Essay On Microfinance Loans

Microfinance loans are usually financial services for low income earner and the poor people given by different organizations commonly known as microfinance institutions. Microfinance loans usually gives services to poor and low earning people who don’t have access to other formal institutions of finance. They are often household entrepreneurs and entrepreneurs who are self-employed. The ultimate objective of the microfinance is to ensure that the low income people in the society are given an opportunity to be self-financing by giving them different ways of borrowing money, insurance and saving money. They gained popularity because they managed to show that poor people can be reliable bank customers. Microfinance institutions are majorly non-profit making institutions with the aim of providing credit loans to the poor people in the society with the aim of crossing them over the poverty line and also improving their economic status. (Mason and Yamaguchi)

Microfinance has been a powerful and effective tool in the reduction of poverty by bringing the poor into the income stream. This is because it creates an opportunity for the poor to be able to indulge in self-employment rather than waiting for employment opportunities to be created. The invention of Grameen Bank and other programs has led to the spread of more and more micro-credit and microfinance services to the poor in the society. (Mason and Yamaguchi)

Grammen Bank can be said to be the pioneer of micro financing and micro-credit facilities. At the beginning all its clients were among the poor people in the society with a big percentage of them being women. The Grammen Bank has been able to give an enabling environment to the poor to strive for better life and cross the pover...

... middle of paper ...

...elves against risks of future crisis that may occur or even be able to cope with the crisis when they happen. The microfinance organizations have also been able to develop a wide range of assets that have helped in the reduction of vulnerabilities of the poor people to economic, physical and social ways. These assets can be described as financial, human, physical and social. The financial assets deal with the people being able to increase their income size, their savings and also being able to provide them with loans and security. The human assets entail giving the people knowledge and skills, the ability to work, control over decisions, good health and empowering the people with bargaining power. Physical assets empower the poor with housing facilities, possessions that are non-productive and land. Social assets offer wider access to society and social institutions.