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What is the objective of microfinance and microfinance institutions (MFIs )? Lending to poor

What challenges do poor people face that prevent them access to formal sector banking institutions ? What is the objective of microfinance and microfinance institutions (MFIs)? How does microfinance work? What are the pros of microfinance? What problems are associated with microfinance?.

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What is the objective of microfinance and microfinance institutions (MFIs )? Lending to poor

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  1. What challenges do poor people face that prevent them access to formal sector banking institutions? • What is the objective of microfinance and microfinance institutions (MFIs)? • How does microfinance work? • What are the pros of microfinance? • What problems are associated with microfinance?

  2. What challenges do poor people face that prevent them access to formal sector banking institutions? • Very few have accts • Limited access • Formal credit • Credit cards • Lack of banks in rural areas • Bank usage limited • Mobile phone transactions ¤

  3. What is the objective of microfinance and microfinance institutions (MFIs)? • Lending to poor • Offer other services • Empower women

  4. How does it work? • Individual or group loan • Community clubs • Weekly meetings

  5. What are the pros of microfinance? • Poor – access to banking, credit, services • Loans to start businesses • Empower women • Employment • Alternative to moneylenders • Offers choices • Stability ¤

  6. What problems are associated with microfinance? • Monitoring, collection • Interest rates • Expensive to get started • Shady schemes • Often doesn’t lead to increased household income or consumption • Use women to get credit • Loan size negligible • High risk • Diff. to challenge macro-level w/ micro-level approach ¤

  7. Problems (cont.) • Lack of effective national governance • Lack of infrastructure • Lack of demand / buying power in community • Lack of business variety • Lack of business-building ¤

  8. Recap • More like to help communities • Often increases stability • Recent meta-study shows progress • Way to reach poor people • Way to empower women • Many obstacles that decrease potential benefit ¤

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