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Microcredit
Microcredit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment, and a verifiable credit history. It is designed to support entrepreneurship and alleviate poverty. Many recipients are illiterate, and therefore unable to complete paperwork required to get conventional loans. As of 2009[needs update] an estimated 74 million people held microloans that totaled nearly US$40 billion. Grameen Bank reports that repayment success rates are between 95 and 98 percent.[1] The first economist who had invented the idea of microloans was Jonathan Swift in the 1720s. Microcredit is part of microfinance, which provides a wider range of financial services, especially savings accounts, to the poor. Modern microcredit is generally considered to have originated with the Grameen Bank founded in Bangladesh in 1983 by their current Chief Adviser Muhammad Yunus.[2] Many traditional banks subsequently introduced microcredit despite initial misgivings. The United Nations declared 2005 the International Year of Microcredit. As of 2012, microcredit is widely used in developing countries and is presented as having "enormous potential as a tool for poverty alleviation."[3]
Some argue that microcredit has not had a positive impact on gender relationships, does not alleviate poverty, has led many borrowers into a debt trap and constitutes a "privatization of welfare".[4][5] The first randomized evaluation of microcredit, conducted by Mr. Abhijit Banerjee and others, showed mixed results: there was no effect on household expenditure, gender equity, education or health, but the number of new businesses increased by one third compared to a control group.[6] Some of this increase in the number of businesses can be due to 'informal intermediation'[clarification needed] documented by Frithjof Arp and collaborators: Philanthropic, low-interest-rate microcredit fosters unintended entrepreneurship where some borrowers split loans they receive and on-lend to less-entrepreneurial borrowers.[7]
- ^ "What We Do – Grameen Foundation – Connecting the World's Poor to Their Potential". Archived from the original on June 29, 2013. Retrieved May 16, 2012.
- ^ Cite error: The named reference
Bateman 2010was invoked but never defined (see the help page). - ^ Jason Cons and Kasia Paprocki of the Goldin Institute, "The Limits of Microcredit—A Bangladeshi Case" Archived 2012-01-16 at the Wayback Machine, Food First Backgrounder (Institute for Food and Development Policy), Winter 2008, volume 14, number 4.
- ^ Gina Neff:Microcredit, microresults Archived October 21, 2006, at the Wayback Machine The Left Business Observer #74, October 1996
- ^ Arp, Frithjof (January 12, 2018). "The 34 billion dollar question: Is microfinance the answer to poverty?". Global Agenda. World Economic Forum. Archived from the original on January 18, 2018. Retrieved January 18, 2018.
- ^ Banerjee, Abhijit; Esther Duflo; Rachel Glennester; Cynthia Kinnan. "The miracle of microfinance? Evidence from a randomized evaluation". Archived from the original on April 6, 2012. Retrieved April 17, 2012.
- ^ Arp, Frithjof; Ardisa, Alvin; Ardisa, Alviani (2017). "Microfinance for poverty alleviation: Do transnational initiatives overlook fundamental questions of competition and intermediation?". Transnational Corporations. 24 (3). United Nations Conference on Trade and Development: 103–117. doi:10.18356/10695889-en. hdl:10419/170696. S2CID 73558727. UNCTAD/DIAE/IA/2017D4A8. Archived from the original on May 4, 2020. Retrieved September 30, 2017.
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