About microfinance
Introduction
Despite the huge leap in the economy and production achievements of humanity in recent decades
the twentieth century, poverty remains high on the agenda of the list of world problems. International reports have indicated that one out of every five in the world, living under the poverty line, i.e., less than a dollar Per day, though this line is lifted slightly exceeded the proportion of poor third world's population, while the wealth of a few Hundreds of billionaires nearly half the world's total income, Therefore, the fight against poverty and reduction of Spread of the most important battles of development in the world.
Literature and go financing for Development to correct the financial system promotes economic growth, and there is a strong correlation between lack of access to financial services and between low incomes, have emerged numerous allegations claiming that lending may spend on poverty. On the other hand, it was clear that 90% Of the world's population do not have access to loans from formal financial institutions and Here have seen the idea of microfinance as a means to eradicate poverty and achieve the Millennium Development Goals Of the third millennium by the United Nations, and as a gateway to promote micro-enterprise sector, grew Significantly in most countries of the world, especially enveloping ones.
1)What is microfinance?
Is to provide very small loans to poor families that are unable to obtain these loans from the banking sector, for assisting them to engage in productive activities or grow their micro enterprises.
And sometimes what is known as micro-finance or smaller as the provision of various financial services (loans and savings and remittances, and insurance,etc) for groups that are unable to obtain these services from the banking sector.
The micro-finance and the youngest of the effective tools that help:
- Help the poor to improve their income and standard
of living.
- Providing work opportunities increased.
- More sectors ability to create employment
opportunities and low investment cost, which makes
it the best way to reduce unemployment and fight
poverty.
- Development of the national economy.
- An upgrade of knowledge through the empowerment of
many women and men to complete the various stages of
their education.
- Reduce the maternal mortality ratio.
- Reduce the mortality rate of children under the age
of five.
- Stop the spread of HIV / AIDS, malaria and other
serious diseases and address them.
2)A historical perspective on microfinance
In the seventies the calendar was established a number of micro-finance institutions such as the famous Gramyin Bank in Bangladesh, the Bank of Sol in Bolivia and the system (unit desa) Bank Rakyat Indonesia, and other microfinance institutions. In 1995 the foundations of the World Bank Consultative Group to assist the poorest (CGAP), led by Deputy President of the World, an Egyptian expert, Dr.. Ismail Serageldin. In February of 1997 held in Washington, the summit of microfinance, this summit has given the impression that everyone will benefit from microlending win-win] [situation was the launch of a calendar nineties as "a micro-finance." The United Nations declared 2005 the International Year of Microfinance. And in 2006 the Bank and its founder Dr. Gramyin. Muhammad Yunus won the Nobel Peace Prize. Depending on the Nobel Committee, the micro-finance can help people to get rid of poverty, which is a prerequisite to reach a lasting peace and continuous. The Nobel Committee said in its reasoning: "Lasting peace cannot be achieved unless large population groups to break out of poverty. Micro-credit is one such means."
Incidentally, pointed criticisms of the writings of microfinance as a non-scientific writings, with most coming from the microfinance institutions themselves, for example, the statement by the Nobel Committee included only one reference, this reference publication of the Bank Gramyin itself.
3)What are the microfinance institutions (MFI)?
Local financial institutions focus on providing microfinance services, and these include different types of institutions ranging between:
- Formal, such as banks.
- The semi-official organizations such as cooperatives
and non-governmental organizations and savings banks
in the villages.
- Informal groups such as savings and credit or credit.
Where these institutions access to the poor and low-income locally (according to the area coverage), and provide them with the services of microfinance. As well as the sensitization of communities to illustrate the opportunities to improve their lives with microfinance, as well as the provision of microcredit and other financial services such as savings accounts and insurance, and collect weekly loan payments; and help customers to solve some of the challenges of life they may face. It also provides many social services, such as basic health care for clients and their children.
4)Who are microfinance clients?
Typical microfinance clients are poor and low-income people that do not have access to other formal financial institutions. Microfinance clients are usually self-employed, household-based entrepreneurs. Their diverse “microenterprises” include small retail shops, street vending, artisanal manufacture, and service provision. In rural areas, micro entrepreneurs often have small income-generating activities such as food processing and trade; some but far from all are farmers.
Hard data on the poverty status of clients is limited, but tends to suggest that most microfinance clients fall near the poverty line, both above and below. Households in the poorest 10% of the population, including the destitute, are not traditional microcredit clients because they lack stable cash flows to repay loans. Most clients below the poverty line are in the upper half of the poor. It is clear, however, that some MFIs can serve clients at the higher end of the bottom half. Women often comprise the majority of clients.
Over the past decade, a few MFIs have started developing a range of products to meet the needs of other clients, including pensioners and salaried workers. Although little is known about the universe of potential clients, the number of households without effective access to financial services is enormous.
5)Does microfinance help the poor?
Experience shows that microfinance can help poor people to increase their income, for the construction of ongoing projects, to reduce their vulnerability to external shocks. It can be a powerful tool for self-empowerment by empowering the poor, especially women, because they become economic factors to change. Poverty is multidimensional. Through the provision of access to financial services, the microfinance plays an important role in the fight against the many manifestations of poverty. For example, the income from the project not only helps to expand the project activity, but also helps the family income and access to food security, and education of children, etc. … and women in many environments, the marginalized and deprived of their rightful place, dealing with financial institutions, official can build self-esteem. Recent research has shown the vulnerability of people around the poverty line often results in a shock pressure and great demands on the limited financial resources per family, and the absence of quality financial services, can lead to deep bedding in poverty will take many years out of it.
6)When is microcredit not appropriate?
Microcredit may be inappropriate where conditions pose severe challenges to loan repayment. For example, populations that are geographically dispersed or have a high incidence of disease may not be suitable microfinance clients. In these cases, grants, infrastructure improvements or education and training programs are more effective. For microcredit to be appropriate, the clients must have the capacity to repay the loan under the terms by which it is provided.
7)What is the difference between microfinance and microcredit?
Microcredit refers to very small loans for unsalaried borrowers with little or no collateral, provided by legally registered institutions. Currently, consumer credit provided to salaried workers based on automated credit scoring is usually not included in the definition of microcredit, although this may change.
Microfinance typically refers to microcredit, savings, insurance, money transfers, and other financial products targeted at poor and low-income people.
8)How do savings services help poor people?
Savings has been called the “forgotten half of microfinance.” Most poor people now use informal mechanisms to save because they lack access to good formal deposit services,. They may tuck cash under the mattress; buy animals or jewelry that can be sold off later, or stockpile inventory or building materials. These savings methods tend to be risky—cash can be stolen, animals can get sick, and neighbors can run off. Often they are illiquid as well – one cannot sell just the cow’s leg when one needs a small amount of cash. Poor people want secure, convenient deposit services that allow for small balances and easy access to funds. MFIs that offer good savings services usually attract far more savers than borrowers.
9)What is the most prominent microfinance institution (MFI)?
-Grameen Bank (GB) Bangladesh
-Bank Rakyat Indonesia – Unit Desa (banque de village) –(BRI-UD) Indonesia
-BancoSol (Banco Solidario) Bolivia
-Fundación WWB-Colombia (FWWWB Cali) Colombia
-ASA (Association of Social Progress) Bangladesh
-Polli Karma Shahayak (Fondation pour l'emploi rural)
Bangladesh
-Fondation Réseau Covelo Honduras
-Cambodian Association of local agencies for economic
development of Cambodia
10)What is the role of technology in support of microfinance?
Technology provides an unparalleled opportunity to improve the lives of people in the world's poorest countries.
The Grameen Technology Center (GTC) creates innovative and sustainable solutions that meet the efficiency of new and innovative ways to reach out to communities to international development and microfinance. Began in 2001 and based in Seattle, Washington, and is worth mentioning that the motivation for which has been the establishment of the (GTC) is the early successes of GrameenPhone, established by Professor Muhammad Yunus in Bangladesh, as the focus (GTC) on the technological aspects of the following:
1)assisting micro-finance institutions to work more
efficiently and effectively.
2)To provide poor communities with information on
agriculture, health care, market information and
other services.
3)Create small business opportunities for the poor.
4)Linking remote communities.
With the guidance of the advisory board of technology, Grameen Foundation has a significant impact on communities around the world through the transfer and renewal of a technology developed by the private sector and put them to work for the financing of small enterprises and local communities for International Development.
"The only poor person is an island isolated from the same and the same, information technology puts an end to this isolation overnight."(Professor Muhammad Yunus)
Source:
Wafaa Lend 
