Microfinance Literature Review

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Chapter 2 literature review 2.1 Introduction This chapter will implement an overview of subsidies in microfinance, the impact and performance of microfinance and loan repayment issues. A definition of microfinance will be provide in Section 2.2, follow with the history of microfinance. The characteristics of Grameen Bank microfinance is discuss in Section 2.4 while types of microfinance provider is discuss in Section 2.5. The subsidies in microfinance and performance of microfinance institutions is review in Section 2.6 and 2.7 respectively. Section 2.8 will debate the previous studies on the impact of microfinance and lastly in Section 2.9 a reviews on repayment issues in microcredit loans. 2.2 Definition of Microfinance Microfinance is a…show more content…
The old term of microfinance was rural finance or informal finance. In the years 1950s through the 1970s, most of the financial services are given from the donors or governments to subsidised rural credit programmes. The term “ microfinance” became popular when it is extensively used by Muhammad Yunus, the inventor of Grameen Bank in the 1970s. Microfinance is used widely within the Europe countries in16th and 17th centuries, for instance, Ireland and Germany ( Steinwand, 2001). Friendrich Wilhelm Reiffisen, a microfinance provider offers a service name credit cooperative in Germany to helps the economy of the country in the “hunger year” of 1846 ( Hollis & Sweetman, 1998). This credit cooperative model also known as “ Raiffeisen Model” has help Germany served 1.4 million farmers in rural areas by the year 1910 and the successful makes Ireland and Northern Italy intimate the programs ( Morduch,…show more content…
One of the most successful microfinance institutions in the world, Bank Rakyat in Indonesia (BRI) is providing services based on this model ( Seibel, 2005). In the other hands, informal finance is popular among Asian countries, but it called with various name. For instance, the informal lending termed as “Chit funds” in India, “Hui” in China, and “Paluwagan” in Philippines (Seibel, 2005). Microfinance has developed rapidly in Bangladesh since 1970s by Muhammad Yunus. Muhammad Yunus is a famous Bangladeshi economist who aware the economy of the country and the difficulty of the poor ( Yunus, 2007a). Furthermore, Muhammad Yunus starts his first microlending program to a women villagers in Jobra by offering a non-collateral loans with his own money. The women use the loans to involve in activities that will help them generate income such as weaving bamboo stools and making pots ( Yunus,

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