The Importance Of Microfinance

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In the last few decades, Microfinance has become a popular tool in reducing poverty, particularly after the successful impact of Grameen Bank in Bangladesh. There are crossroads between increased humanitarian work and commercialization at which the microfinance industry is standing (Emily, 2005). Micro financing is not successful everywhere but only in some of the regions. In Latin America and Asia the microfinance providers have been the world leaders, and build the significant microfinance industries in Bangladesh, Indonesia and Bolivia with the help of their achievements (see Kieran, 2004). Today, commercial banks are recent applicants to the micro finance industry. In Pakistan, khushhali Bank is a well known established commercial bank…show more content…
This poverty lending approach is more supply oriented than demand oriented and it is mainly focused on credit. Domestic saving mobilization is often disregarded by this approach. As this approach is changed to market principles from subsidized based principles, microfinance institutions and governments regard microfinance as the most important part of the monetary system and both of them know the importance of saving and credit services (Ledgerwood, 1999). Microfinance is creating an ongoing impact in increasing the income and if institutions provide easy access to the credit, it can create long-lasting rise in income by investing in income enhancing activities. Easy access to credit can help in accretion of assets and it can decrease the susceptibility due to crop failures and drought. The best advantage of access to credit is that it contributes toward the better health, housing and education of the borrower (Littlefield, Morduch and Hashemi, 2003; Dunford…show more content…
These advantages are: They implement participatory approach in the implementation, evaluation, planning, and monitoring of the projects. These institutions assist the poor to take part in the matters affecting their lives and thus they further gain control over the quality of poor’s lives. They have skills to mobilize the poor and communicate with them. Microfinance institutions have the ability to promote public participation with the help of the relationships they build with societies they serve. Futile local institutions are strengthening by these institutions and they are also experimental, innovative and flexible in their work. This signifies that they adapt technologies which are developed elsewhere to local state, as well as devising new original responses to local requirements, i.e. they are proficient in implementing the social learning progression approach. Microfinance institutions and NGO’s are of key importance who will take the development a step forward rather the governmental institutions. (Davids: 2005:

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