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Microfinancing

Microfinancing. Presented by: Myasnik Poghosyan Ramiel Betnisan Kari Roth. Introduction. Existence of extreme poverty Fight against global poverty Lack of traditional financing Help poor to help themselves A profound effect of microfinance. Defining Microfinance .

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Microfinancing

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  1. Microfinancing Presented by: Myasnik Poghosyan Ramiel Betnisan Kari Roth

  2. Introduction • Existence of extreme poverty • Fight against global poverty • Lack of traditional financing • Help poor to help themselves • A profound effect of microfinance

  3. Defining Microfinance • What is Microfinance ? • Microfinance is a proven “micro” financial solution that helps poor people to help themselves. • Provision of several financial services such as microcredit, microsavings, and microinsurance

  4. Origins of Microfinance • 1864-Friedrich Wilhelm Raiffeisen • Village-bank movement in Germany • Reached 2 million farmers by 1901 • 1900-Alphonse Desjardins • “Caisse Populaire” movement Quebec • Member-owned financial co-operative • 1970’s- A new wave of microfinance • An early pioneer Akhtar Hameed Khan • Revolutionary idea of “microcredit”

  5. The Key Role of MFIs • Reaching out to the very poor • Delivering microfinance services • Educating local communities • Collecting weekly loan payments • Providing additional social services

  6. Models of MFIs • The Grameen Bank model • Focus on women • Borrower group • Five members guarantee each other • The Village Bank model • Latin America and Africa • External accounts and internal accounts • Credit Unions • Self-help Group

  7. Grameen Bank • Community Development Bank • Makes small loans without requiring collateral • Accepts deposits, provides other services, and runs several development-oriented businesses including fabric, telephone and energy companies • Founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006.[1]

  8. Grameen Bank • Self-help group • Group of five individuals are loaned money, but the whole group is denied further credit if one person defaults • (97%) loan recipients are women • High payback rates—over 98 percent

  9. Grameen Bank • Of the total equity of the bank, the borrowers own 94%, and the remaining 6% is owned by the Government of Bangladesh • Total number of borrowers is 6.67 million, and 97% of those are women • The Bank has 2,247 branches (as of May, 2006) covering 72,096 villages, with a total staff of over 18,795 • Since inception, total loans distributed amounts to (US$ 5.72 billion) • Out of this, Tk 258.16 billion (US$ 5.07 billion) has been repaid.

  10. Rural Telephone Programme • Bangladesh has one of the lowest telephone densities of the world. • Grameen Phone, a sister company of the bank, is already the largest mobile telephone provider of the country • Grameen Telecom, another sister company of Grameen Bank, brought radio-telephones and mobile phones to almost half of the villages of Bangladesh. • Distributed loans to almost 139,000 poor women in rural areas to pay for the phones.

  11. Woman and Microfinancing • Economic development • Reduce birth rates • Improve health • Improve nutrition • Improve education • Types of Businesses • Weaving • Embroidery • Raising Livestock • Basket making • Growing fruits & Vegetables

  12. Advantages of Microfinancing • Easy to obtain • Do not need collateral • Offer development services • Used for any purpose provided it is business related • Microloans administrated on a local level, easier to develop a relationship with your lender • Opportunities

  13. Disadvantages of Microfinancing http://ies.fsv.cuni.cz/storage/sylab/148_w07_microinstitutions_eldc.pdf - Micro Institutions Lecture 7

  14. Challenges/Recommendations • Better accessibility • Provide more formal training • Tax incentives • Performance-based microfinancing

  15. Questions?

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