Lesson 3 Flashcards
While microcredit has been viewed as a help in alleviating poverty, there is a growing trend in microfinance that views ______ as a way to help poor people decrease risks and expenses associated with borrowing.
a. savings
b. insurance
savings
can help them accumulate assets which could be used for business and household purposes while also earning interest on savings.
a. savings
b. insurance
savings
______ also provide capital formation for microfinance institutions thereby enabling them to grow and expand so as to better serve their communities.
a. savings deposits
b. microcredit
a. savings deposits
The ______ is an option available to people who want to build their assets but have limited income to spare. It permits them to save even the smallest amounts of money over time in order to achieve a degree of financial security over time.
a. micro savings system
b. microcredit system
micro savings system
Micro-savings accounts first achieved popularity in _____ communities and developing nations.
a. low-income
b. rich
low-income
Micro-savings work much like regular savings accounts but some of the fees are ____, no ____ is required, and very ____ deposits are permitted
a. waived, minimum balance, small
b. not waived, minimum balance, huge
a. waived, minimum balance, small
_____ accounts evolved in part to serve segments of the population who tend to live paycheck to paycheck and spend as much or more than they take in.
a. micro-savings
b. micro-insurance
a. micro-savings
Moreover, conventional banks may make little effort to reach less affluent consumers who, at least for the present, will not make much of a contribution to the bank’s bottom line. Banking fees and penalties for below-minimum deposits effectively_____ them from opening accounts.
a. encourage
b. discourage
b. discourage
Many micro-savings programs require _____ on savings. The goal is to encourage the account holder to set aside funds even in the smallest increments in order to build up savings over time.
a. few or no fees
b. huge fee
few or no fees
_____ is a common form of microfinance that involves an extremely small loan given to an individual to help them become self-employed or grow a small business.
a. microcredit
b. micro-leasing
Microcredit
These borrowers tend to be low-income individuals, especially from _____ (LDCs).
a. less developed countries
b. less damaged countries
less developed countries
Microcredit is also known as ____ or ____
microlending, microloan
The concept of microcredit was built on the idea that skilled people in underdeveloped countries, who live outside of traditional banking and monetary systems could gain entry into an economy through the assistance of a ______.
a. small loan
b. huge loan
small loan
is a dynamic type of business financing that is well suited to the microfinance industry
leasing
With leasing, an MFI can develop longer term financing mechanisms for its clients and increase their _____ capacity.
a. borrowing
c. saving
borrowing
______ gain access to short- and medium-term capital for fixed assets—an option not readily available at most MFIs.
microentrepreneurs
Because the lease is granted based on an enterprise’s _____ rather than on its credit history, assets—or capital base— leasing gives entrepreneurs with scarce financial resources the opportunity to start a business on a limited budget or increase an operation’s productivity through new capital investments.
a. cash flow
b. cash outflow
cash flow
can be structured as a transaction that also reaps profits for the leasing company.
Leasing
MFIs can reduce _____ by accurately projecting cash flow during the lease period, with the assumption that microenterprises will meet lease payments.
a. transaction costs
b. marketing cost
transaction costs
The risk involved also is reduced because property ownership is not transferred to the enterprise until the _____ is completed; this provides the lessor with collateral—the leased item—that can be repossessed in the event of loan default. This technical note provides a snapshot of the benefits of leasing.
a. lease term
b. credit term
lease term
The lease agreement documents the transaction between the equipment owner (_____) and the business that wants to lease the equipment (____).
a. lessor, lessee/client
b. lessee/client, lessor
a. lessor, lessee/client
Through leasing, the client acquires the right to use the _____ for a fee over time. The client agrees to make payments to the leasing company over the life of the agreement and can purchase the equipment, return it to the lessor, or negotiate a lease extension, when the original agreement expires.
a. equipment
b. land
equipment
Leasing is not simply a form of ____lending; it also is a proactive commercial discipline. Lease financing is an asset management-based business that requires specialized expertise.
a. passive
b. active
passive
Given the use of _____ technology in the informal sector, lessors targeting this market must be able to accurately estimate the equipment’s residual value and participate actively in re-leasing and selling the equipment on the secondary market.
a. lower grade
b. higher grade
lower grade
Given this situation, MFIs seeking to offer leasing services to their clients should think about specializing in a _____ of equipment and targeting the most appropriate market channels.
a. unlimited range
b. limited range
limited range
three basic types of leases
clue: CHO
- Capital or finance lease
- Hire-purchase lease
- Operational lease
(TYPES OF LEASES)
is structured as a non-cancelable agreement, where the leasing company buys the equipment that the client has chosen and the client uses the equipment for a significant period of its useful life
a. capital or finance lease
b. hire-purchase lease
c. operational lease
capital or finance lease
(TYPES OF LEASES)
are called full-payout leases because payments during the lease term amortize the lessor’s total purchase costs with a residual value of up to 5 percent of the original acquisition price
a. capital or finance lease
b. hire-purchase lease
c. operational lease
capital or finance lease
(TYPES OF LEASES)
These leases establish either a bargain purchase price or fixed price for the equipment when the lease term ends.
a. capital or finance lease
b. hire-purchase lease
c. operational lease
capital or finance lease
(TYPES OF LEASES)
This type of lease is used with clients that are planning to acquire the equipment at the end of the lease agreement; they assume the risk of equipment obsolescence, maintenance, and insurance. The full purchase price plus interest charges are spread over the length of the lease term.
a. capital or finance lease
b. hire-purchase lease
c. operational lease
capital or finance lease
(TYPES OF LEASES)
This is an alternative to a lending transaction for the equipment purchase
a. capital or finance lease
b. hire-purchase lease
c. operational lease
Hire-purchase lease
(TYPES OF LEASES)
It is usually employed for retail or individual financing of smaller ticket items, such as motorcycles, sewing machines, refrigerators, and the like.
a. capital or finance lease
b. hire-purchase lease
c. operational lease
Hire-purchase lease
(TYPES OF LEASES)
The client assumes a higher down payment, sometimes up to ____ of the purchase price, and with each lease payment retains a higher percentage of equipment ownership, thus building equity.
a. 30 percent
b. 20 percent
30 percent
(TYPES OF LEASES)
Clients typically have an established _____with the institution can manage the down payment and assume a stake in the leasing agreement. This reduces the possibility of default. The asset price and risk involved in the financial transaction are spread over the lease term.
a. credit history
b. savings history
credit history
(TYPES OF LEASES)
This entails the client renting an asset over a time period that is substantially less than the asset’s economic life.
a. capital or finance lease
b. hire-purchase lease
c. operational lease
Operational lease
(TYPES OF LEASES)
Operating leases are generally short term, typically ____ years or less, and are often used with equipment, such as cars or tractors.
a. three
b. two
three
(TYPES OF LEASES)
______ agencies usually finance one type of equipment or serve a specific industry. The agencies assume a share of the risks and rewards inherent in the transaction and anticipate the asset’s resale value at the lease term’s end.
a. credit
b. leasing
Leasing
(TYPES OF LEASES)
This type of lease is typically used with equipment that rapidly depreciates or becomes obsolete in a short time. The leasing agency retains ownership of the equipment during the lease and recovers its capital costs through multiple rentals and the equipment’s final sale.
a. capital or finance lease
b. hire-purchase lease
c. operational lease
Operational lease
are particularly attractive to small and medium-sized businesses because the leasing company retains legal ownership of the leased asset over the lease term, and a client or microentrepreneur can qualify for the leased equipment based on generated cash flow rather than credit history, assets, or capital base.
a. asset-based financing and leasing
b. liabilities- based and leasing
Asset-based financing and leasing
Some of the benefits offered by leasing include:
clue: AECLF
availability and demand
efficient capital use
collateralized financing
lower transaction costs
fixed rate financing
Leasing also has some disadvantages that MFIs should be aware of. These include:
clue: OFCA
ownership over assets
fixed costs
cost of funds and liquidity
a measure of residual value analysis.
is a type of insurance designed to make essential insurance products more affordable. It breaks down insurance in its traditional form into something much smaller.
Microinsurance
offers specified insurance products to those who cannot afford traditional insurance.
Microinsurance
This form of insurance has had some success in developing countries as a way for low-income families to afford insurance, especially health insurance.
Microinsurance
is a way many more people can insure and protect some of their most valuable assets. It can bring a sense of security to low-income families who could not afford insurance before.
Microinsurance
are defined as the provision of assistance in the form of cash to the poor or to those who face a probable risk of falling into poverty in the absence of the transfer
Cash transfers
are direct payments, often from governments, made to eligible groups of people
Cash transfers
There are three main categories of cash transfers:
clue: UCT, CCT, LCT
a. an unconditional cash transfer (UCT): a cash transfer made without any conditions required for the recipient;
b. a conditional cash transfer (CCT), which is made on the condition that the recipient meets specified criteria such as school attendance or receiving vaccinations;
c. and a labeled cash transfer (LCT), in which funds are indicated, or “labeled,” for a specific purpose, but the conditions are not enforced.
defined as “the provision of money to individuals or households, either as. emergency relief intended to meet their basic needs for food and non-food items, or services, or to. buy assets essential for the recovery of their livelihoods”.
Cash transfers
If beneficiaries are required to fulfil a specific obligation or activity (such as attending school, planting seed, constructing a provisional shelter, demobilization, etc.) to receive the transfer, then this is described as a _____
a. conditional cash transfer
b. unconditional cash transfer
conditional cash transfer
grants paid to beneficiaries without the beneficiary having to do anything specific to receive the benefit are referred to as
a. conditional cash transfer
b. unconditional cash transfer
b. unconditional cash transfer
(ADVANTAGES OR DISADVANTAGES)
Cash transfers do not run the same risk microloans do of hurting recipients by encouraging indebtedness at high interest rates.
Advantage
(ADVANTAGES OR DISADVANTAGES)
Cash transfers facilitate higher-risk investments than microloans. They thus give recipients more options and potentially open opportunities to earn greater returns, without risking having to default on loans.
Advantage
(ADVANTAGES OR DISADVANTAGES)
Cash transfers do not require nearly the same level of overhead that microloans do. A microlending operation must track and seek repayment from each recipient, something that can be costly both to the institution (hence the need for substantial interest rates despite high repayment rates) and to the borrowers (microloan recipients often have to attend frequent, time-consuming meetings).
Advantage
Banks in the Philippines are classified into:
clue: UCTRCIGB
(1) universal banks,
(2) commercial banks,
(3) thrift banks,
(4) rural banks,
(5) cooperative banks,
(6) Islamic banks,
(7) government-owned banks and
(8) other banks as may be classified by the Bangko Sentral ng Pilipinas (BSP).
Universal and commercial banks are the dominant groups, representing approximately _____ of the resources of the banking system.
a. 70 per cent
b. 65 per cent
a. 70 per cent
Under the General Banking Law of 2000 (GBL), a _____ is defined as a commercial bank with the additional authority to exercise the powers of an investment house and invest in non-allied enterprises.
a. universal bank
b. commercial bank
universal bank
An _____ does not have that authority.
a. universal bank
b. ordinary commercial bank
ordinary commercial bank
There are branches, subsidiaries and affiliates of ______ in the Philippines that are licensed either as universal or commercial banks. Others have offshore banking units with more limited functions.
a. foreign banks
b. local banks
foreign banks
The ______, which is the Philippine central bank, acting through its Monetary Board, is mandated by law to ensure that the control of _____ of the resources or assets of the banking system is held by domestic banks that are at least majority-owned by Philippine nationals.
a. BSP, 60 per cent
b. BPS, 96 per cent
a. BSP, 60 per cent
is a group that functions independently of any government. It is usually non-profit.
non-governmental organization (NGO)
sometimes called civil society organizations, are established on community, national, and international levels to serve a social or political goal such as a humanitarian cause or the protection of the environment.
non-governmental organization (NGO)
focus on activities in areas involving health or health emergencies, education, infrastructure, advocacy of minority rights, support of the poor, and the reduction of crime and other wide range of issues and areas that include women’s rights, the health of the environment and planet, healthcare, political advocacy, labor unions, religious faith, care of the elderly, and youth empowerment
non-governmental organization (NGO)
two broad groups of NGO
clue: O and A
Operational NGOs
Advocacy NGOs
focus on the design and implementation of development projects
a. operational NGOs
b. advocacy NGOs
a. operational NGOs
defend or promote a specific cause and seek to influence public policy
a. operational NGOs
b. advocacy NGOs
b. advocacy NGOs
_______ (SACCOs) are cooperative financial organizations owned and operated by and for its members. according to democratic principles for the purpose of encouraging savings and using pooled funds to extend loans to members at reasonable rates of interest and providing financial services.
a. Savings and Credit Cooperatives
b. Savings and Credit Corporation
a. Savings and Credit Cooperatives
Challenges Faced by SACCOS
clue: CDPRI
- Centralized Location
- Delayed Service Delivery
- Poor Marketing Approach
- Reporting Challenges
- Incompatible Systems
Challenges Faced by SACCOS
Most SACCO’s are based in one region without branches across the country. This makes it next to impossible for members outside the region to access the SACCOs and their services. For instance, a SACCO that started as a farmers’ group in a particular town has grown in membership and revenues over the years. Some of the members decided to move to other parts of the country for their own reasons.
Centralized Location
Challenges Faced by SACCOS
SACCO members complain of slow services such as delayed loan approvals. This may be caused by the use of manual processes, unreliable technologies, and internal bureaucracies.
Customer convenience is a key element in any financial service institution. Delayed service delivery may end up depreciating the value or relevance of services offered to members. For instance, a member applies for an emergency loan, which means that they need the funds ASAP to solve an urgent matter. If he/she ends up getting the loan a week later, that makes it irrelevant considering the time factors.
a. centralized location
b. delayed service delivery
c. poor marketing approach
d. reporting challenges
d. incompatible systems
Delayed Service Delivery
Challenges Faced by SACCOS
SACCOs face a lot of competition from other financial service institutions and digital lending solutions. Low-interest loans are no longer a selling point therefore SACCOs need to understand the market needs and act upon them.
a. centralized location
b. delayed service delivery
c. poor marketing approach
d. reporting challenges
d. incompatible systems
Poor Marketing Approach
Challenges Faced by SACCOS
For SACCO executives with busy schedules, it can be a challenge if they can’t access the reports at their convenience. As key decision-makers, SACCO executives need to have the financial position of the SACCO at their fingertips at all times.
a. centralized location
b. delayed service delivery
c. poor marketing approach
d. reporting challenges
d. incompatible systems
Reporting Challenges
Challenges Faced by SACCOS
Some SACCOs have been limited from innovation because they use incompatible systems. For instance, they are unable to integrate their core banking system with mobile banking or agency banking. Most of the time this happens in cases where the system vendor wants to be the sole system provider to the SACCO.
a. centralized location
b. delayed service delivery
c. poor marketing approach
d. reporting challenges
d. incompatible systems
Incompatible Systems
