Posts Tagged ‘Grameen Bank of Bangladesh’
Micro Loan Repayments
April 6, 2011 | 
Author How micro loans have made entrepreneurs out of supposedly simple rural people
The truth about human beings is that everyone is a born entrepreneur. Everyone has the desire of doing something on his own, but few people actually get the chance to do it. The problem is obviously money. Poverty in a third world country like India had become a vicious cycle; a trap that promised to kill whoever dared to cross its path. The poor people had all the initiative in the world, but where would they get the money to do anything? This is the premise which made Professor Mohammad Yunus start the Grameen Bank of Bangladesh in making micro loans available to economically- disadvantaged people. India borrowed the example and developed MFIs to give out micro loans to mainly rural women, though men were not left out.
A micro loan can do wonders for a person belonging to a low- income background. As said earlier, poor people don’t lack the initiative, all they need is the money. Once they got hold of micro loans, they had the freedom of starting their own small home- based businesses. Women engaged themselves in making stuffed toys, pickles, detergents, soaps, chapattis, etc. while men set up small shops or started a woodworking business.
Micro loans in India mark a turning point. The supposedly simple rural folk with nothing to show on their resumes became entrepreneurs. Their success can be easily measured by the 97% repayment of micro loans MFI’s in India have calculated. With micro loans in India, it’s been success all the way!
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Why Micro Loans
Why giving Micro Loans is better than dole- outs in India
Micro financing and micro loans in India have come a long way since the government started such initiatives way back in the 1990’s after the example set by the Grameen Bank of Bangladesh. Various programs such as the Swarnajayanti Gram Swarozagar Yojana were started to help people from low- income families to start Self Help Groups (SHG’s). SHGs’ are meant to act as initiatives where not only disadvantaged people can help themselves earn a living, but also help similar people from their community do so. It helped foster a spirit of team wok among people. All this has been made possible because of micro loans.
The reason why micro loans are a lot better than dole- outs is because it helps in building self confidence. Rural people without any land or property often have to wait for days for work. They are impoverished and have difficulty in providing for their families. Giving them free food, blankets, clothes and even money may help for the time being, but it will do nothing for their long- term finances. A micro loan on the other hand, makes them feel that a financial institution actually holds them in high esteem. Micro loans help them understand that they have the abilities and skills required for setting up a SHG and running their own business. This is perhaps the reason why repayment of micro loans is at such a high in the country.
Truly, poor people work better with a micro loan than a dole- out.
How Micro Loans Help Low-Income Families
Micro loans: A helping hand to low- income families in India
With roughly 1.2 billion people in India living below the poverty line, it is no wonder that government initiatives for poverty alleviation became a serious concern to be considered in the 90’s of the last century. After a lot of thought, it was decided that micro loans would be made available according to the commendable example set by the Grameen Bank of Bangladesh. Micro loans are easily available, do not require a collateral or verified credit history and were available in amounts varying from a few hundreds to a lakh rupees.
Micro loans are meant to be a helping hand for low- income families. They were mainly meant for women, though a lot of men have enjoyed their benefits. A micro loan is usually given out because it is expected that the borrower will use it as capital investment for starting a small scale business, preferably employing a few other people as well. Self Help Groups (SHG’s) were linked to the mainstream banking system through micro loans in India. There are options for multiple micro loans as well.
The concept of micro loans in India is such that low- income persons who would otherwise have not been eligible for a loan from a normal bank or financial institution for setting up a business can take advantage of. With more than 2.5 million SHG’s in India started with the money got from micro loans, micro finance has truly achieved what it set out to.