Discuss whether microfinance is profitable. Do you think microfinance helps to lower poverty rates in poor countries?
Is microfinance is profitable
Microfinancing is the process where the loans and funds have transferred to the small business units and other small enterprises. Mainly the micro financing is the option that can be used to increase the financial services and another business movement among small people. Use of micro finance can increase the economic development from the small level of society. Thus, micro finance is very helpful to eliminate the poverty from society because small people can be able to run their own business and total income of these people will increase. The number of economic activities will also increase in society and reduces poverty from society.
Microfinance is a general term to describe financial services, such as loans, savings, insurance and fund transfers to entrepreneurs, small businesses and individuals who lack access to traditional banking services. For some, microfinance is a movement whose object is “a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers. Since, many of those who promote microfinance generally believe that such access will help poor people out of poverty. And for others microfinance is a way to promote economic development, employment and growth through the support of micro-entrepreneurs and small businesses. Hence, by all these points we can say that microeconomics is profitable.
I think that microfinance helps to lower poverty rates in poor countries because microfinancing produces many benefits for poverty stricken, or low- income households. One of the benefits is that it is very accessible. Banks today simply won’t extend loans to those with little to no assets, and generally don’t engage in small size loans typically associated with microfinancing. Through microfinancing small loans are produces and accessible. Microfinancing is based on the philosophy that even small amounts of credit can help end the cycle of poverty. Another benefit is it presents opportunities, such as extending education and jobs. Families receiving microfinancing are less likely to pull their children out of school for economic reasons. As well, in relation to employment, people are more likely to open small businesses that will aid the creation of new jobs. Overall, the benefits outline that the microfinancing initiative is set out to improve the standard of living among impoverished communities and as a result it lowers the poverty rates.