Poverty Alleviation

Topics: Poverty, Microfinance, Poverty reduction Pages: 5 (1313 words) Published: August 1, 2011

At the most basic level, the key to ending extreme poverty is to enable the poorest of the poor to get their foot on the ladder of development. ~ Jeffrey D. Sachs

Creating self employment opportunities is one way of attacking poverty and solving the problems of unemployment. The Scheme of Micro-finance has been found as an effective instrument for lifting the poor above the level of poverty by providing them increased self-employment opportunities and making them credit worthy. There is a need for designing financially sustainable models and increase outreach and scale up operations for poor in India. The impact of micro finance on poverty alleviation has been measured in terms of several dimensions such as : 1) improved income 2) employment 3) household expenditure 4) reduced vulnerability to economic and social crises. Micro finance organizations should provide the social space and the political power for the poor to advance entrepreneurial endeavors and providing them with the right financial tools and knowledge to start a microenterprise, which will help them in the long-term and allow them to become self-sustaining in the process. It helps create investment options which the poor can choose from. The deeper the poverty — social, economic and political — the less effective is credit as a trigger for livelihood. , utilizing microloans Kathryn Imboden (2005) indicates in her research that there is a growing number of literature that can support the positive relationship between financial sector development and poverty alleviation. .Success, self-respect and dignity are basic ingredients in overcoming the conviction that poor people and their children are born losers, born to fail” (van Maanen, 2004, pp. 27-28). The challenges involved in measuring the impact of Micro Finance are :

1) Obtaining a reliable data for market analysis through the development and use of the new tools for evaluation and monitoring which can cut costs in the short-run and help achieve long-term social and economic goals.

2) The level of flexibility in the credit instrument will help to meet the multiple credit requirements of the low income borrowers.

3) The designing and targeting of the Micro Finance programs to the needs of the extreme poor will have a positive impact on the client’s retention.

A number of studies have substantiated on the impact of Micro finance :-

1) There are strong potential synergies between the Micro Finance and the provision of basic social services for micro finance clients

2) The infrastructure for micro finance and the services provided to the clients need to be relevant to the needs of the of the target group. The benefits derived from micro finance, basic education and primary health care are interrelated , and the impact of the program increases when the basic social services are delivered together.

3) The social and economic impacts of micro finance has a beneficial affect on increase in income recorded by various researchers ( Wright 2000; UNICEF 1997; Khandker 2001,1998) and reductions in vulnerability in some studies ( Wright 2000,Zaman 2000;Mc Culloch and Baulch 2000)

4) Studies show that there is no evidence of an inverse relationship between a client’s level of poverty and their entrepreneurial ability ( Garson) and borrowing patterns and the inclination to save have been found to be similar across clients at different levels of poverty( Zaman 2000).

5) Savings have a minor developmental impact on the basic social needs and is slow in creating any significant wealth in itself unless credit is available. Researchers have revealed that Savings –first Micro Finance Institutions tend to reach a smaller proportion of the poorest and have a lower and slower impact on the poverty alleviation

6) Micro Finance compares favorably to other interventions with...
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