Question

discuss microfinance activities in developing countries

Answer 1

Microfinance increases financial inclusion by extending financial services to small businesses and new entrepreneurs, especially in rural and poor areas. The objective of microfinance is to create an environment where low-income earners can easily access good quality financial services to smooth their consumption, purchase assets and fund their daily activities. In recent years, there has been much debate about the effectiveness of microfinance in alleviating poverty. This article will cover the positive and negative effects of microfinance in developing countries, particularly in Africa and South Asia (where most of the world’s poor live) and aims to evaluate the future of microfinance in these countries. Microfinance may theoretically be effective in creating financial inclusion but it has a dark side. Although the global microfinance sector has shown impressive growth and is expected to grow by 15-20% by the end of 2015, this growth is unique to certain areas. For instance, numerous areas in Africa and South Asia still do not have access to microfinance: the industry may be booming in Kenya, Ghana and India but many remote villages in Sudan, Democratic Republic of Congo and Afghanistan have never been introduced to the concept of microfinance. This is largely due to geographical constraints, political conflicts and poor governance that hinder the genuine implementation of microfinance.