Micro-Credits

Week 5// Post 6

In previous blog post I have referred to Poor Economics, by Banerjee and Duflo and how they have addressed the issues regarding aid in Africa from the good to the bad in in-between. This week we are introduced to micro-credits, which are playing a role in aid. Micro-credits are defined as a small financial loan made to poverty-stricken individuals seeking to start their own business according to Business dictionary .

Banerjee and Duflo make notions for and against the aid of microcredits. They said that if done right micro-credits could do a lot for a country and pull it out of poverty. Staring a new business is hard enough in a country that isn’t stuck in poverty, so staring a business in a country that is poverty is nearly impossible. When these people receive loans it gives them the motivation and hope that they are capable of reaching their goals and dreams while taking of some of the pressure to get it started. It has the potential to do great things if executed correctly and gives the people something to strive for.

Starting a new business comes with a lot of work and responsibility. Typically we only see the finished product not all of the work that is involved. When you receive a loan you have to pay it back in the long run, which the entire point of a loan. When you give out money to a country in poverty it is hard to expect that money is going to returned because they are so poor and if there business fails they are put into even more debt; again pushing them back into the poverty trap. The other issue is, is that it takes so long of for a business to establish itself that people lose their motivation and end goal and cant pay back their loan.

In my opinion I agree with the good and bad, I can see where both sides of the argument is presented. I think that if educated correctly on the process businesses have the opportunity to succeed. However, I also agree with the bad and how when you give someone a loan that cant repay you, you are pushing them deeper into poverty. As well as starting a business in a poor area and expecting your business to succeed.

As I have been focusing on Burkina as a country over the past couple blog post. I have been discussing the different aid and how it has been successful in Burkina the same goes for micro-credits. The Hunger Project has been a big success by bringing awareness to the end of hunger in Africa. “…The economic empowerment of the most important but least supported food producers on the continent – African woman” (Greenberg, 2017) In Burkina Faso there are currently 15 epicenters that have a bank with an office and out of that 5 of them are considered Rural Banks. Each of these fifteen epicenters has partners that concentrate on a number of different topics like agriculture, food processing, handicrafts, livestock, petty trade and general services. Because of these loans many people have be able to seek a life other than farming due to the opportunity that micro-loans has provided. While reading up on the hunger project something that I found to be interesting was that this project is focused on woman and woman empowerment. The Hunger Project Microfinance program (MFP) is locally owned and led by woman as well as being fully intergraded. This program is met to train these women how to manage credit and loans in order to be successful. “ The majority of the microfinance committee seats are for woman and 75% of the board of directors of the rural bank are woman, giving woman a powerful choice in the community – often for the first time.” (Greenberg, 2017) The program will eventually gain the financial means that will give them the economic self-reliance as well as the government certification that will allow the Rural Banks to flourish.

 

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I am pro micro-credits for the country of Burkina Faso. From the research and different programs there have been a lot of positive outcomes. The “training” that is offered to help woman and men that goes hand and hand with the loans that are given out allows the economy to achieve. This program is going above and beyond to create a sustainable aid by educating rather than just handing out.

Digital technology is increasing by day and especially in developing countries. With the increase more and more countries in poverty have has access to mobile phones. With mobile phone it has given these countries lost of opportunity. According to World Bank “ Digital technologies can promote inclusion, efficiency, and innovation. Bangladesh is a great example of how digital technology has a positive impact on a country; mobile banking has expanded financial inclusion for the poor. Expanding the world of ecommerce.

 

References

http://www.worldbank.org/en/news/press-release/2016/05/16/digital-technologies-have-spread-rapidly-but-digital-dividends-have-lagged-behind-says-new-world-bank-report

http://www.thp.org/our-work/where-we-work/africa/burkina-faso/microfinance-economic-activity-burkina-faso/

Banerjee, A. & Duflo, E. (2011). Poor Economics.

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