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Micro-loan Challenges and Possibilities in Globalization and Free-Trade The Argentinian Case

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Micro-loan Challenges and Possibilities in Globalization and Free-Trade The Argentinian Case

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    1. Micro-loan Challenges and Possibilities in Globalization and Free-Trade The Argentinian Case

    2. Microloans- Introduction In Argentina , Micro-loan Phenomenon arose during the last decade as a result of the increase in the unemployment and poverty levels which left millions of Argentinians on the margins, excluded from the formal circuit of credit.

    3. Micro-loan Situation The Argentinian Case Micro-loan dimension: Organization Access to resources Demand: characteristics and transformation Effects on poverty reduction FODA Analysis Challenges

    4. Organization The main Institutions which work with Micro-loans in Argentina: Non governmental Organizations Government offices/ departments Banks

    5. Organization Non Governmental Organizations Positive aspects: They work according to a standardized methodology that changes from one Institution to the other to render the programme successful ( associations, solidarity within the groups, support to women,etc.) They work with a simple and standard procedure. Assistance is not limited to a financial one ( it means qualitative changes in beneficiaries´ attitude). They know the place where they work very well and they work in close contact with the beneficiaries .

    6. Organization Non Governmental Organizations Negative aspects: They have some organizational problems. They have some resources problems: Financial resources: external financial support is needed because of lack of self-support ; problems with fund raising. Human resources: problems associated to voluntary work. They work with high interest rates to cover operative costs.

    7. Organization Non Governmental Organizations Results: Qualitative and Quantitative changes in the beneficiaries. High rates in credit refund ( more than 90% ).

    8. Organization Government Departments Positive aspects: They can reach more people. More possibilities in fund raising. They work with lower interest rates ( subsidy interest rates).

    9. Organization Government Departments Negative aspects: They don’t follow a suitable methodology to make the programme succeed ( high amounts of money, individual credits,etc.) It does not favour personal growth. It can be used to gain political support. Lack of personal relationship with the beneficiaries. Bureaucratic procedures ( changes in the forms, poor information,etc.)      

    10. Organization Government Departments Some Micro-loan programmes from the Government: National Manos a la Obra Programme Provincial BANexo Programme CAM Programme

    11. Organization Government Departments Results: Although governmental programmes are devised to help the poor, they tend to fail because of: lack of a suitable methodology, lack of personal development goals and political support restrains.

    12. Organization Banks Banks ( specially state ones) work together with the non governmental organizations and the government departments with direct or indirect support ( fund raising, fee cash,etc). Some Banks: Provincia Bank ( BANexo Programme ) Nación Bank (FoMicro Programme )

    13. Access to resources Economic or financial resources Non Governmental Organizations Most of Micro-loan Institutions have not reached self-support That is why many of them need external finance support such as: Donations Public subsidies International Help: IDB, WB Other sources: FONCAP

    14. Access to resources Economic or financial resources Government Departments Until 2001 Argentina was not a first priority for the International Cooperative Institutions as regards “ poverty fight” because of its high per capita income. From 2001, The Government has received International assistance for different Programmes including Micro-loan Programmes ( The World Bank has given $ 100 millions for “ Manos a la Obra” Programme).

    15. Access to resources Economic or financial resources Problems: Non Governmental Organizations - problems with fund raising due to: lack of ads campaign, poor standardized procedures to provide information to prospective donors. Government- Wrong use of the financial support (fines have to be paid as supports were not applied to programmes).

    16. Access to resources Human resources Non governmental Organizations: Positive : Great quantity of volunteers Negative: Personnel rotation Government: Positive: paid staff Negative: a small staff in relation to the beneficiaries

    17. Demand: characteristics and transformation Micro-credit demand has been changing during the last years. First it proved to be a valuable asset for the poor. Nowadays micro-credit demand belongs to the impoverished middle class ( new poor). Lower class: First destination of Micro-credits. They are still the principal goal for the Government and the non governmental organizations assistance. Low socio-cultural level, low literacy level. They work in poor conditions. They are used to receive assistance from the Government.

    18. Demand: characteristics and transformation Impoverished Middle Class: They have begun to ask for micro-credits recently. Middle or high socio-cultural level, middle or high literacy level. They have work experience because they used to be employed in the past. They are not used to receiving assistance from the Government.

    19. Effects on Poverty Reduction The increasing poverty level ( in Argentina) during the last decade ( excluding millions of people from the formal circuit of credit ) paved the way to Micro-loans Institutions growing raise. Unemployment rates were gradually diminished because of the governmental and non governmental support to micro entrepreneurs through this financial tool.

    20. Effects on Poverty Reduction

    21. Effects on Poverty Reduction

    22. FODA Analysis

    23. FODA Analysis Positive aspects: Suitable goal of the loans. Wide variety of choice ( governmental and non governmental loans). A decade´s experience Excellent quantitative and qualitative results (poverty decreasing level, literacy increasing level,etc.)

    24. FODA Analysis Possibilities Argentina: shows a high entrepreneur culture. Knowledge about the importance and necessity of this instrument. Great increase in Micro-loan demand. Slight economic boost together with a favourable view in the international political area. Governmental support.

    25. FODA Analysis Weaknesses Fund raising problems. Human resources problems. Lack of a suitable standardized methodology ( in some cases) Organizational problems ( in some cases)

    26. FODA Analysis Threats Lack of a right legislation. Differences within political parties Poor working conditions ( low added value) Restricted financial resources Economic instability

    27. Challenges A suitable legislation to benefit: Micro entrepreneurs Institutions Prospective donors Better access to financial resources Micro entrepreneurs enrolment in tax system Increase in the value of products

    28. Challenges... Foster relationship between different Micro enterprises. Educational Development Programmes. Positive answer to the increasing demand by the impoverished middle class.

    29. Thank you for your time

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