Micro-credit financing is helping
alleviate poverty in developing countries. Small and medium sized enterprises are the engine of growth and
development in emerging markets and they are also the biggest beneficiaries of micro-financing.
Micro finance institutions lend to small and medium
enterprises who under normal circumstances do not qualify for loans from
traditional banking institutions because they cannot meet most preset conditions. But through micro financing, small businesses have access to cheap financial products and flexible conditions. This is crucial especially for startups that do not have negotiating prowess and financial might of large corporations.
In
Africa it is amazing how a loan (sometimes as little as $500) can go a
long way in changing people's lives and make a difference for business. However, gaining access to such loans is hard and time consuming.
Apart from the bureaucracy that characterizes the inefficiencies in all financial institutions, small loans are very costly and basic collateral requirements are oppressive. Interest rates are unregulated in most African countries. Banks take advantage of this lack of regulation to cover up for their inefficiencies by raising interest rates at will.
Apart from the bureaucracy that characterizes the inefficiencies in all financial institutions, small loans are very costly and basic collateral requirements are oppressive. Interest rates are unregulated in most African countries. Banks take advantage of this lack of regulation to cover up for their inefficiencies by raising interest rates at will.
The
good news is that
unlike banks and other traditional financial institutions, micro-
finance institutions are not driven by the profit motive. They are
therefore able to lower their lending rates significantly.
Micro-finance institutions that focus on charity driven agendas like poverty alleviation, are
financed by donors and
philanthropists. They are therefore very attractive to new entreprenuers who have
great ideas and only need a little financing to activate
them.
The micro finance wave is really making ripples
across the continent. Success stories and testimonials from entrepreneurs who have benefited from cheap loans
are now very common.
Poverty is not a situation that anyone should be condemned to. If micro finance projects are given the support they require, by host governments and also by rich nations, then poverty could soon be constricted to history books.
Poverty is not a situation that anyone should be condemned to. If micro finance projects are given the support they require, by host governments and also by rich nations, then poverty could soon be constricted to history books.
One way in which micro finance has been able to reach most of the people who need
financing most, is through the cooperative movement.
In Kenya, for instance, micro-finance institutions encourage lending to groups of entrepreneurs with common interests. Through this, they enlarge the target groups and also strengthen the purpose of the enterprise.
People, who have never handled any form of business are assigned qualified assistants who guide them through the initial stages and offer technical support for growth and long term survival. They offer free training services and valuable advice to ensure that the business takes off and achieves stability.
In Kenya, for instance, micro-finance institutions encourage lending to groups of entrepreneurs with common interests. Through this, they enlarge the target groups and also strengthen the purpose of the enterprise.
People, who have never handled any form of business are assigned qualified assistants who guide them through the initial stages and offer technical support for growth and long term survival. They offer free training services and valuable advice to ensure that the business takes off and achieves stability.
Finally, it is important to note
that poverty alleviation in Africa and other under-developed countries
can only succeed if people are empowered to fight
poverty on their own. Micro finance is a step in the right direction
because it is a source of hope for those who want to catch their own
fish and end dependence on others.