To What Extent Does Micro-Finance Play an Important Role in National Economic Growth

Topics: Poverty, Microfinance, Bangladesh Pages: 8 (2078 words) Published: January 30, 2013
|Student Name: |Aklilu Berhanu Alaho | |Student ID number: |000762358 | |Course Code: |BUSI 1546 | |Title of Course: |Foundations of Scholarship | |Title of Assessment: |To what extent does micro-finance play an important role in national economic growth | |Type of Assessment |Topic Review | |Tutor’s Name: |Dr. Girma Gezahegn | |Date Assessment Due: |21 January 2013 | |Turn tin Report |% |


Table of contents

Content page I Introduction 1
II Micro finance Defined 2
III History of Micro finance 3
IV Micro finance and National Economic growth 4
V The Case of Bangladesh 6
Evidence of Economic Impact 7
National level Impact 7
VI Micro finance in India 8
VII Conclusion 10
VX Bibliography11

It is known that there are 500 million economically poor people operating small businesses and micro enterprises. Most of these people do not have access to adequate financial services. Joanna (1999). On this topic review I will discuss about the role of micro-finance in national economic growth by taking Bangladesh and India as example.

Microfinance defined
In most cases micro finance is understood to entail the provision of financial services to micro-entrepreneurs and small business which lack access to banking and related services due to the high transaction costs associated with serving these client categories. (Encyclopedia)

Micro finance programs have two focuses
1. Improving the standard of living of their clients by providing financial services needed to established small business. 2. Expanding local economic activities.
Financial services thought to include savings and credit; however, some micro finance organizations also provide insurance and payment services. In addition to this intermediation, many micro finance institutions provide social services including group formation, self confidence development, and among group members training in managements capabilities and financial literacy. Joanna (1999)

The boundaries of micro finance are extending beyond the classic role of financial assistance to the poor, characterized by the Grameen Bank model, due to the continuous extension of financial services offered in micro finance programmes and the ever increasing diversification of clients. Mario and Gianfranco (2006).

History of micro finance
Micro finance, started initially by what is often referred to as a “Civil society”, was largely built upon initiatives from non-governmental organizations (NGOs), and co-operative. Grameen Bank, for example, stared as a small pilot project with NGO-features in Bangladesh, in 1976. This financial institution is now serving over six million clients in Bangladesh, with hundreds of replications world wide. Beartiz (2011)

The word “micro financing” is back rooted in the 1970s. Muhammed Yunus, the founder of Grameen Bank,...
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