Basic Concepts of Microfinance Flashcards
What is Microfinance?
Microfinance refers to financial services to the poor that included not only credit, but also savings and other services such as insurance and money transfers. (Ledgerwood, 1999)
“banking with the poor”
Bangko Sentral ng Pilipinas defines Microfinance as:
“Provisions of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance products.
-to the poor and low-income households
-for their microenterprises and small businesses
-to enable them to raise income levels and improve their living standards”
What are the microfinance services?
Insurance (Micro-insurance)
Loans (Micro-loans)
Savings (Micro-savings)
Transfers or Payments
__________ out of 89 million Filipinos were considered poor. (Year 2006)
28 million
In 2009, the population was estimated to reach _________.
92 million
How can we say that individual is poor?
These are the people who cannot afford to provide continuously for their minimum basic needs for food, health and their social amenities in life.
They are basically the individuals who are below the poverty line or threshold.
During the first semester of 2012, poverty threshold for a family of 5 was at ________ per month to meet the basic food and non-food needs. (Php260.7 per day)
Php 7,821
What is Microenterprises?
Microenterprises are small business with total assets (excluding land) below Php 3,000,000.00 and employs no more than 9 staff (Source: DTI, 2008)
Owners of microenterprises are considered self-employed individuals (Microentrepreneurs)
Examples of Microenterprises
Vending vegetables in the market
Running a carinderya (small eatery)
Operating a tiny sari-sari store (general merchandise)
The Two Financial Sources of the Microentrepreneurs
Formal Financial Services
- Hesitance to lend the poor
- One of the reasons is because of the belief that the poor cannot pay back loans
Informal Financial Services
- Commonly these includes the Indiano “Bombay”, the 5’6 moneylenders
- Interest rate of 20%
- Fast Loan Release
The end result once your accustomed to moneylenders:
End Result:
People dependency to moneylenders has pushed them to poverty.
- Supply-led credit from rural banks and cooperatives for agricultural activities
- Low repayment rates
What specific year did these scenarios happened?
1950s
What specific year is the birth of Microfinance?
1960s
In what year this specific scenario happened?
✓ Bangladesh was one of the first countries to conduct an experiment involving tiny loans (microcredit) extended to poor women to invest in microbusinesses.
1970s
Dr. Mohammad Yunus, an _________________ in Bangladesh.
Economic Professor
