Nobody downloaded yet

Microfinance - lending to the poor - Essay Example

Comments (0) Cite this document
Summary
Most of the businesses, whether large enterprises or small scale businesses, require some form of financial support in order to carry out day-to-day operations and be able to create revenue (Collins et al. 160). Banking industries and most of the other financial institutions…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.8% of users find it useful
Microfinance - lending to the poor
Read TextPreview

Extract of sample "Microfinance - lending to the poor"

Download file to see previous pages Due to these stringent measures, small scale businesses and private entrepreneurs are locked from assessing bank finances to support their businesses. The service of lending finances to small scale businesses and private entrepreneurs who cannot access such services from banking and other financial institutions is referred to as microfinance. Banking institutions consider such borrowers as lacking ability to repay loans and the interest (Collins et al. 135). However, microfinance institutions have successfully advanced finances to such borrowers for a long time and have managed to get them out of poverty.
Conventionally, banks have ignored small scale clients by failing to grant them loans or accept deposits from them. Providing financial services to small scale customers is an expensive activity because it takes a lot of time to processes numerous but small value loans involving many clients (Collins et al. 155). This is because the same processes undertaken when processing small amount transaction is similar to that which is taken to process a large amount belonging to one large client. Since the same interest rate is charged for both large and small scale clients, banks prefer dealing with large clients in order to save costs involved when dealing with many small scale clients (Yunus 135). The operation cost of processing transactions in the bank remains unchanged regardless of the amount of funds the bank is handling. This is the reason why banks prefer large scale clients who are making large transactions so that they can maximize their revenues. According to Collins et al. (165), handling many accounts is costly in terms of data base management. This has discouraged banks from inviting membership from small scale clients so that they can maintain the cost of data base management as small as possible.
According to Yunus (137), banks consider lending their finances to small scale ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Microfinance - lending to the poor Essay Example | Topics and Well Written Essays - 1750 words”, n.d.)
Microfinance - lending to the poor Essay Example | Topics and Well Written Essays - 1750 words. Retrieved from https://studentshare.org/miscellaneous/1615339-microfinance-lending-to-the-poor
(Microfinance - Lending to the Poor Essay Example | Topics and Well Written Essays - 1750 Words)
Microfinance - Lending to the Poor Essay Example | Topics and Well Written Essays - 1750 Words. https://studentshare.org/miscellaneous/1615339-microfinance-lending-to-the-poor.
“Microfinance - Lending to the Poor Essay Example | Topics and Well Written Essays - 1750 Words”, n.d. https://studentshare.org/miscellaneous/1615339-microfinance-lending-to-the-poor.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Microfinance - lending to the poor

Microfinance

...from economic ascension. Significance in developing economies The foremost significance of microfinance institutions lies in their pro-poor feature Most of the developing nations are characterised by a majority of the population dwelling in poverty-stricken rural areas. Hence, microfinance institutions help to bail them out of dire situations arising out of low investment potentials and opportunities mirrored through a poor economic growth rate. Secondly, the fragile financial systems of developing economies are too poor to confront the risk of lending out to the rural poor; rather, they tend to advance their services to...
16 Pages(4000 words)Dissertation

Lending Decision

...Lending Decision Lending Decision Titus Manickam Order No. 183523 02 October 2007 (Rejoinder to my report of 28 September 2007) Lending Decision (A Rejoinder) Performance Forecast for Coles Group Limited Coles performance during FY 2007 is quite dismal at a decrease of 9.5 percent in profits from its return on Food and Liquor business. This is difficult to understand in a booming economy where everyone in the competition is doing well. For Wesfarmers, who are on the verge of taking over Coles, it is bad news. However, a judicious mix of fast action (shape up or ship out) at the top and middle management levels, training and empowerment at the bottom level must...
2 Pages(500 words)Case Study

Microfinance

...Dissertation Topic and Its Rationale Microfinance has been an effective tool in efforts to combat poverty in third world countries such as Bangladesh, Indonesia and the Philippines. In the light of the rising unemployment rates and the lack of any sign of immediate economic recovery for America, a paper tackling the suitability of microfinance as the means to help low-income groups and the homeless families therein would be timely and relevant. Books have been written, accounts have been told and various awards - including the 2006 Nobel Prize - have been garnered by Prof. Muhammad Yunus, the founder of microfinance. With the establishment of his Grameen Bank, Prof. Yunus has given...
2 Pages(500 words)Essay

Microfinance

...Faisal Albwardi 01 December 2009 Non Profit Microfinance versus For Profit Lending Introduction The origins of microfinance can be traced as early as the 1800s when Lysander Spooner proffered the advantages of lending to small businesses to release people poor from the bondage of poverty. Contemporary microfinance began in the 1970s through the enterprising spirit of Mohammad Yanus of Grameen Bank in Bangladesh. (Microfinance and Micro Credit 1) Accordingly, microfinance is defined as ““banking the unbankables, bringing credit, savings and other essential financial services within the reach of millions of...
5 Pages(1250 words)Essay

Microfinance: Banking for the poor

...of funds in the form of loans and savings and also other financial services to the poor people. The term ‘microfinance’ has been specified to this operation because it generally deals with small amount of money and also to distinguish it from other formal services that are provided by banks and other financial institutions. The concept of microfinance formally came into being when Dr. Mohammad Yunus started to experiment by lending money to poor women. This happened in the village of Jobra in Bangladesh. With the passage of time, the concept grew and became prominent when Dr. Yunus founded Grameen Bank in 1983. Measurement of Impact of...
4 Pages(1000 words)Essay

Microfinance

...Article: Think Again: Microfinance February Link: www.foreignpolicy.com/articles 02/01/think_again_microfinance MicrofinanceMicrofinance is a financial service that people access in the form of loans. Their aim is to provide loans to the poor who cannot access bank services. Microfinance has managed to gain popularity around the world. It is not just for developing countries anymore. The idea of self-reliance and independence that micro finances may portray has increased trust in the microfinance institutions. The European Union benefits from the micro finances. Microfinance has enabled people to start the small...
1 Pages(250 words)Essay

Microfinance

...Microfinance Microfinance can be termed as a development tool that provides affordable and continuous access tofinances for small businesses, reducing the gap between the active but financially challenged business society and financial services (Ledgerwood 3). It is a service provided by Microfinance Institutions, also known as MFIs. In this aspect, they provide more than just banking services. In my opinion, MFIs have empowered the poor by bringing financial services closer to them. However, it is also of equal significance to lay policies for efficient management and operations of the MFIs (Ledgerwood 205). To determine if the MFIs are able to make sufficient returns...
1 Pages(250 words)Essay

Microfinance

... spurred reckless lending to poor Indians. Just months after the SKS listing, Andhra Pradesh’s state government accused the industry of strong-arm collection tactics that drove some farmers to suicide. It issued suffocating rules; almost all loans in the state were written off; business ground to a halt” (“Road to redemption”). Changes on the area of healthcare, education and female position improvement Unfortunately, the availability of loans provided by microfinance institutions did not change the situation in the field of healthcare and education. The number of children admitted to schools did not increase at the same time as the number of applications to hospitals did not decrease. People still can’t spend more on sanitation... in this...
4 Pages(1000 words)Essay

Payday Lending

...Payday Lending should be illegal Payday lending, a practice slowly developing into a culture, negatively affects the borrowers and the economy. A number of reasons necessitate payday lending. People having financial problems at the beginning of the month, or those with projects and anticipate the need for money during the coming month engage in payday lending. With time, people have adopted this as a culture, oblivious of the exploitation by these moneylenders. It creates a culture of borrowing, and creates a vicious cycle of debt where people cannot save but have to rely on credit. With interests charged on these funds going as high as over 100%, coupled with the...
1 Pages(250 words)Assignment

Microfinance

...Microfinance Case Study The major stakeholders are the poor who cannot obtain loans from commercial banks, the microfinances, the government, and stockholders. The poor’s concern is obtaining loans for use in financing their businesses. This group is at the core of the existence of microfinances. The microfinances are concerned with empowering the poor through issuance of loans to improve the economic status of borrowers. The government gains significantly as its efforts to improve the living standards of its citizens are boosted through the efforts of microfinances. Lastly, for...
1 Pages(250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Microfinance - lending to the poor for FREE!

Contact Us