Question

Create a table to identify some costs and benefits for microcredit

Answer 1

BENEFITS OF MICROFINANCE ACCESS Banks simply won’t extend loans to those with little or no assets, and generally don’t engage in the small size of loans typically associated with microfinancing. Microfinancing is based on the philosophy that even small amounts of credit can help end the cycle of poverty. Many women and girls have trouble accessing formal financial institutions as they don't have appropriate identification or certification of land and house ownership. BETTER LOAN REPAYMENT RATES Microfinance tends to target women borrowers, who are statistically less likely to default on their loans than men. These loans help empower women, and they are often safer investments for those loaning the funds. EXTENDING EDUCATION AND HEALTH Families receiving microfinancing are less likely to pull their children out of school for economic reasons and more likely to have resources to pay for school fees or health services. SUSTAINABILITY Even a small working capital loan of $100 can be enough to launch a small business in a developing country that could help the individuals pull themselves and their family out of poverty. These small businesses can help create new employment opportunities, which has a beneficial impact on the local economy. IMPROVED INCOME AND NUTRITION Through small loans women are able to get needed agriculture inputs such as improved seeds and fertilizers to increase productivity and nutritional content of crops and generate more income from the market.

COSTS While some have lauded microfinance as a way to end the cycle of poverty, decrease unemployment, increase earning power, and aid the financially marginalized, some experts say that it may not work as well as it should, even going so far as to say it’s lost its mission. Others argue that microfinance simply makes poverty worse since many borrowers use microloans to pay for basic necessities, or their businesses fail, which only plunges them further into debt.