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Microfinance

ECON 465 March 5, 2009 Catherine Nguyen Samuel Oh. Microfinance. Overview. What is microfinance? Origins Institutions Jobs Benefits Examples Current Conditions Future Prospects Concerns. Chipa in Caacupé, Paraguay. What is Microfinance?.

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Microfinance

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  1. ECON 465 March 5, 2009 Catherine Nguyen Samuel Oh Microfinance

  2. Overview • What is microfinance? • Origins • Institutions • Jobs • Benefits • Examples • Current Conditions • Future Prospects • Concerns

  3. Chipa in Caacupé, Paraguay

  4. What is Microfinance? • Microfinance is defined as financial services for poor and low-income clients. • Microfinance is a movement that will help low income families have access to financial institutions.

  5. Origins of Microfinance • Microfinance clients are poor and have low-incomes. • Microfinance clients tend to be below the poverty line. • Many households are without financial access.

  6. Institutions • Most microfinance intuitions started as not-for-profit organizations.

  7. Active Institutions in Latin America • ACCION Communitaria del Peru (ACP) • ACODEP, Nicaragua • ACTUAR/Tolima, Colombia • ADMIC National, A.C., Mexico • Agencia de Desarollo Economico Local de Morazan, El Salvador • Asociacion Benefica PRISMA, Peru • Asociacion de Mujeres Campesinas Salvadorenas, El Salvador

  8. Jobs Created by Acción Border Lending 1994 - 2005

  9. Benefits of Microfinancing • Microfinance can provide a range of benefits that poor households highly value. • Microcredit improves lives. • Other microfinance services include…

  10. Shopkeeper in León, Nicaragua

  11. Current Microfinance Environment • Report from Economist Intelligence Unit, Oct 2008. • Overall portfolio value increase since 2001: from $1.19 bn to $9.25 bn. • 34% growth/year.

  12. Future of Microfinancing • Bright in current financial markets. • Typical repayment rates are 95-98%. • Not a solution to poverty.

  13. Concerns of Microfinancing • CompartamosBanco listed its shares for $1+ bn in 2007. • Legal Loan Shark? • Average interest rates 79%+. • Exploiting the financial ignorance of customers?

  14. Response to Concerns • Allowing open market to meet needs. • Microfinancing is labor-intensive. • Entice competitors and lower interest rates (115% seven years ago). • Financial Literacy courses to clients.

  15. Questions?

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