Microfinance is a general term to describe financial services to low-income individuals or to those who do not have access to typical banking services.

1. Presented By:
Dinesh Adhikari
MBA II
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ROLE OF MICROFINANCE IN POVERTY ALLEVIATION

2. Role of Microfinance in Poverty Alleviation Friday, December 12, 2014
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Give a woman a fish, she eats for
a day.
Teach a woman to fish, she eats
for a lifetime.
Provide credit and training, she
opens a seafood stand, feeds the
village, and becomes a leader in
the community.

3. CONTENTS
Role of Microfinance in Poverty Friday, December 12, 2014
Alleviation
Founder and history of microfinance
Introduction to microfinance
Key feature of microfinance
Developments in microfinance - Global
Developments in microfinance - Nepal
Some insights of poverty
Transmission mechanism of microfinance to poverty
alleviation
Summary
Recommendation
References
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4. Role of Microfinance in Poverty Alleviation Friday, December 12, 2014
FOUNDER OF MICROFINANCE
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2006 Nobel
Peace Prize
Winner
1998-99 Rotary
International
Award for World
Understanding
Dr. Mohammad Yunus

5. HISTORY
Role of Microfinance in Poverty Friday, December 12, 2014
Alleviation
In the late 1970’s, returning from the U.S. where Yunus obtained his
Ph.D in economics, Yunus started an organization called Grameen
Bank. Back in his hometown in Bangladesh, Yunus saw the extreme
poverty in his country. Yunus was angry with the formal institutions
(e.g. the World Bank, commercial banks) who had failed to help his
fellow citizens. Yunus believed that formal institutions “pronounced a
death sentence on the poor” because they “rejected the poor as
unworthy of credit,” imposing a “financial apartheid. Yunus decided he
would help the poor by stepping outside of the formal institutions and
providing small loans without collateral to groups of 5 borrowers; this
became known as the Classical Grameen model. One village bank1
(of several groups of borrowers) grew to two, and two grew to three,
until Grameen Bank became one of the largest microfinance
organizations in the world. Yunus classical Grameen model came to
be known as “microfinance.”
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6. INTRODUCTION
Role of Microfinance in Poverty Friday, December 12, 2014
Alleviation
Microfinance is defined as financial service to
poor and low income household:
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Deposits Loans
Payment service Money transfer
Insurance

7. Role of Microfinance in Poverty Friday, December 12, 2014
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INTRODUCTION - CONTINUED
Micro-finance is termed as
the financial services
rendered to the deprived
groups of the people and
small entrepreneurs in
savings, credit, remittance,
micro insurance, etc. to
help them in developing
self-employment
opportunities and various
income generating
activities.
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8. Role of Microfinance in Poverty Friday, December 12, 2014
KEY FEATURES OF MICROFINANCE
Lend to
the poor
Do not
take
security
Prefer
saving
over
borrowing
Small
short-term
loans
Cost
covering
interest
rates
Alleviation
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9. Role of Microfinance in Poverty Friday, December 12, 2014
Alleviation
DEVELOPMENTS IN MICROFINANCE- GLOBAL
In 1976, the Grameen Bank has stablished by Dr. Yunus with promise of
providing credit to poor people without collateral.
The Grameen has spread numerous countries like Bolivia, Chile, China,
Ethiopia, Honduras, India, Malaysia, Philippines, Thailand, United States
and Vietnam.
Microfinance institutions(MFIs) have also begun to seek out public and
international financing.
MFIs applied their innovations in all processes from lending to the
collection of deposits.
MFIs have become more efficient; increased their clients base and
expanding their services through different product such as micro savings,
flexible loan repayments and insurance.
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10. Role of Microfinance in Poverty Friday, December 12, 2014
Alleviation
DEVELOPMENTS IN MICROFINANCE- NEPAL
It was started evolve in 1950s for providing
credit only to the agriculture sector, i.e.
microfinance sector in Nepal.
Co–operative bank was established in
1963.
The milestone was Small Farmer
Development Program (SFDP) IN 1975
within ADB, which covers the entire
country to provide credit without collateral
to the farmers.
NRB Introduced the Intensive Banking
Program (IBP) in 1981
Grameen Bikash Banks Were initiated by
the government sector, crossing a
milestone in rural micro financing in Nepal
in 1992
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11. What is “POVERTY”?
Elite – a small fraction of the population with
an ever-increasing and disproportionate share
of wealth
Wealthy nations – have poor populations but
generally not extreme poor, this is described as
Relative Poverty
Moderate economic development – now
includes much of China and India. In general
the standard of living is improving for these
populations worldwide
Moderate Poverty – basic needs are
met, but just barely - minimum means
exist to achieve self-sufficiency
Extreme Poverty – all assets and
energy go to daily struggle for survival;
exists mostly in Africa, Asia, and parts of
Latin America
Source :The End of Poverty by Jeffrey Sachs
Role of Microfinance in Poverty Friday, December 12, 2014
Alleviation
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12. Role of Microfinance in Poverty Alleviation Friday, December 12, 2014
POOR: THEY HAVE THEY HAVE-NOTS
THE POOR HAVE: THEY LACK:
Intelligence
Resourcefulness
Community
Dignity
Motivation
Assets =
Collateral =
Credit
Experience
handling
finances and
running a
business
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13. Role of Microfinance in Poverty Friday, December 12, 2014
Alleviation
MICAROFINANCE TO POVERTY
ALLEVIATION – TRANMISSION MECHANISM
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Micro finance
Target poorest segment of society
Increase in employment
Rise in income level
Increase in training and education
cont...

14. CONTINUED…
Increase in savings
Role of Microfinance in Poverty Friday, December 12, 2014
Improvement in living standard
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Increase in consumption of goods
and services. Aggregate demand
increase
Increase in investment and
employment opportunities. Aggregate
supply increase.
Economy growth and poverty
declines.
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15. CONCLUSION
Role of Microfinance in Poverty Friday, December 12, 2014
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Microfinance Programs extend small loans to very poor
people for self employment projects that generate income
for their survival, allowing them to care for themselves and
their families.
Microfinance brings the bank (money/capital) to the poor
where traditional banking system does the opposite and
involves a lot of bureaucratic complications and hidden
costs like travel cost and sometimes bribing the bank
officials.
A sustainable micro credit system in the country is vital for
the long term development of micro credit mechanism and
to provide credit to the poverty hit poor people.
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16. Role of Microfinance in Poverty Friday, December 12, 2014
RECOMMENDATION
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First of all micro credit institutions should brief clients that what can
be the best use of this credit.
Poverty reduction is not only the task of the government and the
whole society, but it is first of all the responsibility of the poor
themselves to develop the capacity to escape from poverty.
Poverty reduction objectives should be consistent and visionary: the
goal should be not only to improve the living standards of the
people, but also to create opportunities in the financial market.
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17. REFERENCES
Role of Microfinance in Poverty Friday, December 12, 2014
 http://www.cbs.gov.np
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 http://www.nrb.org.np/mfd/mfdindex.php
 http://www.ifc.org
 http://www.kiva.org/about/microfinance
 http://en.wikipedia.org/wiki/Muhammad_Yunus
 http://en.wikipedia.org/wiki/Microfinance
 http://www.microfinancegateway.org
 Various articles regarding microfinance
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18. Role of Microfinance in Poverty Friday, December 12, 2014
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