Microcredit and Poverty Alleviation Essay example
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Microcredit is a financial innovation that is considered to have originated with the Grameen Bank in Bangladesh, and Muhammad Yunus is its founder. This Bank offers collateral free loan to rural poor women. Women are afforded the opportunity of education and access to health care, reduced unemployment, so that their families and communities prosper. The future of the Microcredit is very bright now because it plays an important role for the development of poor families. This system is being introduced in both developing and developed countries of the world. The relationship between Muhammad Yunus’s Grameen bank and women’s lives is important because he helps poor women to be independent and economically support their family. Because of…show more content…
Muhammad Yunus has had phenomenal success helping people lift themselves out of poverty in rural Bangladesh by providing them with credit without requiring collateral. According to his microfinance theory is largely based on mutual trust, the enterprise, and accountability of millions of women villagers. The popularity of the work of Muhammad Yunus is known as a pioneered the world famous microcredit financial institution, Grameen Bank. One interesting goal Yunus set for it was to have at least half the borrowers be female. Yunus had a dream to end extreme poverty and his most priority to help poor women to get loans who have nothing because the way they can become independent and economically succeed. He has interviewed Sufiya Begum in Jobra village to know about her bamboo stools business. Therefore he asked her that how much you profited from bamboo stools. She said “five taka and fifty poysha” (about 25 cents) (Yunus 47). Because she bought it with five taka (about 23 cents) from middlemen and sell back to him with five taka and fifty poysha (25 cents). According to Yunus quote He shocked because Sufiya earned two cents per day that is not enough for her family’s foods, cloths and other expenses. He lent $27 out of his own pocket to a group of poor craftsmen in the Jobra village including Sufiya Begum since then he has developed the Grameen Bank. This was a struggle given the low social status of women in
Microcredit can be defined as small loans, or microloans, for people around the world in extreme poverty to help spur entrepreneurship. The issue of microcredit is extremely important in the world’s economy. Poverty alleviation and economic development are the primary goals of microcredit programs, that is why they began in the developing countries of Asia and Latin America, economist Muhammad Yunus and his Grameen Bank in Bangladesh are credited of pioneering this financial innovation (Smith, Thurman, 2007). After acquiring a loan, impoverished people get involved in self-employment projects that help them to start a business and begin generating income and in many cases leave poverty. Microcredit offers loans to poor people without requesting any financial history from them. These loans help to improve the quality of life of individuals and communities through commitment. In recent years, the idea of giving small loans to poor people became the darling of the development world, giving a way to propel even the poorest people into better lives (Jolis, 2011).
Since its emergence, microcredit has been viewed as a very important tool for development. Many around the world believe microcredit is the antidote for global poverty. Although the Grameen Bank focuses only on people from Bangladesh, different microfinance institutions had been established around the world. Accion International is one example of these institutions in Latin America, which started providing loans in 1973 (The history of microfinance, 2005). These financial institutions started to grow rapidly due to high demands of small loans. Poor people around the world started to lose faith to their countries’ authorities to provide for their well being and started to turn to these financial institutions. From 1996 to 2006, Accion went from distributing 276,000 loans to 2,375,000, and the average of each loan rose from $581 to $829. Almost all of the loans have been repaid (The history of microfinance, 2005). Also, new internet-based organizations that connect lenders to micro-entrepreneurs are emerging on the Web, for example, Kiva, which is an organization that allows people to lend money through the Internet to different microfinance institutions, which in turn lend the money to impoverished people. Each year more people use microcredit to dig themselves out of poverty. It seems that microcredit has become the only practical solution in countries whose governments still cannot find a way to boost the lives of their poor. Despite the good work that microcredit organizations had been able to accomplish through the distribution of loans, basic skills are still necessary. People need to have the ability to manage that money in an efficient way, not only by starting a business and creating revenue, but being able to save in case of an emergency and having a plan to repay that loan and other debts. Without proper management of loans, microcredit is far from solving global poverty.
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