Last week we talked about microfinance, and specifically ways to help alleviate poverty in the poorest of areas. A topic that’s closely related to microfinance, but in some ways a better option is micro-franchising. It’s basically business ownership training. It is not only for developing counties however, it can be used for the poor in cities of developed countries as well.
globalEDGE Blog - By Tag: microfinance-series
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To cap off our Blog Series this week I decided to interview a local Microfinance organization started by some of our own Spartans. The Spartan Global Development Fund was started officially on July 4, 2009, when they made their first four microfinance loans.
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The main idea behind microfinance is to provide small loans to the poor small entrepreneurs to help them rise out of poverty. Due to the nature of this finance sector and its origination in NGOs, funding for microfinance institutions comes mainly from subsidized funding.
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Microfinance has seen such an increased popularity in the last decade, which has led to more than 91 million customers, most of them women, with loans totaling more than $70 billion by the end of 2009. India and Bangladesh together account for half of all borrowers! However, the system is not as perfect as you may think. In fact, it may be quite the opposite. In India some lending firms are growing at 60 percent to 100 percent a year. Investors in India’s largest microcredit firm, SKS Microfinance, sold shares last year for as much as 95 times what they paid for them a few years earlier!
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If you’ve been reading our blog series then you know that microfinance is a term that describes the practice of giving small loans to entrepreneurs in developing countries that would not otherwise be able to get a loan. This seems great, but some say that these loans are unfair because of their high interest rates they charge. There are companies that specialize in this and make a lot of money because of the extreme interest rates, however Kiva is different.
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To most people in the developed world, banks have become an integral part of our lives. For the most part they have operated silently in background just as we would wish. We take out a mortgage (or two), pay our credit cards and deposit any extra money into a savings account. We don’t really think about it – they have always been there and we assume they will always be there to serve us. This lifestyle is in direct contrast with low-income citizens from small towns in developing countries.
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It’s time for another blog series at globalEDGE! This week we’re going to be talking about microfinance; but before we get into this topic further, I’d like to give a little background on what exactly microfinance is.