Th4.3: MOS - Microfinance Schemes

Question 1

What do these schemes aim to do?

Answer 1

give poor/near-poor households permanent access to a range of financial services, including loans, savings, insurance and fund transfers

Question 2

What are they used to do?

Answer 2

refer to loans from providers known as microfinance institutions who deliver small loans to unsalaried borrowers

Question 3

What is some information about microfinance schemes?

Answer 3

they take little or no collateral and use group lending, pre-loan saving requirements and an implicit guarantee of access to future loans if present loans are fully repaid promptly - allows borrowers to invest in their business/start new ones

Question 4

Who does the scheme tend to target?

Answer 4

groups who would be less likely to otherwise receive loans

Question 5

However, it has become a problem as it has become a method of…

Answer 5

a method of financing consumption spending and unemployment means that most people don’t have the funds necessary to ensure repayment of their loan

Question 6

When actually being used for investment, what happens?

Answer 6

it has simply increased the informal economy with very little being spent on sustainable methods of development - financial resources diverted away from more productive/sustainable activities