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Microfinance - Essay Example

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There is much debate around it as the reasons of poverty can be very different. The reasons can have different origin: they can spring from personal characteristics, inequality or government’s actions. As there are many causes of the given…
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Download file to see previous pages Thus, it is essential to consider every region separately in order to come to the right conclusion. In the given paper we will analyze the effect of microfinance in India, Hyderabad.
Microfinance is widely used in India and even had some positive results at the very beginning: “India’s microfinance sector was once touted as a saviour of the poor and a good bet for investors. The high point for the industry came when SKS—then India’s biggest microfinance company with a $1.2 billion loan book, a third of it in the southern state of Andhra Pradesh—went public in July 2010. The $350m offering was more than 13 times oversubscribed.” (“Road to redemption”) However, according to the same source, the situation started worsening at once. It is essential to analyze the reasons of worsening and make recommendations.
According to the available statistics, the credit offered by Spandana and other Microfinance institutions working in the region of Hyderabad, was used by 37% of households. The percent is not very high if to take into account the purposes of taking loan (Chowdhury, 2007). Institutions do not state that credits were taken for business starting purposes. However, 30% of people who took loans said that they used this money mainly for this purpose, while 22% used these funds to buy facilities for the business they already have; 30% of borrowers spent loan to buy new facilities for their households (Greater Hyderabad Municipal Corporation).
Here we can see some positive dynamics. The availability of Microfinance institutions loans changed annual percent of newly created businesses from 5.3 to 7. Competition did not bring any difficulties to the existing businesses (Greater Hyderabad Municipal Corporation)
The expenses are different and depend on the purpose of credit. Data shows that those who took a credit ...Download file to see next pagesRead More
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