Micro-Credit and Risk Management in Development

Micro-Credit and Risk Management in Development
Students Name
Institution

Microfinance 1
Introduction
Primarily, microfinance implies the provision of financial, organizational activities
inclusive of offering credit, insurance, community development programs and savings (Qudrat-e
Elahi & Rahman, 2006).Majorly, microfinance services are rolled out by formal ,semi-formal or
informal institutions. Undoubtedly, microfinance services has been successfully used as a
developmental tool for twenty five years thus the assertion that the impact of these services are
evident (Noreen,Zaheer & Saif, 2011).Noteworthy, the Grameen Bank based in Bangladesh, the
Kashf Microfinance bank in Pakistan, the Finatrust Bank in Nigeria are among the notable
providers of microfinance services which have greatly impacted their communities. The
institutions have impacted negatively and positively on their target population in various
countries.
Specifically, due to the Grammen Bank microfinancing initiatives, its 10000 monthly
clients were able to escape poverty according to a World Bank study. This is due to the fact that
the recipients of the Grameen bank were able to access loans thus the ability to afford better
housing facilities, food and education thus lifting their social-economic standing(Noreen, Zaheer
& Saif,2011).Additionally, microfinance services positively impact of household asset and
expenditure which uplifts the livelihood of poverty-stricken individuals by increasing their
income, ability to save and invest hence the increase in assets and expenditure of previously
disadvantaged persons in the communities. Specifically, microfinance has led to efficiency
according to a survey of 407 persons in the Punjab province of Pakistan.
Particularly, It was found out that farmers who engaged in microfinancing activities were
more efficient as contrasted with non-participants (Makhdum & Amjad,2015).From the study of
the farmers it was clear that microfinance impact on their social economic status was positive.

Microfinance 2
The farmers who partook in microfinancing initiatives had easier resource access, increased and
diversified income plus increased ability to bear risks as contrasted to other non-microfinance
participating farmers. Basically, it is worldly accepted that microfinance is an effective tool in
eradication poverty through the redistribution of income and providing opportunities and
financing access to the lee advantaged in society .Microfinance facilities income distribution
among the disadvantaged population thus raising their social economic status in society.
Moreover, microfinance has been praised for increasing employment opportunities,
promoting income equality, women empowerment and improved nutrition and health conditions
(Ocasio 2016).According to a Mexican study on the impacts of microfinance activities on
women, results are conclusive as to the economic and social empowerment of the female
gender(Drasarova, 2015).Through microfinance, the education levels have improved in the
disadvantaged communities thus the assertion that microfinance is an effective poverty
eradication tool in most jurisdictions. The increase in the income household of the disadvantaged
people has enabled them to afford basic necessities such as better food and access to educational
facilities thus a win for microfinancing.
Challenges facing the success of microfinance
Despite the successes of microfinance services in elevating the social –economic
standards of the disadvantaged in society, there are various challenges, social and structural
which minimize the impact of the services. With reference to the Grameen Bank initial exclusive
services to advance their services to male customers, this brought about gender inequality at the
onset of the program. Also, the assumption that women are better at loan repayment as compared
to men might create a preference against male customers who could benefit from the service.
According to Ocasio, the belief that women are the main beneficiaries of microfinancing is far