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Impact of Microfinance on Developing Countries
Finance & Accounting
Pages 9 (2259 words)
In a good number of countries, poor people continue to be excluded from formal financial institutions and other formal financial systemsThis may range from partial exclusion as in most developed countries, to full exclusion in developing and poor countries…
With no access to financial systems, the poor have to define new informal ways through which they have to guarantee their financial survival while at the same time obtaining seed capital for development. Such informal community based institutions are meant to meet their daily and long-term financial needs, a gap that is perfectly filled by the micro financial institutions (Jegede, Kehinde & Hamed, 2011). Consequently, micro financial institutions are organizations developed towards promoting economic activities among the poor and low-income earners, where formal financial institutions have not offered similar services. To these people, banking services are impossible or almost impossible and they have to get a new way of bridging the gap left by the banks, which makes micro financial institutions prominent in poor countries particularly in the African continent. Micro financial institutions will lend small amounts of capital to members and other poor individuals in the locality towards poverty eradication, in addition to providing the poor communities the same services that are available in banks, and which are enjoyed by the rich (Jegede Kehinde & Hamed, 2011). In fact, microfinance institutions do not only provide capital for the poor but will go an extra mile to alleviate poverty from the basic individual level and at the community level (Anyanwu, 2004). ...
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