“Impact Assessment of Microfinance in Amhara Region

Part I: Defining Micro-finance and understanding it implications on rural lives Over the course, the term 'microcredit' has shifted to 'microfinance' mainly to anticipate the broader aspect of financial ecosystem to serve the need of the poor through various financial services (Ledgerwood, Earne, & Nelson, 2013) such as microcredit loans, savings, and insurance (Newman, Schwarz, & Ahstrom, 2017). The transformation and commercialization of the microfinance concept has now integrated as a formal financial sector (Ledgerwood & White, 2006). According to Obaidullah (2008) microfinance is an appropriate stratagem to alleviate poverty. Nwankwo, et al. (2013) stated that microfinance is drawing greater attention as a solution to the "… crippling effects of the conventional banks interest on the poor …" Ledgerwood & White (2006) supported that the microfinance approach is the ideal method to accomplish the mobilization required to greatly expand exposure to financial resources for millions of low-income households worldwide.

2021

Manager - The British Journal of Management, 2022

Microfinance, also called microcredit, is a banking service provided for low income individuals or unemployed people who does not have other access to financial service. They do not have enough money to do business and are deprived of traditional financial sources. Microfinance is assisting the underprivileged, particularly in rural areas in this perspective. With the financial support from the microfinance sector, rural women all around the country have experienced significant improvement. Ghambhirpur village, Jagitial district is the subject of this study in particular. This study evaluates whether microfinance actually assisted the underprivileged in rural area (Jagitial district Ghambhirpur village) and aims to study how the poor people's standard of living has altered since they joined in microfinance and if microfinance has benefited the people of Ghambhirpur, Jagitial district. Data is collected with a sample size of 100 using a survey method through a structured questionnaire. Descriptive analysis, Chi-square test, Correlation are used to analyze the data and it is found that respondents' standards of living has increased after joining in microfinance and also there is an increase in financial assets of respondents. The respondents felt that microfinance led to economic development and finally it is concluded that microfinance plays an important role in rural development.

Microfinance is a type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services. Such loans were used for various purposes, including investments in micro enterprises and petty trading activities and agricultural production. Most micro-credit clients are female heads of households, pensioners, displaced persons, retrenched workers, small farmers, and micro-entrepreneurs (Morduch and Haley, 2002). Rural dwellers have been considered as poor, non-bankable and un-bankable. They are deprived of the basic financial services due to the lack of saving and collaterals to offer in order to access these services, most specifically in the formal banking sector. Consequently, they have to depend on other mediums of financing their businesses. Due to the large hole left by the formal banking sector in providing small loans for the economic activities of the poor in rural areas, the micro financial institutions are therefore entrusted to fill the gaps and provide financial and other business support to the poor in society. The study was carried out in the West Mamprusi District, one of 45 new districts created in 1988 under the Government of Ghana’s decentralization and local government reform policy. Carved out of the old Gambaga District in the Northern Region the districts’ administrative capital is Walewale, which lies on the Tamale-Bolgatanga trunk road, approximately 68 miles away from Tamale. District is predominantly rural with more than 75% of the population living in rural settlements with population less than 2000. The main objective of this study was to explore the relationship between micro-credit and its effect on the wellbeing of rural folks. The study also sought to identify some of the challenges faced in accessing micro-credit facilities. It was carried out in the West Mamprusi District of the Northern Region of Ghana and employed the survey method using structured interview guides. It also used case studies and literature search for data collection. Of the 78 participants, 65 of them were women. The results indicated that the design used by the micro-credit schemes suited the characteristics of the poor and significantly empowered the MFIs clients both economically and socially. Economically and socially enterprises and welfare of beneficiaries of micro-credit facilities had significantly improved. Socially, participants were able to finance their basic needs and by implication had reduced absolute poverty in their communities. The micro-credit facilities provided easy access to credit once they were able to provide guarantors and also saved with the MFIs. They encouraged a culture of savings and repayment habits. A major challenge faced by the clients was the provision of 2 guarantors. The study recommends that MFIs should ensure that funds are made available to clients who can do better with extra capital than what is currently given and also they should upscale their activities to neighbouring communities.

Microfinance emerged as a noble substitute for informal credit and an effective and powerful instrument for poverty reduction among people, who are economically active, butfinancially constrained and vulnerable in various countries. Microfinance covers a broad range of financial services including loans, deposits and payment services and insurance to the poor and low-income households and their micro enterprises. Microfinance institutions have shown a significant contribution towards the poor in rural, semi urban or urban areas for enabling them to raise their income level and living standards in various countries.In developing countries like India the structure of economy is dualistic. The rich getricher and the poor get poorer. This worsens the access of poor to economic opportunities andreaches for formal financial services. Rural people in India suffer from a great deal ofindebtedness and are subject to exploitation in the credit market through high interest rates and lack of convenient access to credit. They need credit to fund their working capital needs on aday-today basis as well as long term needs like emergencies or other income related activities.So the need for financial assistance is essential to alleviate poverty for consistent economic growth. Despite the numerous achievements made by the microfinance service providers, employees and recipients of the services, there has been some setbacks which made the sector unstable, least trusted and unattractive in the early 1990s such as the frequent scam where depositors moneys were taken away, ineffective monitoring of the operators by the central bank; this situation lead to many mushroom microfinance companies springing up and dying out at tender stages therefore collapsing smaller businesses. In recent years, the criticism has also been centered on the very high interest rates charged by most microfinance services providers. This has caused the collapse of some small scale business therefore not serving the purpose for which it was intended to achieve i.e. poverty alleviation. Borrowers then become over burden with payment of loan or interest. This paper examines the actual attainment of success that microfinance institutions and non-profit organizations attempts for the growth and development of the society specifically the rural region. The financial Inclusion were providing by these organizations for accelerating the growth and development of rural region but we through this paper are trying to examine whether the services availed by rural people are really utilizing for their self growth and attainment and whether the Micro Finance Institutions (MFIs) are contributing for the growth of people residing in rural area. We are also trying to find out whether there are any other reasons that why people are not approaching these services or are there any hurdle in getting the facilitation of those services. It has been observed through literature review that financial inclusion provided by Government through these MFIs are not been reached to rural areas. The reason being the unhealthy practices been adopted at both receiver and the sender end.

Academic Journal of Interdisciplinary Studies, 2015

An efficient rural financial market plays an important role in the development and growth of productivity in agriculture and livestock. This means setting up a financial system to meet the typical functions of a market economy and above all the mobilization and allocation of financial resources to this sector and coordination with sources of donors and of the state budget. In this context, perhaps it is useful to set up a bank profiled in agriculture and rural development, ending anarchy of today and by establishing opportunities for better coverage to the growing needs of this sector. This would help for the displacement of available funds to the agrarian sector, either through a specialized bank without curb or deter the existing commercial banks, and the combination with other efforts in the form of investment funds, would constitute a good opportunity for to finance agricultural development with nonpublic resources.

More than subsidies poor need access to credit. Absence of formal employment make them non 'bankable'. This forces them to borrow from local moneylenders at exorbitant interest rates. Many innovative institutional mechanisms have been developed across the world to enhance credit to poor even in the absence of formal mortgage. The present paper discusses conceptual framework of a microfinance institution in India. The successes and failures of various microfinance institutions around the world have been evaluated and lessons learnt have been incorporated in a model microfinance institutional mechanism for India.