Microfinance in Asia and Africa: Difference between revisions

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'''Microfinance''' is a term for the practice of providing financial services, such as microcredit, microsavings or microinsurance to poor people. By helping them to accumulate usably large sums of money, this expands their choices and reduces the risks they face. As suggested by the name, most transactions involve small amounts of money, frequently less than US$100.
'''Microfinance''' is a term for the practice of providing financial services, such as microcredit, microsavings or microinsurance to poor people. By helping them to accumulate usably large sums of money, this expands their choices and reduces the risks they face. As suggested by the name, most transactions involve small amounts of money, between US$100 and US$600.


A few key principles of Microfinance are:
A few key principles of Microfinance are:
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# '''Microfinance is a powerful instrument against poverty.'''
# '''Microfinance is a powerful instrument against poverty.'''
#* Access to sustainable financial services enables the poor to increase incomes, build assets, and reduce their vulnerability to external shocks. Microfinance allows poor households to move from everyday survival to planning for the future, investing in better nutrition, improved living conditions, and children’s health and education.
#* Access to sustainable financial services enables the poor to increase incomes, build assets, and reduce their vulnerability to external shocks. Microfinance allows poor households to move from everyday survival to planning for the future, investing in better nutrition, improved living conditions, and children’s health and education.
# '''Microfinance means  building financial systems that serve the poor.'''
# '''Microfinance works best when it measures—and discloses—its performance.'''
#* Poor people constitute the vast majority of the population in most developing countries. Yet, an overwhelming number of the poor continue to lack access to basic financial services. In many countries, microfinance continues to be seen as a marginal sector and primarily a development concern for donors, governments, and socially-responsible investors. In order to achieve its full potential of reaching a large number of the poor, microfinance should become an integral part of the financial sector.
#* Accurate, standardized performance information is imperative, both financial information (e.g., interest rates, loan repayment, and cost recovery) and social information (e.g., number of clients reached and their poverty level). Donors, investors, banking supervisors, and customers need this information to judge their cost, risk, and return.
More key principles of microfinance can be found at [http://www.cgap.org/portal/site/CGAP/menuitem.64c03ec40a6d295067808010591010a0/ CGAP]
More key principles of microfinance can be found at [http://www.cgap.org/portal/site/CGAP/menuitem.64c03ec40a6d295067808010591010a0/ CGAP]
'''Bibliography'''
"Key Principles of MicroFinance" CGAP. 14 Dec 2007 <http://www.cgap.org/portal/site/CGAP/menuitem.64c03ec40a6d295067808010591010a0/>.
Written by Harris Ayuk-Takor
[[User:Ayuktakh|Ayuktakh]] 13:02, 17 November 2007 (EST)
[[User:Ayuktakh|Ayuktakh]] 13:02, 17 November 2007 (EST)


''''''=History=''''''
[http://select.nytimes.com/2007/03/27/opinion/27kristof.html?_r=1&oref=slogin|Kiva Video]


    Microfinance did not magically appear within the last 20 years, the concept has existed since the 1700s.  The "susus" of Ghana, "chit funds" in India, "tandas" in Mexico, "arisan" in Indonesia, "cheetu" in Sri Lanka, "tontines" in West Africa, and "pasanaku" in Bolivia, are a few examples of saving and credit groups that have been in operation for centuries. These organizations provided customers who were traditionally neglected by larger banks an opportunity to use financial institutions to better their lives.
==History of Microfinance==
    One of the earliest and longer-lived micro credit organizations providing small loans to rural poor with no collateral was the Irish Loan Funds system. Jonathan Swift, author and nationalist, began it in the early 1720s. He used capital from donated resources and allowed the Irish access to interest-free loans. The organization witnessed very rapid growth due to a special law in 1823, which turned the charities into financial intermediaries thus creating the Loan Funds Board in 1836. This board regulated and supervised the acquisition of resources and capital.  At their peak, the Irish Loan Funds systems were making loans to 20% of all Irish households annually. Unfortunately commercial banks used their power and influence to stop the funds by getting the government to put a cap on the interest in 1843. The funds finally disappeared in the 1950s. Hamburg established a similar community owned financial system in 1778 but unfortunately this also ended due to outside intervention.
[[History of Microfinance]]
    From the 1880s-1950s, microfinance institutions began spreading to different parts of the world such as Latin American and Indonesia (Indonesian People's Credit Banks). The new institutions focused mostly on rural areas. The goal of the more rural finance interventions was modernization for the agricultural sector, increasing commercialization of the rural sector, as well as eliminating oppressive feudal systems that reinforced indebtedness. One of the main problems facing the new rural microfinance institutions was the fact that most of these banks for the poor were not owned by the poor, as they had been in 18th and 19th century Europe. The banks were controlled by government agencies or private banks that did not always the welfare of the people in mind. Over time, these institutions became inefficient and at times, abusive. They lost the trust of the people and had to close down the banks.
 
    In the 1970s, experimental programs in Bangladesh, Brazil, and a few other countries extended tiny loans to groups of poor women to invest in micro-businesses. This type of micro-enterprise credit was based on group lending; meaning every member of the group guaranteed the repayment of all members. These "microenterprise lending" programs focused on credit for income generating activities and targeted very poor (often women) borrowers. This type of lending guaranteed accountability, which was a key missing factor in other microfinance enterprises.  Because each member of the local group assured the repayment of all other participants in the loan, if an individual was unable to repay their own loan, the group would support the member financially and emotionally thus encouraging a better business results.
==The Mechanics of Microfinance==
  Formal credit and savings institutions for the poor have been around for centuries, they provided customers who were traditionally overlooked by commercial banks a method of obtaining financial services through cooperatives and innovative finance institutions.
 
[[Why Microfinance works?]]


=Bangladesh=
=Bangladesh=


===Details about the country===
:[[Image:Bangladesh.gif]]


===Microfinance===
[[Social and Cultural Effects of Microfinance]]
 
[[Grameen Bank]]


=Zimbabwe=
=Zimbabwe=
<p align="left">[[Image:Mbekimugabe cartoon.jpg]]</p>
[[Details of Zimbabwe]]
General Economic analysis of Zimbabwe:


▪ Zimbabwe is one of the most economically developed country on the African continent.
:[[Image: map.zimbabwe.victoria.falls.jpg]]


▪ Zimbabwe has only enjoyed recognized autonomy since 1980, so it is a fairly young political entity.
<p align="left">[[Image:Mbekimugabe cartoon.jpg]]</p>


▪ Zimbabwe's economic system is one indicative of a transitional country, a country making the transition from dependency underdevelopment to self-reliant industrialization.
'''General Economic Situation in Zimbabwe'''


▪ The dynamics of underdevelopment to development in Zimbabwe are readily apparent.
Due to: bad economic poolicies + social reforms, this has led to the Zimbabwean economy being in horrible shape. Zimbabwe has the highest inflation rate in the world which means that there's hardly any foreign investment and therefore low GDP. Western powers have asked neighboring African countries such as South Africa, to use diplomatic measures and personal ties to convince Mugabe to change his policies. The picture above shows Mbeki(South African President) doing a poor job aka kissing up to Mugabe aka using "quiet diplomacy" to ask Mugabe to change. Obviously it has not worked.


'''Geography'''
In Zimbabwe, the Official CPI (measures the average price of consumer goods and services) suggests that inflation is in excess of 35,000% and the budget deficit is 13.9 trillion dollars. Domestic debt has increased by 54% and the currency rate is now trading at 3 million to 4 million Zim dollars to 1 US dollar. Since the Money Supply is at over 17,000% people are forced to carrry big amounts of money in backpacks.


▪ Zimbabwe is a landlocked country in the southern, sub-Saharan area of the African continent.
'''References'''


▪ Harare is Zimbabwe's capital and largest city with a population of 1,100,000.
"This is Zimbabwe." Sokwanele. 14 Decemeber 2007. <http://www.sokwanele.com/thisiszimbabwe/page/2/>.


'''People'''
"Zimbabwe." Wikipedia. 14 December 2007. <http://en.wikipedia.org/wiki/Zimbabwe#Economy>.


▪ Zimbabweans are comprised of two primary ethnic groups, the Shona, comprising 74% of the population and the Ndebele comprising 20%.
[[User:Ayuktakh|Ayuktakh]] 13:02, 17 November 2007 (EST)
 
▪ Other ethnic black groups and Asians make up 4% of the population while whites make up just over 1% of the population.


▪ Zimbabwe has a population of 10.35 million people with a population density of 24 persons per km2.
=The Impact of Microfinance in Zimbabwe=
[[Zambuko Trust]]


▪ Annual growth rate is declining with -15%.
=Social Effects of Microfinance in Zimbabwe=
[[HIV/AIDS and microfinance]]


===Microfinance===
=The Future of Microfinance=
[[The Future of Microfinance]]

Latest revision as of 13:03, 20 December 2007

Microfinance is a term for the practice of providing financial services, such as microcredit, microsavings or microinsurance to poor people. By helping them to accumulate usably large sums of money, this expands their choices and reduces the risks they face. As suggested by the name, most transactions involve small amounts of money, between US$100 and US$600.

A few key principles of Microfinance are:

  1. The poor need a variety of financial services, not just loans.
    • Just like everyone else, poor people need a wide range of financial services that are convenient, flexible, and reasonably priced. Depending on their circumstances, poor people need not only credit, but also savings, cash transfers, and insurance.
  2. Microfinance is a powerful instrument against poverty.
    • Access to sustainable financial services enables the poor to increase incomes, build assets, and reduce their vulnerability to external shocks. Microfinance allows poor households to move from everyday survival to planning for the future, investing in better nutrition, improved living conditions, and children’s health and education.
  3. Microfinance works best when it measures—and discloses—its performance.
    • Accurate, standardized performance information is imperative, both financial information (e.g., interest rates, loan repayment, and cost recovery) and social information (e.g., number of clients reached and their poverty level). Donors, investors, banking supervisors, and customers need this information to judge their cost, risk, and return.

More key principles of microfinance can be found at CGAP

Bibliography

"Key Principles of MicroFinance" CGAP. 14 Dec 2007 <http://www.cgap.org/portal/site/CGAP/menuitem.64c03ec40a6d295067808010591010a0/>.

Written by Harris Ayuk-Takor

Ayuktakh 13:02, 17 November 2007 (EST)

Video

History of Microfinance

History of Microfinance

The Mechanics of Microfinance

Why Microfinance works?

Bangladesh

Social and Cultural Effects of Microfinance

Grameen Bank

Zimbabwe

Details of Zimbabwe

General Economic Situation in Zimbabwe

Due to: bad economic poolicies + social reforms, this has led to the Zimbabwean economy being in horrible shape. Zimbabwe has the highest inflation rate in the world which means that there's hardly any foreign investment and therefore low GDP. Western powers have asked neighboring African countries such as South Africa, to use diplomatic measures and personal ties to convince Mugabe to change his policies. The picture above shows Mbeki(South African President) doing a poor job aka kissing up to Mugabe aka using "quiet diplomacy" to ask Mugabe to change. Obviously it has not worked.

In Zimbabwe, the Official CPI (measures the average price of consumer goods and services) suggests that inflation is in excess of 35,000% and the budget deficit is 13.9 trillion dollars. Domestic debt has increased by 54% and the currency rate is now trading at 3 million to 4 million Zim dollars to 1 US dollar. Since the Money Supply is at over 17,000% people are forced to carrry big amounts of money in backpacks.

References

"This is Zimbabwe." Sokwanele. 14 Decemeber 2007. <http://www.sokwanele.com/thisiszimbabwe/page/2/>.

"Zimbabwe." Wikipedia. 14 December 2007. <http://en.wikipedia.org/wiki/Zimbabwe#Economy>.

Ayuktakh 13:02, 17 November 2007 (EST)

The Impact of Microfinance in Zimbabwe

Zambuko Trust

Social Effects of Microfinance in Zimbabwe

HIV/AIDS and microfinance

The Future of Microfinance

The Future of Microfinance

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