Micro credit Essay Example | Topics and Well Written Essays - 1750 words

Micro credit - Essay Example The success of Grameen Bank, which was started by Yunus Muhammad in Bangladesh has always been used as a demonstration of the creditworthiness of individuals that live in poverty and the possible positive socio-economic effect of microfinance. The Grameen Bank is popular for two practices of innovativeness; these are mainly serving female customers and giving loans to small groups or individuals that come together for common economical purposes, with shared liability that replaces monetary collateral. Being an approach that is market-based to fighting impoverishment, the focus of microfinance and microcredit is on the development of entrepreneurship and the expansion of self-employment (Abed, 2000). Presently, the institutions of microfinance serve about one hundred and fifteen million individuals. They have a close relationship with the customers, simplified processes and support extension to customers via group networks as well as some other resources, like a basic training on the repayment of loan. The industry has been highly diversified, reaching different sections of the society, though not usually reaching the poorest (Yunus and Weber, 2007). The providers also vary as they range from NGOs, cooperative unions, government and commercial banks, point-of-sale partners like post offices and shops, self-help groups and credit unions. Technology is increasingly assisting in the facilitation of access to the financial services and the reduction of costs of administration. The product portfolios are growing to encompass different kinds of insurance mechanisms and savings, remittance services and emergency loaning, demonstrating the rising recognition of the several financial empowerment’s dimensions. The battle against the availability of credit markets and hence against high rates of interests that the moneylenders demand is not new. They use the power of information concerning the potential borrowers and require different rates of interest