Advantage and Disadvantage of Micofinace

Topics: Poverty, Microfinance, Grameen Bank Pages: 4 (1142 words) Published: October 4, 2011
Most of people have formed a stereotype that credit is belonged to rich people not the poor. They think that the poor has no property to meet the repayment which could cause financial institutes a situation about bad loan. The term microcredit is used to identify a mixture of various financial and non-financial services. It has various definitions accepted by the different international organizations, as well as specialists and scholars. However, apart from the beneficiaries, as far as microcredit is concerned by Mario & Gianfranco (2006) that “these must be people who have problem to borrow money from traditional financial system, who have started or are about to start a business and need the financial support”. The idea of micro-credit scheme has obtained colossal success in reducing poverty around world. It has given them an opportunity to fight for their future, while it also has been criticized that inability to effectively cater to target groups and unchanging poverty levels (Tony Addison 2008). This essay focuses on advantages and drawbacks of micro-credit schemes.

Advantages of Micro-Credit
Micro-credit scheme is not only to allow the poor obtaining an opportunity to change their lives but also to improve the economic conditions in our society. Firstly, the most and important advantage towards micro-credit is that it gives the poor an opportunity to loan a small amount of money. Nowadays, financial organizations have the same goal, which is making more profits without a bad load. As a result, bankers tend to meet the need of rich people rather than the low and middle-income people when it comes to loan, so that the poor has no choice but to work for others. In other words, they cannot start a small business. Fortunately, the idea of micro-credit program releases small loans to the poor for income generating self-employment projects (S. McDonnell, 1999). Taking Grameen Bank for example (S. McDonnell, 1999), The Grameen Bank...

References: Bhatt, N., & Tang, S. (2001). Delivering microfinance in developing countries: Controversies and policy perspective. Policy studies Journal, 29, 319.
Farhad, H. & Tonya, K. (2008). Financing the Poor: Can microcredit make a difference? Empirical observations from Bangladesh. (pp. 3) England, :The University of Manchester.
Lamia, K. (2011). Microfinance and Its Discontents: Women in debt in Bangladesh. (pp.65-66). Minnesota, MN: University of Minnesota.
Lashley, J.G. (2004). Microfinance and Poverty Alleviation in the Caribbean: A Strategic Overview, Journal of Microfinance 6, 83-84.
Mario, L. T. & Gianfranco. A. V. (2006) Microfinance. (pp.42). Great Britain: Antony Rowe Ltd, Chippenham and Easstbourne.
McDonnell, S. (1999). The Grameen Bank micro-credit model: lessons for Australian indigenous economic policy. (pp.1-3). Canberra, Australia: The Australian National University.
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