May 15, 2013
Topic: Microfinance and Microcredit.
Presented by Lynn Suter
Microfinance and Microcredit. Care should be taken to not use these two terms interchangeably. Microcredit only considers small loans, while a microfinancing institution aims to deliver many different financial services (savings, loans, insurance, etc). > > Micro-anything deals with small things. As such, microcredits and microfinancing deal with small amounts of money or investments. How small? That depends on where in the world we are talking about. Usually, it is understood to mean to services for the very poor in India, Bangladesh, and third world countries, where “small” loans for our standards are tiny (just a few dollars, sometimes). However, microcredit institutions are also available in the West, where “small” loans are small compared to traditional bank loans. (See Victoria News links below). For our discussion, I will concentrate on the microloans aiming to enable the very poor to have access to credit. There are different models how such services work. Specifically for loans, they are either provided by a special institution (like a traditional bank, but specializing in microfinance) or they are funded through a group model (like Kiva). Microcredit and financing are generally touted to be beneficial to the poor people. The services are advertised to enable the poor to have access to money to set up or expand their business, increasing their income and “pull the family out of poverty.”
However, there are also many critiques of these services. They are accused of encouraging a consumer society and taking advantage of economically uneducated people. Another critique is that by looking at microcredit as a “prefect solution” other factors that need to be considered when looking at the situation of the very poor are ignored. Health, literacy, and sanitation some of the other factors that need to be considered if we want to help alleviate poverty.
Here are some links to start thinking abou the topic.
Interesting links: Wikipedia’s entry on microfinance (always a good starting point, but as with any other source: double check the facts with other sources). http://en.wikipedia.org/wiki/Microfinance
Trade-offs, rights and responsibilities in the business > of microcredit : A case study from South Africa https://helda.helsinki.fi/bitstream/handle/10138/38909/Hietalahti_dissertation.pdf?sequence=1
India Microcredit Faces Collapse From Defaults http://www.nytimes.com/2010/11/18/world/asia/18micro.html?pagewanted=all
Microcredit doesn’t end poverty, despite all the > hype > > http://www.washingtonpost.com/opinions/microcredit-doesnt-end-poverty-despite-all-the-hype/2012/01/20/gIQAtrfqzR_story.html
When Microcredit Won’t Do http://opinionator.blogs.nytimes.com/2011/01/31/when-microcredit-wont-do/ (including comments on the bottom of the article)
Microcredit Summit http://www.microcreditsummit.org/what-is-microfinance.html
Microcredit here at home: http://www.vicnews.com/business/202614111.html
and the group they are writing about: http://communitymicrolending.ca/