Microcredit - How Useful Has It Been?
Question 2
In 2006, Muhammad Yunus and Grameen Bank received the Nobel Peace Prize for their work in Microfinance. Muhammad Yunus was cited for developing “micro-credit into an even more important instrument in the struggle against poverty”.
What is micro-credit? Why do poorer people need micro-credit? Discuss how the availability of credit might be able to help someone move out of poverty. Make sure to discuss empirical evidence as well.
Having ‘about one billion people globally live in households with per capita incomes of under one dollar per day’, with ‘policymakers and practitioners who have been trying to improve the live of that billion facing an uphill battle.’(Murdoch,1999,p.1569); microfinance, and in particular micro-credit, has been key in the gradual alleviation of world poverty. This has been most apparent in the developing part of the world in countries such as Bangladesh (where Muhammed Yusuf founded the Grameen Bank), Bolivia, Indonesia and Pakistan.
Before going into detail about the role of micro-credit and how its availability might help move someone from poverty, it is important to establish the definition of microfinance, and more crucially, micro-credit. Microfinance is a term that is used to describe financial services catering to poor and low-income clients, and is offered by different types of service providers (known as microfinance institutions) offering those less well-off, loans and other financial services such as savings, remittances, insurance and credit in order to better their financial well being and standard of life. The added bonus would be the fact that these institutions take little or no collateral when handing out credit. The availability of microfinance has shattered stereotypes of the poor as not bankable…[and shown] that it is possible to provide cost-effective financial services to the poor”(Islam,2007,p.2).
When looking at what characterises micro-credit, you can identify the point that it comprises of
In 2006, Muhammad Yunus and Grameen Bank received the Nobel Peace Prize for their work in Microfinance. Muhammad Yunus was cited for developing “micro-credit into an even more important instrument in the struggle against poverty”.
What is micro-credit? Why do poorer people need micro-credit? Discuss how the availability of credit might be able to help someone move out of poverty. Make sure to discuss empirical evidence as well.
Having ‘about one billion people globally live in households with per capita incomes of under one dollar per day’, with ‘policymakers and practitioners who have been trying to improve the live of that billion facing an uphill battle.’(Murdoch,1999,p.1569); microfinance, and in particular micro-credit, has been key in the gradual alleviation of world poverty. This has been most apparent in the developing part of the world in countries such as Bangladesh (where Muhammed Yusuf founded the Grameen Bank), Bolivia, Indonesia and Pakistan.
Before going into detail about the role of micro-credit and how its availability might help move someone from poverty, it is important to establish the definition of microfinance, and more crucially, micro-credit. Microfinance is a term that is used to describe financial services catering to poor and low-income clients, and is offered by different types of service providers (known as microfinance institutions) offering those less well-off, loans and other financial services such as savings, remittances, insurance and credit in order to better their financial well being and standard of life. The added bonus would be the fact that these institutions take little or no collateral when handing out credit. The availability of microfinance has shattered stereotypes of the poor as not bankable…[and shown] that it is possible to provide cost-effective financial services to the poor”(Islam,2007,p.2).
When looking at what characterises micro-credit, you can identify the point that it comprises of
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