Microfinancing: An Intro

By Michael Mak

Summary

Basic concept

Microfinancing encompass the provision of financial services and the management of small amounts of money through the range of products and a system of intermediary functions that are targeted at low income clients
 Includes:

loans, savings, insurance, transfer services

Microloans 
http://www.economicswebinstitute.org/essays/microfinanceghana.htm

Micro loans

What are they?
 Small

loan to purchase productive assets boosting revenue allowing repayment over a short period of time in small instalments without the guarantee of collateral

The size is kept small in three dimensions (see next slide)

http://www.economicswebinstitute.org/glossary/microfinance.htm

MicroLoans – keeping it small
The size is kept  small in three  dimensions 

http://www.economicswebinstitute.org/glossary/microfinance.htm

What does microloans prevent?

Eliminates “loan sharks” that provide loans to the poor at high rates, exploiting the emergency need for money Avoid the cycle of growing indebtedness and heavy pressure for repayment, avoiding menaces and violence

http://www.economicswebinstitute.org/glossary/microfinance.htm

Microcredit vs. loans
Microcredit
Advantage s relatively low interest rate No collateral is required Group member can support you

Loans
There is no limit on the loaning amount and borrowing period

Disadvantages

Interest rate is high Limit with loan amount and they request collateral for borrowing period Need to be a member and pay securing the loan membership fees 

http://www.accu.or.jp/litdbase/material/pdf2/mt/mt06.pdf

Ensuring payment

http://www.accu.or.jp/litdbase/material/pdf2/mt/mt06.pdf

How to pay back

http://www.accu.or.jp/litdbase/material/pdf2/mt/mt06.pdf

Summary

Why target women?
Gender inequalities in developing countries inhibit economic growth and development  Women are disproportionately represented among the world’s poorest people – 70% of the 1.3 billion people living on less than $1 per day are women  Women spend more of their income on households, so when their income increases, welfare of whole family is improved  Promote gender equality and women’s equal access to financial resources

Empowering women through microfinance

What is empowerment?
In order for a woman to be  empowered, she needs  access to the material,  human, and social  resources necessary to  make strategic choices in  her life .  However,  resources are not enough –  need ability to utilize these  resources

Empowering women through microfinance

Does Credit automatically lead to empowerment
Basic theory: microfinance empowers women by putting capital in their hands and allowing them to earn an independent income and contribute financially to households and communities  However, the ability of a woman to transform her life through access to financial services depends on many factors
  Individual

situation and abilities  Status of women as a group  Environment

Need to properly access and evaluate the needs of women to maximize effect of microcredit Empowering women through microfinance

Empowerment leads to:
Greater impact of decision making  Increase in self confidence  Impact on women’s status and bargaining position within the household  Strengthening of economic autonomy  Improvement of women’s status in their community  Political empowerment (rarer)
  

Empowering women through microfinance

Case study in ghana: Sinapi Aba Trust (SAT)
Nana Addai “Before joining SAT, I did not have much money, so I had to collect the  goods from somebody, sell them, and give her the profit before she would  give me some. . . . Every week I would have to render accounts to the  supplier—what had been bought, what is left, etc., before she would give  me other goods to sell. . . . Because I now have my own money, I am able to  negotiate well for good prices and . . . if what my suppliers are selling is not  nice, I can go to a different store to purchase what I think people will buy. .  . .The time that I spend with my business has reduced because I now have  my own money, unlike the past where I was working for somebody so I had  to be able to sell all day long before she would give me my share. So always  I was tired and in a rush to make sure that I spend more time at the  business to ensure that people buy it. But now I have my own business and  money, and I can organize myself better to get time to rest.”
Empowering women through microfinance

Important points for success
Need to provide business training that is designed to complement their existing skills and address their most pressing needs  Improve general education and literacy initiatives  Foster balance between family and work responsibilities  Increase dialogue on social and political issues  Workshops and experience in decision making and leadership

Summary

Microcredit in Ghana
Microcredit is not new in Ghana, rather it has been common practice  First microcredit was probably established in Ghana in 1955 by missionaries  Susu, one of the current microfinance schemes in Ghana, is thought to have originated in Nigeria and spread to Ghana from the early 1900s
 

Microfinancing: A working paper

Three broad types of microfinance in ghana

Microfinancing: A working paper

Microfinance Existing in Ghana
           

The Rural and Community Banks, · Savings and Loans Companies · Financial NGOs · Primary Societies of CUA · Susu Collectors Association of GCSCA · Development and commercial banks with microfinance programs and linkages · Micro-insurance and micro-leasing services. Association of Rural Banks (ARB) · ARB Apex Bank · Association of Financial NGOs (ASSFIN) · Ghana Cooperative Credit Unions Association (CUA) · Ghana Cooperative Susu Collectors Association (GCSCA)

Microfinancing: A working paper

Summary

TVG statement

Economic Empowerment: provide microloans to women in rural villages in Northern Ghana so that they can begin to end the cycle of poverty for themselves and their families.

What we need to do

Economic plan

Formulated Question

Through assessing the need for microcredit loans in a community and the resources in TVG, how can we create and initiate a multistaged economic plan that involves business training, education, and entrepreneurship so that women can be empowered through starting their own businesses?

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