Microfinance Institution: The Example of Banco

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.

More increasingly we are concerned about a real problem, that of economic and social gap between the welfare of the rural population in developed European countries and in Romania. This has always been a big problem, but never the number of those in poverty was so great like today-about 5.6 million people. The article is based on this reality and attempts to synthesize the ideas of those who are at the forefront of rural society and who are able to save the Romanian village of this state of decline. Once integrated in the EU, Romanian authorities should present new principles and rules in order to adjust the Romanian legislation with EU legislation. Social inclusion and financial progress are the results of digitization trend of the financial sector, with a major impact on financial and non-banking institutions. Creating new distribution models (networks of external agents, banks without branch network), the emergence of new opportunities for customer access and management of back-office are just some of the challenges that microfinance sector has passed through on a continue process of innovation and adaptation.

That has to be uppermost in our minds as we think about what microfinance means. For IFAD, the finance issue is crucial to the task of reducing rural poverty. We do not insist on any particular institutional model. The demand for financial services is very diverse even among the poor, and we believe that any sustainable response will have to be pluralistic. Some require access to more capital than local savings systems allow. I am thinking about those who face clear investment opportunities that will allow a sustainable improvement in food security and income. For this sort of effective demand to be met, it is essential that we foster linkages with upstream financial institutions with a much larger capital base. Support can take a wide variety of forms, from intense training of qualifying microfinance institutions, so they may become viable partners with the private sector, to taking equity stakes in private-sector institutions to increase their rural outreach. We have to keep in fr...

Journal of Eastern Europe Research in Business and Economics

there is a favorable environment for the creation of economic models of financial support to SME from the Romanian rural area, namely the creation of the microfinance policies. During the approach of this difficult process for financial support, the study tries to emphasize possible new mechanisms for revitalizing the social and economic life of Romanian village. During the reference year of 2015, after two and a half decades of capitalist market economy, in the banking environment from the rural area there is not any specialized lending institution to

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.

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.