Top PDF Microfinance and Poverty Alleviation

Microfinance and Poverty Alleviation

Microfinance and Poverty Alleviation

The argument for the minimalist approach is that unless the MFI is financially sustainable, it will be unable to grow, and thus, will exclude thousands of potential clients who could be helped by access to microcredit (Murdoch and Haley 2002). Jonathan Murdoch and Barbara Haley, co-authors of Analysis of the Effects of Microfinance on Poverty Reduction argue that “combining financial services with training, education or other components is also viewed as attempting to mix ‘business’ and ‘welfare’. This is seen as compromising the business orientation of microfinance” (Murdoch and Haley 2002). Also, if an MFI is forced to depend on subsidy and the pool of funding suddenly dries up, the entire institution will collapse. Promoters of the minimalist approach point out the widespread failure of MFIs who try to provide multiple services to their clients and are unable to fund charitable ventures (Bhatt and Tang 2001:2). Minimalists insist that it is necessary to achieve financial sustainability first. Then, when sufficient profit has been accumulated, the MFI can look into the possibility of providing training and educational services.
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Microfinance and its Impact in Poverty Alleviation in Nigeria: A Case Study of some Microfinance Banks in Edo State.

Microfinance and its Impact in Poverty Alleviation in Nigeria: A Case Study of some Microfinance Banks in Edo State.

This research examines the relationship microfinance and poverty alleviation in Nigeria, to understand the effectiveness of micro credit within the context of its current practice in Edo State in particular, and the nation as a whole as a tool for wealth creation and capital accumulation among the poverty stricken populace and low income earners. The study made use of primary data obtained through field survey from the selected microfinance banks in Edo State and utilized quantitative tools to analyze these data so as to bring out any existing relationship between microfinance and poverty alleviation. The results obtained showed that microfinance has the potential of alleviating poverty by ensuring wealth creation and its attendant self-sufficiency. From our result, about 70% of the sampled population agreed that there is a positive relationship between microfinance and improved standard of living of the recipients of these micro credits; 78% attested that they obtained some sort of credit from microfinance banks to set up their small scale businesses, without which it would be impossible to do so; about 67% said they have used loan collected to expand their business while 24% said they used the loan collected to invest on new technology for their business and the remaining 9% of the respondents obtained loans to facilitate the export of their products. Based on these findings, we could see that Microfinance has helped in alleviating poverty in the country by helping individuals to start up their business, expand their existing business, increase the level of employment and raise the standard of living in the country Focus of microfinance programmes in poor communities for it to be meaningful; a massive educational drive on the importance of microfinance in fighting widespread poverty should be launched in the country; etc were some of the recommendations made in this study.
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Microfinance and Poverty Alleviation Programmes in Nigeria -The Needed Paradigm Shifts

Microfinance and Poverty Alleviation Programmes in Nigeria -The Needed Paradigm Shifts

The initial success of microfinance programmes in the 1970s led pioneers to think that many essential problems of the poor might be resolved by access to credit alone with ability to acquire assets, to start businesses, to finance emergency needs and to insure against illness and disaster. Part of that vision has certainly been realized. But much remains to be done. Most microfinance. institutions (MFIs) are still small and vulnerable to constraints on their resources and to the risks inherent in single-donor portfolios. Most depend upon donors and governments to remain in operation. There is much waste and duplication, and some mature programmes have declining loan recovery rates, even as competition for borrowers rises from conventional banks and finance companies. The Nigerian experience of microfinance programmes and their sustainability is not different from the experience of other developing economies. There is currently a surge of interest in the issue of whether the formal and informal microcredit institutions in the country are effectively serving the needs of the poor and the rural sector of the economy. It is also questioned whether or not the myriads of poverty alleviation programmes launched and funded by the various tiers of government in Nigeria have a very high microfinance component. There is also a need to evaluate painstakingly the various poverty alleviation programmes in terms of their outreach to the poor, the financial sustainability and their welfare impact. This is what is described as the ‘Triangle of Microfinance’.
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The Role of Islamic Microfinance in Poverty Alleviation: A Case of Esaar Microfinance Program of Helping Hand for Relief and Development (HHRD)-Pakistan

The Role of Islamic Microfinance in Poverty Alleviation: A Case of Esaar Microfinance Program of Helping Hand for Relief and Development (HHRD)-Pakistan

This theoretical study shows that Islamic microfinance has a significant role in poverty alleviation strategies. While conventional microfinance products have been successful in Muslim countries, Muslims/beneficiaries are not much satisfied with these products because of interest (Riba) which is prohibited in Islam. Although taking an impression of Islamic microfinance in Muslim countries, this Study commences a case of Esaar Microfinance program of HHRD, an Islamic microfinance Program operating in Pakistan. Critical financial analysis of Esaar Microfinance program shows that it is providing services for all the poor according to the three different classifications: Abject poor, below the poverty line, at the poverty line and Interest free loans, is operating through three different modes, i.e., Murabaha, Mudaraba, and Qard-e-Hasan. Islamic Microfinance can be used as a powerful tool to trim down the poverty of Muslims as well as other communities. It recommends that linkages of institution NGOs (Non Government Organization), NPOs (Non Profit Organization) and RSPs (Rural Support Programs) with the specialized resource mobilization institutions and capacity building centers will enhance the financial stability of organizations and will be supportive to achieve the targets of providing Islamic microfinance services to the poorest of the poor under the umbrella
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Impact of Microfinance on Poverty Alleviation: A Global Analysis

Impact of Microfinance on Poverty Alleviation: A Global Analysis

The cross-section estimation shows the positive impact of microfinance on poverty alleviation at the macro level. The larger impact of the percentage of female borrowers has been observed in multidimensional poverty. The impact of the number of active borrowers and gross loan portfolios is much higher than that of any other explanatory variable included in the analysis. We also find that the key variables of our analysis remain negative and statistically significant after including the regional dummy. Results for regional dummies show that East Asia and the Pacific, Eastern Europe and Central Asia, Latin America and the Caribbean, and the Middle East and North America have negative and statistically significant coefficients with reference to South Asia at a 5% level of significance. In the meantime, Africa has a positive coefficient although statistically insignificant, suggesting that in Africa, the effect of MFI activities on poverty is not great. Table 8 shows the impact of microfinance on poverty in terms of head count ratio and poverty gap using level data of explanatory variables instead of log variables. The different columns represent the estimation showing the microfinance activities effect with and without regional dummies on poverty. In all specifications, the results are statistically significant but magnitudes are relatively small. Table 9 shows the microfinance effect on three dimensions of poverty: living standard, health and education. We use a log-level model for this estimation. The cross-sectional regression shows a significant impact of microfinance activities on these three dimensions of poverty. Table 10 demonstrates the cross-sectional regression interaction between poverty and legal status of MFIs and region. The estimated coefficient shows that a higher number of female borrowers can decrease the poverty head count ratio. Table 12 shows the cross-sectional regression for instrumental variables used to remove the simultaneous equation problem from our model. Our main objective with the instrumental variable estimation is to remove or solve the problem of endogeneity of the microfinance activities and poverty incidence. The coefficient of the number of active borrowers is negatively and statistically significant at a 5% level, overcoming the heteroscedasticity with and without regional dummies. We conduct three tests: an F test for weak identification, Sargan’s test for over-identification, and an under-identification test. We observe from these tests that we fail to reject the null hypothesis, which is that our instrument has no correlation with the error term. Table 11shows the validity of our instruments; if we use only one instrument - legal origin - we observe that poverty reduces the impact of the number of active borrowers.
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IMPACT OF MICROFINANCE ON POVERTY ALLEVIATION IN ONDO STATE, NIGERIA

IMPACT OF MICROFINANCE ON POVERTY ALLEVIATION IN ONDO STATE, NIGERIA

Theoretically, several other channels through which microfinance assists the poor have been properly articulated in the literature (Little, et al. 2003, Hulme 2000, Binswanger and Khandker 1995 and Chowdhury, 2009). However, the role of microfinance in reducing poverty has been disputed in the literature. DFID (2009) asserts that international microfinance experience shows that micro credit is not a suitable tool to assist the chronically poor. Hickson (2001) submits that most microfinance institutions have a long way to go in reaching the extremely poor so as to effectively achieve the goal of poverty alleviation. Srinivas (2004) argues that microfinance facilitate the diversion of valuable aid money from untested and non-viable microfinance programs- away from vital programs on health, education that are in dire need of such funds. Asides, some other critics of microfinance have contended that poor people are bad borrower, especially women; or that microfinance is not profitable 2 . In short, conflicting views surround microfinance and its effectiveness at reducing poverty in the less developed economies (LDCs). This has led to several empirical studies on microfinance and poverty reduction in the developing economies.
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Empirical Review of the Role of Microfinance Bank’s Operations on Poverty Alleviation in Nigeria

Empirical Review of the Role of Microfinance Bank’s Operations on Poverty Alleviation in Nigeria

The scourge of poverty and the rate at which the figure is growing has necessitated the establishment of many anti-poverty programmes by different administrations in Nigeria. As at 2010 the number of Nigerians living below poverty line stood at 72 million, this then means that nearly half of Nigeria Population of 160 million is living below poverty line with all the anti-poverty programmes put in place. This figure is still on the increase. Microfinance Banking is the most recent and the only anti-poverty programme that combines financial intermediation with provision of financial services to the poor in the society. This paper therefore examined the role of Microfinance Bank’s operations on poverty alleviation in Nigeria. Data for the study were generated via secondary sources. The study built a regression model in line with the hypotheses. SPSS package version 17.0 was used. We tested for and corrected Autocorrelation and Muiticoliinearity. Our findings were as follows: the operations of MFBs have played significant role in poverty reduction in Nigeria, loans and advances of MFBs have significant negative impact on poverty alleviation. Some of our of our findings were in agreement with the objectives of MFB, while those that were not in agreement reflect the peculiar circumstances of the operations of microfinance banking in Nigeria. Since the government of Nigeria is interested in alleviating poverty, this work will be of immense help. The government can support Microfinance development by promoting macroeconomic stability, and avoiding interest rate caps and high inflation, ensure that the benefits of Microfinance banking are targeted at the core poor.
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MICROFINANCE LOAN DISBURSEMENT AND POVERTY ALLEVIATION IN TOGO: AN EMPIRICAL INVESTIGATION OF RURAL WOMEN

MICROFINANCE LOAN DISBURSEMENT AND POVERTY ALLEVIATION IN TOGO: AN EMPIRICAL INVESTIGATION OF RURAL WOMEN

This research seeks to investigate the empirical relationship between microfinance loan disbursement and rural women poverty alleviation. Descriptive statistics surveys methods are tested by employing chi-square test, F-test and T-test to find the effect of microfinance loan disbursement on rural women poverty alleviation. Findings suggest that the sample survey research design employed in this study is revealed. Then, the research testing of hypotheses and interpretation of results revealed that there is a significant difference between those people who used microfinance institutions and those who do not use them. Poor rural women have access to microfinance funds and loans for the development of micro enterprises as expected. Microfinance prospects and circumstances can promote empowerment of rural women and help the poor out of poverty. There is a significant effect of microfinance loan disbursement on rural women poverty alleviation. In conclusion, this research requires more future research that must be focused on a deeper understanding of the effect of microfinance loan disbursement on rural women empowerment and poverty alleviation.
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Microfinance for poverty alleviation: do transnational initiatives overlook fundamental questions of competition and intermediation?

Microfinance for poverty alleviation: do transnational initiatives overlook fundamental questions of competition and intermediation?

Microfinance initiatives for low-income households are deemed by many to have a positive effect on the lives of people in poor countries (Baye, 2013; Ghalib, Malki and Imai, 2015; Imai, Arun and Annim, 2010; Imai et al., 2012; Imai and Azam, 2012). Not only taxpayer-funded donations support these initiatives; in addition, transnational corporations (TNCs) and the international business community are deeply involved. The food giant Mars, for example, supports microfinance initiatives in 15 cocoa- growing communities in countries such as Côte d’Ivoire and Indonesia. Seeking to empower female entrepreneurs, it provides loans and microgrants to fund inputs within its supply chain (Mars, 2015). The banking giant Citibank invests in microfinance initiatives through a range of programmes. It maintains a partnership with the U.S. Government’s Overseas Private Investment Corporation, which funds microfinance initiatives in developing markets around the world and has provided more than US$417.4 million in financing to 46 microfinance institutions in 24 countries. It also partners with the Philippines-based Asian Development Bank (ADB) to facilitate local currency loans of up to US$100 million to microfinance institutions in the Asia Pacific region (Citibank, 2016: 80). TNCs Pearson, Hewlett-Packard, Google and MetLife are among the funding partners of the transnational initiative Kiva, which provides US$979.9 million in microfinancing for poverty alleviation in 83 countries (Kiva.org, 2016). Indeed, the World Bank’s 2016 Cross-Border Funder Survey estimates that US$9.4 billion (28%) of the US$34 billion of funding for financial inclusion comes from private sources, with more than two thirds of overall funding used to finance lending portfolios (Soursourian, Dashi and Dokle, 2016). Hence, TNCs and the international business community are important stakeholders in the debate about microfinance effectiveness.
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Islamic Microfinance: an Interest free Microfinance Model for Poverty Alleviation

Islamic Microfinance: an Interest free Microfinance Model for Poverty Alleviation

This theoretical paper deals with Islamic microfinance and its rationality in Indian context as a panacea of Muslim poverty. Conventional microfinance system is very effective to alleviate poverty of developing countries. But it could not touch all community of people because of ‘interest’ component in debt and high degree of interest. Muslims dislike that microfinance which is based on ‘interest’ as it is strictly prohibited in Islam. Therefore the motto of financial inclusion is out of reach through conventional microfinance. An alternative interest free microfinance model has been developed in some part of world to include all Muslim poor people within the banking system. India is yet to adopt Islamic microfinance though 20% of total population is Muslim. The author strongly opines that India should adopt Islamic microfinance as a tool for poverty alleviation of Muslims as well as other communities.
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The Role of Islamic Microfinance for Poverty Alleviation in Mogadishu, Somalia: An Exploratory Study

The Role of Islamic Microfinance for Poverty Alleviation in Mogadishu, Somalia: An Exploratory Study

In practice, poverty alleviation requires more than financial support. Borrowers often lack the necessary skills to run a successful business and are thus unable to repay the loan on time (Abdul Rahman and Dean, 2013; GIFR, 2016). Other factors such as market opportunity, physical health, consumer demand, and adverse weather all affect the ability of borrowers to repay their loans. Therefore, Abdul Rahman and Dean (2013) suggested a combination of microfinance services with educational programmes. This requires collaboration between multiple organisations or experts, which is complicated and difficult to coordinate. The success of microfinance in alleviating poverty as shown by the Grameen bank is debatable because critics argue that Grameen model of microfinance could not be sustained without grants (Abdul Rahman and Dean, 2013). Other researchers found that the success of Grameen bank in helping the economically disadvantaged groups was partly due to its village phone programme, where borrowers can purchase mobile phones and provide payphone service to villagers (Yunus, 2004). It thus appears that the Grameen model of microfinance requires joint efforts from multiple organisations (i.e. grant provider and network provider).
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Microfinance: A Tool of Poverty Alleviation with Bank Linkage Programme in Himachal Pradesh

Microfinance: A Tool of Poverty Alleviation with Bank Linkage Programme in Himachal Pradesh

risk and high transaction cost for the banks. It creates hurdle in smooth flow of credit to needy people. Loan disbursement involves lengthy documentation process which is problem for the rural public. Due to such problems involved in formal banking, it has forced the poor and needy to borrow money from informal lenders and be a part of vicious cycle of poverty. Poor have inadequate supply of money. They need money in the form of credit but due to the lack of it, they are unable to raise their income levels and standards of living. That is why weaker section of the society remains poor in the country like India. There are certain main reasons because of that poor are unable to access these services as people do not have collaterals to mortgage. Even the banks found the cost of screening and monitoring of these loans is very high in order to make this loan profitable to borrowers. This showed that efforts of the banks were insufficient and unsuitable for fulfilling the expectations and needs of the poor clients. Thus government of India has made many efforts for providing formal financial services to the rural people by setting up NABARD (National Agriculture Bank for Rural Development) and Regional Rural Banks. Government of India has made a remarkable effort by setting up NABARD. These banks have helped to provide credit at low interest rate as compared to interest rate charged by informal lenders. These efforts of government have led to growth and emergence of microfinance. Microfinance is considered as a poverty alleviation tool for the poor. It is not only the provider of credit but also other financial and non-financial services like saving, insurance, technical assistance and training facility. Commercial banks, RRBs and NGOs are making a great contribution in this field. Most of the NGOs are involved in formation Self Help Group (SHG) which is linked to banks for providing financial help to poor
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Poverty Alleviation via Microfinance using the Concept of Mudharabah

Poverty Alleviation via Microfinance using the Concept of Mudharabah

Poverty has been a long outstanding crisis at global scale and poverty alleviation has become one of the primary national developmental agendas. Conventional microfinance programmes have received growing attentions due to its capability to improve standard of living and social inclusiveness. Arguably, however, these conventional microcredit programmes do not effectively alleviate poverty as the borrowers remain into an interest-base debt cycle which may worsen the financial burdens. Meanwhile, Islamic microfinance by way of Mudharabah financing is equity based financing structure which is perceived to have a fair borrower-lender agreement. It promotes an effective wealth redistributive mechanism to reach the poor, to encourage their participation in productive real economic sectors. This not only alleviates poverty, but also enhances standards of living. This research discusses the applications of conventional and Islamic microfinance models currently practiced globally and proposes an enhanced Mudharabah microfinance model to be adopted.
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The role of Islamic Microfinance in Poverty Alleviation: Lessons from Bangladesh Experience

The role of Islamic Microfinance in Poverty Alleviation: Lessons from Bangladesh Experience

The study was expected to improve the practice of Islamic Microfinance because it highlights and provide a better understanding to IMF programs and how IFIs can contribute to the alleviation of poverty. The social role of Islamic financial sectors can be best exemplified by providing finance to the poor so as to increase their income and wealth. One of the main approaches to benefit the poor is to facilitate their accessibility to appropriate financial services and products. Islamic financial institutions need to consider some measures such us the establishment of new branches in area lacking financial services. Also, hiring and training local male as well as female staff in order to better reach and serve poor clients in their communities has a capital role in term of poverty alleviation. Applying group guarantees or group lending should be an effective method in reaching the poor, reducing the risk of default, and lowering transactions costs. Furthermore, designing special lending program based on repeated loans of increasing size and duration is important is a key task. Such program be supposed to encourages business expansion, provides an incentive for timely and complete repayment and, develops continuing relation with the financial institution; Providing complete financial services including savings or deposit mobilization not just lending, reducing transactions costs in terms of money and time through simplifying credit application and approval procedures, and increasing the decision authority of field offices and finally providing standardized financial services and products which meet the various needs of borrowers with fees and no riba or interest, should be taken in account.
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Microfinance and Rural Poverty Alleviation: A Reality?

Microfinance and Rural Poverty Alleviation: A Reality?

Despite the fact that microfinance has been used for decades as an important development tool and as a formidable programme for poverty alleviation, development practitioners still know little about the possible efficiency of microfinance activities in reducing poverty (Khandker, 2005). Consequently, little efforts have been advanced to study the effect of these programmes on the rural poor particularly in the study area of this research. This exercise will be the foremost study in this geographical area when an independent research will be conducted to study the impact of microfinance on the rural poor. The study is expected to spur the government policy directed to empower the poor with adequate credit facilities and necessary infrastructure for economic development. In this study, an attempt was made to appraise the content and performance of Micro- Finance Bank as a catalyst for enhancing economic growth, income redistribution and poverty eradication particularly in South-West Nigeria, having adjudged that Micro- Finance Banks have a key role to play in poverty alleviation programmes.
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Microfinance Non-Financial Services: A Key for Poverty Alleviation? Lessons from Mexico

Microfinance Non-Financial Services: A Key for Poverty Alleviation? Lessons from Mexico

The academic literature does not present clear evidence that NFS contribute to poverty alleviation objectives. McKernan (2002) is responsible for a pioneer study aiming to gauge the separate impact of non-financial program aspects using cross-sectional data of over one thousand households that received microcredit in Bangladesh. Her aim was to disentangle which part of the positive effects of microfinance was exclusively due to the loan and which to the other procedures used in group lending methodologies. She finds positive non-credit effects in self-employment profits of borrowers. Smith (2002), in his impact analysis of health training on the expenditure levels of Project HOPE’s borrowers in Ecuador and Honduras, finds mixed results. Similarly, Karlan and Valdivia (2011) find no significant positive impact of a Peruvian business development program on key outcomes of FINCA borrowers, such as business revenues and profits. However, both of these last studies do find positive added impact of NFS on specific objectives of the training programs such as breastfeeding or business practices, respectively.
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Impact of Microfinance on Women Empowerment, Poverty Alleviation and Employment Security in Rural Areas of Rajasthan

Impact of Microfinance on Women Empowerment, Poverty Alleviation and Employment Security in Rural Areas of Rajasthan

In Rajasthan, Around 2007, Microfinance Institutions (MFIs) started their journey and by March 2011, combined clients of MFIs had touched 6.92 lakhs and the outstanding credit to MFIs has touched Rs.505 crores. The Micro Financial Sector Development and Regulation Bill 2011 requires all Microfinance Institutions (MFIs) to be registered with Reserve Bank of India and have a minimum net owned funds of Rs.5,00,000. The RBI has issued guidelines in consonance with the approved Bill by the Cabinet. Products and services offered by MFIs are primarily credit led and insurance led. Credit led products typically have loan sizes of Rs.6000 to Rs.10,000 and increase with every loan cycle. MFIs also tie up with insurance companies to provide life insurance. For repeat loans, credit records and attendance at the weekly meetings of the members are studied and based on this criterion the repeat loan is given out. Interest rates reported by MFIs vary from 15-28 per cent on reducing balance basis. However, this reporting does not include flat loan processing fee charged to clients at time of initiation of the loan. Moreover, this also does not include the certain amount of deposit that is kept as collateral with some MFIs.The impact assessment of microfinance programmes in Rajasthan and elsewhere clearly indicates the change in income level of beneficiaries; reduction of dependence on moneylenders; increase in expenditure/investment on children’s education, health, agricultural inputs, increase in production and most important the increased awareness and self-confidence among women and poor.
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THE ROLE OF ETHIOPIAN MICROFINANCE INSTITUTIONS IN POVERTY ALLEVIATION: THE CASE OF OROMIA CREDIT AND SAVING INSTITUTION

THE ROLE OF ETHIOPIAN MICROFINANCE INSTITUTIONS IN POVERTY ALLEVIATION: THE CASE OF OROMIA CREDIT AND SAVING INSTITUTION

It is noticed from the study that Oromia credit and saving institution has improved the standard of living of the poor section of the people. Oromia microfinance plays a significant role in contributing to poverty reduction by providing loans and mobilizing savings. It is also creating job opportunity for the unemployed section of the society through offering efficient financial services. Besides that it is also developing saving culture of its clients. It is also cultivating and prioritizing many economic sectors. Among others, these include metal works, wood works, computer and internet centres, petty trade, beauty salon and barberry.
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Islamic Microfinance System and Poverty Alleviation in Somaliland

Islamic Microfinance System and Poverty Alleviation in Somaliland

Salaam Financial Services, K-MFI and prospective microfinance providers should adopt full-fledged -compatible products, processes and activities and they should be perceived to be so by [r]

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MICROFINANCING THROUGH SELF HELP GROUPS-A CASE STUDY OFBANK LINKAGE PROGRAMME OF NABARD

MICROFINANCING THROUGH SELF HELP GROUPS-A CASE STUDY OFBANK LINKAGE PROGRAMME OF NABARD

Since independence, the formal banking institutions had ignored the poor due to perceived high risks, high transaction costs involved in small-scale rural lending to a large number of poor households and absence of collateral securities. Against this backdrop of failures of earlier poverty alleviation schemes and the financial institutions to reach the real needy, microfinance schemes using self-help groups (SHGs) were designed and NABARD considered this „SHG- Bank Linkage‟ model as a core strategy for rural development. In the earlier schemes like IRDP, DWCRA, the beneficiaries perceived the loan as grant. The poor did not feel the responsibility of repaying the loan and the bankers only concentrated on disbursement of loan which led to poor recovery and the schemes became non-viable. But microfinance through SHGs has proved the notion wrong and showed that even the poor are bankable. The SHG members thrift, mobilize the savings and invest in microenterprises. The recovery rate was reported around 95 percent. Hence, microfinance though SHGs has evolved as an accepted institutional framework to provide financial services to the poors. Further, it is regarded as better mechanism to reduce poverty gradually as against giving one time loan for productive assets which may or may not lead to sustained increase in income (Madheswaran and Dharmadhikary, 2001).
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