A Friendly Introduction to Microfinance

A Friendly Introduction to Microfinance A Friendly Introduction to Microfinance - Start

2018-11-11 18K 18 0 0

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w. ith Sanghmitra Gautam. The start of Microfinance . Why was there a gap in service?. The first Microfinance loan:. USD 27.00 lent to a group of 42 women in rural Bangladesh. . Each of the women made a profit of USD 0.02 . ID: 727952 Download Presentation

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A Friendly Introduction to Microfinance




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Presentations text content in A Friendly Introduction to Microfinance

Slide1

A Friendly Introduction to Microfinance

with Sanghmitra Gautam

Slide2

The start of Microfinance

Why was there a gap in service?

The first Microfinance loan:

USD 27.00 lent to a group of 42 women in rural Bangladesh

Each of the women made a profit of USD 0.02

Slide3

Before Microfinance

Self-Help Groups (SHG)

ROSCAs (Rotating Savings and Credit Association)

Post Offices in India

‘SUSU’ Collectors in Ghana

Community Banks (NABARD India)

Slide4

What did Microfinance bring?

Instutionalized the process of lending credit

Grameen Bank in

Bangladesh (1983)

Transition from Microcredit to Microfinance

Financial self-sufficiency

Sustainable productivity from credit

Access to financial services

Slide5

Household Demand

Savings:

Education

of childrenInsurance against shocks (Health, Weather etc.)Smoothing Household consumption Loans:Investment to increase productivity

Slide6

Supply

‘provide loans for investment in an income generating activity’

Slide7

Theory behind the policy

Why doesn’t the free market supply financial services?

The standard Principal – Agent Problem Presence of Asymmetric Information Transaction Costs Adverse Selection (Screening/Signalling)Moral Hazard (Monitoring) Enforcement Costs (Repayment of loans)

Slide8

How does it work?

GROUP LENDING

Mechanism: Joint Liability Default Clause

Delegation of agency costs to the borrowers Efficiency gains – borrowers can screen, monitor and enforce repayments at a lower costEnforcement of repayment via social sanction among peer members

Slide9

How does it work?

INDIVIDUAL LENDING

Mechanisms

Progressive Lending Loans conditional on savings Loans to WomenPublic disclosure of borrowers’ repayment history Non-Refinancing threat Cross Reporting (MFIs)

Slide10

Loans

for income generating

activities

Small scale investment in machineryLivestock (e.g. dairy farming) Cash loans to smooth Household consumptionSeasonal liquidity constraints Micro Insurance Micro Savings Many Faces of Microfinance

Slide11

Recent Developments

M-

Pesa

in Kenya Loans to urban poor (Developed Countries) Loans for health infrastructure – Clean water and sanitation Many Faces of Microfinance

Slide12

THANK YOU

Slide13


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