Importance of Microfinance in Pakistan

Topics: Poverty, Microfinance, Poverty reduction Pages: 4 (1063 words) Published: April 2, 2013
A microfinance bank is one devoted to extending small loans, referred to as microloans, to individuals, businesses, and organizations in low-income regions, including under-developed countries where small amounts of money can go a long way. Some financial institutions are devoted entirely to microfinance, while others are part of larger companies, such as global investment banks. Ultimately, a microfinance bank provides credit to those who would otherwise be unable to access this form of capital. These loans foster the development of small businesses and provide tools to entrepreneurs to follow their dreams, all in an attempt to alleviate global poverty in vulnerable regions. Loans for women living in poverty are among the most widely-issued forms of credit in microfinance. This is because 70% of the world's population struggling through extreme-poverty conditions are women, according to Opportunity International, a US-based non-profit organization that works with microfinance lenders. A woman is less likely to receive formal education, business training, or a prominent role in society in an underdeveloped region, and without proper financial support may never overcome those obstacles.

Role of Micro Finance in the Economic Development

As credit plays vital role in beginning and expanding the business, microfinance has been treated as an important tool for economic development. Microfinance lenders offer small loans to aspiring as well as current business owners. These loans assist people in getting access to traditional financing and offer jobs to local communities. Microfinance plays vital role in economic development through following ways- * Job Creation: A business that starts and operates because of microfinance aid can create jobs in equal number as those created by multi-national corporations. Most of the microfinance lenders provide loans to borrowers who reside in some of the remote and most deprived areas of the world. The...
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