How To Find the Impact of Microfinance on Poverty Alleviation

Poverty alleviation is the focus of most governments in the developing world. Multilateral financing institutions also aid in sharing resources from richer countries. Unfortunately due to a largely inefficient bureaucracy and a culture of corruption that is often embedded deep within the framework of the societal structure and government organizations, poverty eradication continues to be a dream that is not being realized in many nations.

In many countries of Africa, extreme poverty is a reality of daily life. Most families don’t even have access to clean water for drinking, therefore making diseases such as cholera commonplace. With the help of international aid organizations, as well as the visionaries from society, many people from urban poverty backgrounds have slowly made their way up the economic ladder. Since the government has been largely undependable for the most part, the private sector has found their own ways of effecting change. One way is through microfinance services, which is thought to be a good way in trying to end rural poverty.

Microfinance is nothing new, but with the increased advocacy of people like Muhamad Yunnus–a recent Nobel Peace Prize Laureate—the practice is gaining more and more support all throughout the world. Yunnus himself is a citizen of the impoverished nation of Bangladesh in South India. The country is overpopulated, and a vast amount of the citizenry lives below the acceptable standards for living. He used his bank, the Grameen Bank, to loan money to people who had great business ideas, but didn’t have the working capital to execute and start their own establishments. With microfinance, a community can be given the advantage of self-sufficiency, as long as they put the money in an enterprise that can make them more money in the long run.

This has been very important in the impoverished regions of Pakistan, Bangladesh and India. Due to extreme poverty, the men of many communities have fled their small villages in search for work in the bigger cities. This leaves the women to absorb the brunt of the poverty with the rest of their family. With the help of microfinance, housewives in rural areas could be given a chance in making their families more self-sufficient through small businesses.

Much emphasis must be put in the ability of poor individuals to pay up. The loans would still have to be serviced, so it must be ensured that applicants for micro-loans have potential to earn and pay back what is owed, and at minimal risk. Having greater debt for an already impoverished community family would only spell greater problems for the people who needed help in the first place.

Still, if handled correctly, microfinance can be a great way of battling poverty at the grassroots level. Rather than teaching people to rely on their governments or on dole-outs, impoverished families and communities learn to stand on their own, with a little financial help to get their small moneymaking enterprises started. And because of the often easy payment terms and concessional interest rates (if at all), borrowers are encouraged to pay for their debts even in small amounts at a time.


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