Microfinance ---- series 1

The first thing which comes into my mind when I read or hear the word microfinance is that of the Grameen Bank of Bangladesh. My first acquintance with the word microfinance was in 2000 when International Gandhi Peace Prize for year 2000 was awarded jointly to Dr Nelson Mandela and Grameen Bank of Bangladesh. That day I surfed the net to get the knowledge about this word " microfinance" and came to know how it helped in improving the staus of people especially women in Bangladesh. though Bangladesh was and still it is a pooor country, but the social and economic prosperity it has brought about in Bangladesh demands appreciation and praise. The fertility rate in Bangladesh has come down from 7 children to 3-4 children in a span of just 25 years.

For me microfinance was just providing small loans to very poor families in order to help them setting their tiny businesses and engaging them in productive activities so that they are able to have a standard of living. but this is not microfinance. This is what we call as microcredit.

Microfinance involves more than this. It is a bundle of services including, credits, savings, insurance etc., because as poor families have very little access to formal financial institutions they require different financial services other than loans. Just like anyone else, poor families need diverse set of financial services through which they can build their assets, check and stabilize their consumption and mitigate any risks in future. e.g., Many poor farmers are not interested in borrowing a loan from the institution but they want a palce to save their earnings from the harvest which will get consumed in several months as one's daily requirements. The clients of microfinance are those people who do not or have little access to the formal financial institutions. these are generally low income homebased-product entrpreneurs such as small farmers, people who involve in food and petty trade in rural areas and in urban areas the clients are shopkeepers, artisans, service providers, street vendors etc.

Poverty is multi-dimensional and so does its vulnerable effects. The people around the poverty line are highly vulnerable to external shocks such as illness of the bread earner, theft, bad weather etc. that put enormous pressure on the small financial kitties thereby forcing the entire family into the glooms of darkness from which it becomes impossible for them to come out. Microfinance help the poor to build viable business which not only increases their economic conditions but also increases their food secuirty, security of children's education, access to medical services etc.