Microfinance
leading to poverty reduction
The
most interesting thing I realized this week is what the effective solution of
poverty reduction be microfinance. Who the poor is a person earns $1.25 per day
which is the poverty line. More than 20 percent of the world populations are
under poverty line (The World Bank 2008). Thus, it is attempted to reduce poverty
by various ways because of various definitions and measurements. To reduce
poverty, the most effective way is microfinance because the simplest reason why
they are poor is lack of investment in informal works.
This
realization is important for pulling the poor above the poverty line themselves
with the various reasons. First, microfinance can increase income from
self-employment because it is one of the loans for income generation activities
leading to increase job opportunities which in turn increase demand for
children, health, education and leisure. Third, microfinance can provide consumption
smoothing which can make the poor better withstand economic shocks such as
natural disasters, health care costs. Finally, it can empower women due to
giving a chance to participate women. Nowadays, 50% of the world population is
contributed by women but they earn only 10% if wages due to discrimination. That
is why women can increase social power if they can access to credit because they
are remain in unpaid work and have greater burden in household. Thus, in
Bangladesh, the annual household consumption expenditure increases by women
than men.
This
concept make me realise that microfinance can provide the poor not only to
increase income and also to improve empowerment of the poor women. It can lift
up the level of poor leading to poverty reduction. Yunus
(1994), claims, “If we are looking for one single action which will enable the
poor to overcome their poverty, I would go for credit. Money is power.” By
proving the credit to poor, it can improve the skills, the quality and quantity
of the product, and increase income of the poor. As a result, the poor can
invest in human resource such as education, improve the standard of livings and
wellbeing. In Pakastan, the rural small farmers increase 15%-20% of the income
from the dairy farming due to the microfinance.
Moreover, it leads to empowerment of women which is one of the
main points to reduce poverty because women are critical person in household
because they have to manage the income and expenditure for the survival of the
family. However, the most of the poor are rural women who access lower education,
lower job opportunities, lower wages and lower public services than men due to
male dominated system. Thus, women can access income generation activities such
as bakery, increase social network, and participate in community development
leading to increasing self-confidence resulting to reduce poverty due to
microfinance.
This concept will be useful in my future career in my country. As
we know, Myanmar, my country, is still one of the poorest countries all over
the world. It is starting to fight poverty by developing policy and laws. At
present, it has a microfinance program as a pilot with the aid of the World
Bank in some area not covering the whole country but it is still gender blind.
As my interesting is gender and development and improving the role of women is
my dream as well, thus, I will point out the empowering women resulting from
microfinance program leading to poverty reduction because gender perspective is
also important to reduce poverty when I will be in the development field at the time after
my degree.
Reference:
Guy Vincent, “Sustainable Microentrepreneurship: The Roles of Microfinance, Entrepreneurship
and Sustainability in Reducing Poverty in Developing Countries” http://www.gdrc.org/icm/micro/guy_sust-micro.pdf
Kirsten Leikem,
"Microfinance: A Tool for Poverty Reduction?"(2012). Senior Honors
Projects. Paper 300.
Shahidur R.Khanker.
“Microfinance and Poverty” 2013, Evidence
Using Panel Data from Bangladesh.The World Bank
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