micro credit & poverty

8/9/2019 Micro Credit & POverty

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Poverty


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Poverty:

Poverty is one of the spatial variable that

is more common to the developingcountries, and is one of the currentpopulation and development issues of theworld.


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Contains:

DefinitionTypes

Causes of PovertyPoverty linePoorest &Richest CountriesBangladesh Poverty:Cycle of povertyPoverty reductionConclusion


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Definition

Poverty is hunger. Poverty is lack of shelter.Poverty is being sick and not being able tosee a doctor. Poverty is not having access toschool and not knowing how to read.Poverty is not having a job. Poverty is losinga child to illness brought about by uncleanwater. Poverty is powerlessness, lack ofrepresentation and freedom.


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Types:

Extreme (or absolute) poverty

Relative poverty

Moderate poverty:


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Causes of Poverty:

1- Half the world nearly three billion people live on less than two dollars a day.

2-

The GDP (Gross Domestic Product) of the 41

Heavily Indebted Poor Countries (567 millionpeople) is less than the wealth of the worlds 7richest people combined.

3- Nearly a billion people entered the 21st centuryunable to read a book or sign their names.


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Around the world, 2730,000children die every day. Thatis e uivalent to 1 child dying

every 3 seconds, 20 childrendying every minute, a 2004Asian Tsunami occurringalmost every week, or1011million children dying everyyear. Over 50 millionchildren died between 2000and 2005

Today,over 26,500 childrendiedaround theworld.


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GDP - per capita

$600$600

$600

$600

$700$700

$800

$800

$800

$900

1 Malawi2 Somalia3 Comoros4 Solomon Islands5 Congo, Democratic Republic of the6 Burundi7 East Timor8 Tanzania9 fghanistan10 Yemen

Rank Country GDP - percapita

1 Malawi $ 600

2 Somalia $ 600

3 Comoros $ 600

4 Solomon Islands $ 600

5Congo,Democratic Republic

ofthe$ 700

6 Burundi $ 700

7 East Timor $ 800

8 Tanzania $ 800

9 Afghanistan $ 800

10 Yemen $ 900

Source: CIA World Fact book

10 Poorest Countries in the World.


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Rank Country GDP - percapita

1 Luxembourg $ 68,800

2 EquatorialGuinea $ 50,200

3 United Arab Emirates $ 49,700

4 Norway $ 47,800

5 Ireland $ 43,600

6 United States $ 43,500

7 Andorra $ 38,800

8 Iceland $ 38,100

9 Denmark $ 37,000

10 Austria $ 35,500

Source: CIA World Fact book

10 Richest Countries in the World.

GDP - per capita

$68,800

$50,200

$49,700

$47,800$43,600

$43,500

$38,800

$38,100

$37,000$35,500

1 Luxembourg 2 Equatorial Guinea3 United Arab Emirates 4 Norway5 Ireland 6 United States7 Andorra 8 Iceland9 Denmark 10 Austria


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Poverty indicators of Bangladesh (most

recent)

Numberofrural poor(million) 101.0

Pooras % oftotalrural population 53.0

Populationlivingbelow US$1 aday(%) 36.0

Populationlivingbelow US$2 aday(%) 82.8

Populationlivingbelowthe national poverty

line (%)

49.8

Povertygap ratioat US$1 aday(%) 8.0

Share ofpoorest 20% innational income or

consumption(%)

9.0

Bangladesh Poverty:


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Bangladesh Poverty:


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Cycle of poverty

In economics, the cycle of poverty is the "set of factors or events by which poverty, once started, islikely to continue unless there is outsideintervention."


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Poverty reduction:

1-Microcredit

2-Economicgrowth

3-Freemarket

4-Directaid

5-Trade


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MICROCREDIT

What it is?

A simple definition would be as followExtend small loans to very poor people

for self-employment projects that generateincome, allowing them to care forthemselves and their families.


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CHARACTERISTICS OF MICROCREDIT

It promotes credit as a human right.

It is targeted to the poor, particularly poor women.

Most distinctive feature of credit is that it is not based on anycollateral, or legally enforceable contracts. .

It is offered for creating self-employment.

It was initiated as a challenge to the conventional bankingwhich rejected the poor by classifying them to be "notcreditworthy". .

It provides service at the door-step of the poor .

In order to obtain loans a borrower must join a group of

borrowers. oans can be received in a continuous se uence. All loans

are to be paid back in installments (weekly, or bi-weekly).

Simultaneously more than one loan can be received by aborrower.

Microcredit gives high priority on building social capital


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E IGIBI ITY TO RECIEIVE MICROCREDIT

and ownership of the household. For example, landless andmarginal farmers owning or cultivating less than 1.50 acre(0.6ha) of land

Age of the individuals applying for credit must be agedbetween 18-54 years.

Income of the households: maximum monthly income of up to3000 taka (e uivalent to 44.44 USD).

The individual should be a permanent resident of the village.

The individual cannot be affiliated with otherNGOs or any

other microcredit program at the same time. Health status of the individuals. Individuals must be physically

active having no serious diseases like cancer or disabled.

Chief Focus on poor and destitute women. Priority is given onwidowed or divorced women with children.


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HOW MICROCREDIT IS

DISBURSED

Mode of operation.

There is an exclusive focus on thepoorest of the poor.

eligibility for a subse uent loan

depends upon repayment of first loan


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HOW AMEMBER IS CONSIDERED TO BENO MORE E IGIBI E

The family lives in a house worth at least Tk. 25,000(twenty five thousand)

Family members drink pure water and have access tosanitary latrine.

Minimum weekly loan installment of the borrower is Tk.200 or more

All children in the family over six years of age are allgoing to school

Family members have ade uate clothing for every day

use, Family afford to take necessary steps to healthcare.

The borrower maintains an average annual balance ofTk. 5,000 in her savings accounts

Family experiences no difficulty in having three s uaremeals a da throu hout the ear


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MICROCREDIT PROVIDERS IN

BAN

G ADESH

Grameen bank

BRAC

Proshika

ASA

PKSF


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MicroCredit and Poverty Alleviation Microcredit assumption believes that the poverty is not

created by the poor, it is created by the institutions andpolicies which surround them.

In order to eliminate poverty all we need to do is to makeappropriate changes in the institutions and policies,and/or create new ones. Charity is not an answer to

poverty. Rural poor need credit to allow investment in their smalland micro enterprises. The lack of physical collateralrestricts the poor to the formal source of finance.

Micro credit is intended to help the rural poor escapepoverty by investing in their own enterprises.

it had earlier been thought that the poor would not beable to find remunerative occupations. In fact,Microcredit borrowers have successfully done so.

It was thought that poor rural women in particular werenot bankable; in fact, they accounted for 94 percent of

borrowers in early1

992.


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The Success ofMicroCredit inBangladesh

It was thought that rural power structures would makesure that such a bank failed; but the Grameen Bank hasbeen able to expand rapidly. Indeed, from fewer than

15,000 borrowers in 1980, the membership had grown tonearly 100,000 by mid-1984.

By the end of1998, the number of branches in operationwas 1128, with 2.34 million members (2.24 million ofthem women) in 38,957 villages.

There are 66,581 centres of groups, of which 33,126 arewomen. Group savings have reached 7,853 million taka(approximately USD 162 million), out of which 7300million taka (approximately USD 152 million) are saved

by women.


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MICROCREDIT IN CO OMBIA

In Colombia, innovative microenterprise program is run byFUNDAEC (Foundation for the Application and Teaching of theScience) a private social and economic development foundationbased in nearby Cali.

FUNDAEC's program is the degree to which it seeks to extend the

benefits of credit to the entire community. FUNDAEC re uires thatone percent of each loan be set aside in a special social fund, tobe used in projects that are of service to the entire community.

Since it was started in 1989, the FUNDAEC program has turnedover an initial fund of about $400,000

The average size of each loan has been about $600. ike the Grameen Bank, FUNDAEC organizes potential borrowers

into "solidarity groups" - small bands of three to five people whocollectively pledge to repay such loans

Over the last seven years some 250 solidarity groups have been

formed


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MICROCREDIT IN KENYA

In Kenya microenterprise program is run by Kenya RuralEnterprise Programme ( K-REP) a private microfinanceinstitution registered as a Company imited.

The Kenya Rural Enterprise Programme (K-REP) wasestablished in 1984.

K-Rep's mission is to facilitate poverty alleviation by developingsystems and institutions that will enable poor people to organizetheir lives financially.

K-REP operates two loan programs for micro and smallentrepreneurs, Juhudi and Chikola.

The Juhudi methodology involves groups of small groups: eachJuhudi group consists of four to seven smaller groups, whichconsist of three to eight individuals.

The Chikola loan program works through existing rotatingsavings and credit self-help groups that are comprised ofindividual microentrepreneurs.


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Conclusion

Yet there is plenty of food in the world for everyone. The problem is that hungry peopleare trapped in severe poverty. They lack the

money to buy enough food to nourishthemselves. Being constantly malnourished,they become weaker and often sick. Thismakes them increasingly less able to work,

which then makes them even poorer andhungrier. This downward spiral oftencontinues until death for them and their families.

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