According to the World Bank, 1.3 billion people are living on just over $1 a day. Due to lack of access to economic necessities such as financial, educational and health care, the gap between the rich and poor is gradually widening. Statistics recorded by the University of Dayton show the richest 1% of U.S. citizens own 40% of the total property of the country while 80% own approximately 16%.
So why aren’t banks supplying these services to all? Today’s financial institutions are met with complaints of mainly assisting those already enjoying financial assets.
What is Microfinance?
Microfinance is a servicing of miniature loans, insurances and savings to locals of either low income or insufficient resources. This privilege comes with little or no collateral required of the recipient and is used to encourage lenders into starting their own businesses. Like a life raft, such financial facilities are established in the interest of keeping the poor from sinking even lower below the global poverty line.
The Benefits of Microfinance?
According to the Kiva organization, microfinance promotes:
economic stability and nourishment of a household
expansion of businesses
locals’ ability to survive sudden crises such as drought, flood, and other natural disasters
So what do delegates think about the empowerment of microfinance and local entrepreneurship programs?
Delegates have been heard expressing that microfinancing is a productive way to connect the global economy. It motivates the lower socioeconomic portion of our community by allowing them to present their creativity through the establishment of their own businesses.
In contrast to the benefits of microfinancing, other delegates considered the process as risky. The need for the activities of the borrowers to be constantly monitored by their respective governments to ensure the borrowed money will be used as financial investments and not for personal spending. This requires unlimited financial resources that might result in more harm to the market through its expansive costs than good.
By Shahad El Shafei
Photo By Aya El Husseini