, client-centric
approach, and its role in empowering individuals and communities while addressing
poverty and promoting economic development on a global scale.
FEATURES AND CHARACTERISTICS OF
MICROFINANCE:
18. MICRO-FINANCE IN GLOBAL PERSPECTIVE
• Microfinance institutions (MFIs) currently operate in over 100 countries, serving
more than 92 million clients worldwide.
• Microfinance has historical roots dating back to the early 1700s when Jonathan
Swift created the Irish Loan Fund to provide small loans to the poor in Ireland.
• By the 1800s, similar banking systems targeting the poor emerged across Europe,
including Friedrich Wilhelm Raiffeisen's rural credit union in Germany, which
aimed to break the cycle of borrowing and repayment.
• Credit unions, owned by members, spread globally by the end of the 1800s
19. MICRO-FINANCE IN GLOBAL PERSPECTIVE
• In Latin America, microfinance institutions were often owned by the government or
private banks and were less efficient than their European counterparts.
• Donor and government subsidies for loans in the 1950s had limited impact, as funds
didn't reach the neediest farmers and interest rates were unsustainable.
• The first commercial microfinance institution, BancoSol, was founded in Bolivia in 1992,
leading to a shift towards sustainable microfinance.
• Microfinance investment firms and large banking institutions like Credit Suisse,
Deutsche Bank, and Citigroup have entered the industry.
20. MICRO-FINANCE IN GLOBAL PERSPECTIVE
• By the end of 2008, nearly $15 billion in foreign investment had been channeled into MFIs, with
over 10,000 institutions serving 16 million people.
• The global microfinance market was valued at an estimated $187 billion in 2022, and is
expected to exceed $488 billion by 2030.
• MFIs are categorized into commercial, quasi-commercial, and nonprofit institutions, each
serving its target population differently.
• The future of microfinance remains essential, as estimates suggest that millions of people still
lack access to financial services that could improve their economic situation and living
conditions.
• Microfinance and other alternative ways to encourage and support entrepreneurship are likely
to play a crucial role in the global economy's development.