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Poverty and Microloans

Poverty and Microloans. Hyeona Im Kevin Ding Katie Russell. Do You Know? . At least of humanity lives on less than $10 a day. A) 20% B) 60% C) 80% D) 40% C. Do You Know?. people worldwide do not have enough food to eat. A) 170 million B) 320 million C) 610 million D) 870 million

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Poverty and Microloans

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  1. Poverty and Microloans HyeonaIm Kevin Ding Katie Russell

  2. Do You Know? • At leastof humanity lives on less than $10 a day. A) 20% B) 60% C) 80% D) 40% C

  3. Do You Know? • people worldwide do not have enough food to eat. A) 170 million B) 320 million C) 610 million D) 870 million D

  4. Do You Know? • is the number one cause of death in the world. A) Hunger B) HIV C) AIDS D) Malaria A Hunger kills more people thanHIV/AIDS and malaria combined.

  5. Poverty in Canada • 2009 statistics: • 1 in 10 Canadians are considered poor. • The poverty rate increased from 9.4% to 9.6% from 2008 to 2009. • In Ontario, the richest 20% enjoyed 44.3% of total after tax incomes, compared to poorest 20% which had 4.7% of the after tax income. • Cost of poverty to Canada is around $72-$86 billion; 6% of GDP.

  6. Poverty in Canada Cont’d • In Hamilton, there is a 21-year difference in life expectancy between people living in high and low income neighbourhoods. • In 2010, 59% of Canadian’s lived paycheque to paycheque. • The average annual income of Canada’s best-paid CEO ($6.6 mill) is 155 times higher than the averageworker’s income (42,988). • By the end of 2009, 3.8% of Canadian households controlled 67% of the total household wealth.

  7. Poverty Line in Canada • Low income cut-offs (poverty line) in 2009: • 1 person: $18,421 • 2 persons: $22,420 • 3 persons: $27,918 • 4 persons: $34,829

  8. Poverty Measures in Canada • Absolute poverty is defined as lacking the basic fundamentals to survive, such as food, shelter and clothing. • Two types of absolute measure: basic needs poverty measure and market basket measures. • Relative poverty is defined as lacking the conditions to enjoy life as compared to others in the same country. • One type of relative measure: low-income cut off • Canada has several methods to measure poverty.

  9. Basic Needs Poverty Measure • Developed in 1992 and is based on a variety of data sources e.g. Statistics Canada. • Information is collected and put into a list of the cost of household necessities. • Based on family size, the list helps determine how many households have sufficient income to afford these needs. • Note: most measures are taken into consideration the after-tax income as a household well-being indicator. • In 2004, the basic needs poverty rate was 4.9%, equaling 1.6 million Canadians.

  10. Market Basket Measure • Created by the Government of Canada’s Departmentof Human Resources and Skills Development in 2003. • Analyzes a broader range of essential goods and services compared to the basic needs measure. • Takes into account community size and location. • Also determines a disposable income required to meet these basic needs to live.

  11. Low-Income Cut Off • The most “accepted” measure of poverty, which is usually quoted in the media and has been used since the 1960s. • A measurement used to identify income levels, which a household is classified as being in a relatively limited income situation. • In 2008, 9.4% of Canadians were apart of a family whose income was below the after-tax LICO.

  12. Social Welfare Programs • Government programs that are created to assist citizens outside of what the market provides. • The emergence of a welfare state in Canada occurred after the Great Depression. • Microloans is a concept that is used to combat poverty. • Becoming a very popular poverty alleviation tool in developing countries.

  13. Microloans • Small loans to impoverished borrowers. • Support entrepreneurship and alleviate poverty. • Empower women and uplift entire communities by extension. • A division of microfinance. • Known as a structural strategy because it focuses on the long-term changes needed to combat poverty.

  14. Muhammad Yunus 0 "Banker to the Poor“ • Born 28 June 1940 • Bangladeshi banker, economist and Nobel Peace Prize recipient • Developed the concepts of microcredit and microfinance • In 2006, received the Nobel Peace Prize • His objective was “to help poor people escape from poverty”

  15. Grameen Bank • After Yunus witnessed the devastating effect of the famine in 1974 in Bangladesh, he had a desire to help anyway he could. • He created microfinance in Bangladesh and lent out$27 US dollars to 42 women in a village. • From there, he created Grameen Bank and it supplied $6.38 billion dollars by 2007 to impoverished people. • Some criticisms: microcredit can bring communities into debt that they can’t escape.

  16. Microfinance Organizations • A microfinance institution is a company that provides microfinance services; range from small non-profit organizations to large commercial banks. • Microfinance organizations such as FINCA organization have been created in Canada. • In 1980, John Hatch, the founder of FINCA, created a small loan program targeted towards low-income farmers in Bolivia; known as village banking. • In El Salvador, the weekly income of FINCA clients increased on average by 145%. • Another advocate for microfinance programs is the organization Plan Canada. • Companies teach the borrowers how to save their money, repay their loan etc. • (Youth Economic Empowerment video)

  17. Microloans in Canada 0 • MOSAIC (http://www.mosaicbc.com) is a multilingual non-profit organization • Its micro-loans range from $500 to $5,000. The Micro-Loans Program offers three types of loans to help individuals with different needs: Back to Work Loans: With These Hands Loans: Peer Lending (Circle Lending): Be My Own Boss Loans:

  18. Divide class into two groups: disadvantages and advantages of microloans. • Duration: five minutes

  19. Microloans- Disadvantages • Microcredit doesn’t end poverty • Microcredit rarely transforms lives • some people do better, some do worse, but “very few” climb to middle class • popular in public due to story-telling promotion - popular, but not representative • according to luck/pluck, people get different outcomes American economists Dean Karlan and Jonathan Zinman say: microloan has no effect on poverty for family 1/2 years after they receive loan

  20. Microloans- Disadvantages • What microloans miss • in 2010, suicidal occur among over-indebted borrowers • microloans often used to “smooth consumption”, tiding a borrower over in times of crisis • what poor countries need the most is “small-to-medium-sized enterprises • “Missing middle” phenomenon

  21. Microloans- Advantages • Improve people’s living standards. (health and welfare) • Mitigate the awful toll of HIV/AIDS • Help nations to recover from wars • Helps create a sense of community • Betters the future generation (families have more money to support children to go to school etc.) • Tool to empower women • Job Creation • “A little can go a long way”

  22. Connections to the Course Chapter 9: • GDP growth (microloans indirectly boost country’s GDP) • Full employment (microloans help to reduce a country’s unemployment rate) Chapter 13: • Welfare State • Distribution of wealth Chapter 15: • Income Distribution • Absolute and relative poverty • Low-income cut-off (poverty line) • Before-tax income and after-tax income • Structural Strategies Chapter 17: • Comparative and absolute advantage (people start small businesses using microloans)

  23. Conclusion • Overall, microloans are a great tool to help eliminate poverty in developing countries. • The advantages of microloans outweigh the disadvantages. • "Today I'm a very respected woman in the community. I have come out of the crowd of women who are looked down upon. Due to the loan that I received... you have made me to be a champion out of nobody.” -Rose Athieno, Produce Reseller, Uganda

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