Analysis of microfinance lending and credit assessment methodology

Micro finance there come in as the beginning of seeking effective market oriented solutions to the provision of substantial and effective financial resource for poor groups of people who do not have access to financial service from formal government and private financial institution. Hence microfinance is emerged as his provision of financial service to poor, low income and active group of people in both urban and rural area in general. So provide financial service to face lack of capital to start up new business or to improve him existing one. The number of micro finance institutions that operate in the country has reached 28 at the end of

Analysis of microfinance lending and credit assessment methodology

A Systematic Review of the Impact of Microfinance on Poverty Microfinance evaluations reveal a positive impact on per capita income, non-land asset value and poverty incidence.

Analysis of microfinance lending and credit assessment methodology

Across countries and methodologies, microfinance is most likely to have a short-term positive effect; regionally, the most positive impacts are seen in Africa. Women tend to benefit the most from microfinance.

Better off households tend to benefit more from microfinance initiatives than poorer ones. Since its institutionalization about 35 years ago, microfinance has been promoted and supported by foreign aid as an innovative tool against poverty and vulnerability.

Microfinance has proved not only to allow the poor to access credit, but because it often relies on group-lending also encourages peer sharing while reducing transaction costs to the lender by achieving economies of scale.

Although microfinance has been examined under various socio-economic conditions, there is no consensus on the impact it has had on poverty reduction.

Given this, it is important to review the available literature to assess whether any clear conclusions can be drawn about the impact microfinance on poverty. There are three main quantitative research designs used to assess the impact of microfinance on poverty. First non-experimental methods measure impacts on treatment and control groups without random assign to treatment of a particular population.

Second, quasi-experimental methods compare the outcomes of an intervention with a simulation of what would have happened had there been no intervention. Third randomised experimental designs which allow for more robust causal inference by the virtue of randomisation of both treatment and control beneficiaries.

It is important to take a broad look at experimental and quasi-experimental studies on microfinance in order to understand what these different methods can tell us about its effectiveness.

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Khashm Al Gerbah, Kasala: The young nephew of a fisherman helps on the lake during their school holidays. He received a microfinance loan to purchase his boat.

After examining the impact of microfinance on each of these poverty dimensions, it is clear that microfinance has a significant positive impact on per capita income, non-land asset value and poverty incidence.

Microfinance fails, however, to engender positive change on other poverty dimensions, namely non-food expenditures, per capita monthly and daily food expenditures, medical expenditures, and livestock.

Overall, across countries and methodologies, it seems that microfinance generally has a short-term positive effect on borrowersbut that this effect is not necessarily sustained in the long-term. In terms of regional differences in impact, microfinance in Africa appears to have a more positive impact on poverty compared to elsewhere.

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Important trends can also be extrapolated from this analysis: This might indicate that lending to women may be more effective when addressing poverty and welfare deprivations, than lending to men.

The impact microfinance has on the poorest households is inconclusive. Some studies indicate that microfinance has had an impact on poor or extremely poor households more than on moderately poor ones.

Others indicate that microfinance likely has no effect or negative effects on poor households. If the latter is true, this would imply that the socio-economic condition of households influences the way they use and benefit from access to credit, with better-off households reaping more effectively the benefits from microfinance.

There are significant differences in the reported impact of microfinance according to the methodology used in the impact studies.JSTOR is a digital library of academic journals, books, and primary sources.

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An Assessment of the Impact of Microfinance Volume 7 Number 1 Because the assessment utilized a baseline survey in and a follow-up survey in of the same microentrepreneurs, it was.

Survey methodology and the future and expansion of the housing microfinance product. The data analysis institutions’ portfolios both as a response to client demand and as a means of diversifying lending portfolios.

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