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…
regular banks, in most cases because they are unable to offer sufficient collateral.” (Gert van Maanen, 2) There are two schools of thought regarding the entire industry of Microfinance: the first advocates non-profit lending, while the other takes the opposite view- that for-profit. In this regard, this essay is written to present arguments that profit microfinance institutions (MFIs) are better off by pursuing profits making them more sustainable than non-profit MFIs. This paper will argue that by microfinance institutions (MFIs) pursuing their own interest (profits) this is the only way to be sustainable & will lead to more outreach & more the greater good for all impoverished people despite the fact MFIs are for-profit.
Years of research indicate that for-profit MFIs are more sustainable than non-profit microfinance institutions because they have higher growth rates, access to a larger pool of funding and are much more profitable. According to Global Microfinance Forum (1), “profit-maximizing MFIs run just as normal businesses do, making enough profit to fund themselves and benefit owners and investors.” For-profit MFI’s pursue profits because they are market driven. They could rely on donor funds in their initial stages, but unlike non-profit MFI’s, they specifically stipulate that their goal is to be financially self-sufficient—the ability to rely on themselves financially from within the institution. Hence, by gaining profits they want to grow, expand the number of institutions; lower all possible costs and ultimately reach the most amounts of people possible. By relying on themselves, for-profit MFIs are sustainable.
The opportunities for profit MFIs are greater in terms of availability and accessibility for investor capital. In addition, with their own sources of funds, potentials for expanding their target market are vast. Supporters for nonprofit MFIs stipulate that these institutions solicit funds from donors, grants, government ...
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(Microfinance Essay Example | Topics and Well Written Essays - 1250 Words)
“Microfinance Essay Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.net/miscellaneous/383886-microfinance.
Microfinance programs contribute significantly to enhancing economic, social, and political empowerment. Some credit programs promote group formation and facilitate women to generate income, hence availing potential for both economic and political empowerment.
Microfinance Institutions.History of microfinance institutions Microfinance institutions are relatively new developments in finance that emerged around the 1970s (Robbinson, 2001). Microfinance was an improvement of how donors and governments used to channel funds to the grassroots to help the poor in development projects.
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 hope to millions of poor people who never had access to loan services of banks.
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
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 business as it provides equity to entrepreneurs.
Microfinance can be termed as a development tool that provides affordable and continuous access to finances 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.
Microfinance is one of them. Its effectiveness is very doubtful thus needs special investigations held in order to determine if it really helps decrease the level of poverty in our society (Branch & Klaehn, 2002). Certainly, like
The major stakeholders are the poor who cannot obtain loans from commercial banks, the microfinance, the government, and stockholders. The poor’s concern is obtaining loans for use in financing their businesses. The microfinance is concerned with empowering the poor through the issuance of loans to improve the economic status of borrowers.
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