«Importance and sustainability of microfinancing does not cause doubts. While people live in poverty, and there is an unemployment, loans will be claimed», confirm «the father of microfinancing» and the Nobel winner Muhammad Junus.
Microfinancing is not only granting of the negligible sums to small-scale business and individual businessmen practically “on parole”, but also the flexible form of classical crediting, facilitating solution at least of 3 tasks:
- Increases in number of businessmen;
- Increases of tax revenues;
- Creations of credit history.
Forming of such phenomenon as “microfinancing” has began in Bangladesh, and now it seems quite logical, considering that fact that the basic receivers of microcredits are inhabitants poor and developing countries where earlier to leave poverty practically it was not represented possible because of granting of credits only under high percent and for short terms. It is considered to be year of its creation 1976 when the professor of economy and in a consequence the banker – Mohammed Junus has created Grameen Вank crediting those whom as was considered, to borrow money in any way it is impossible – representatives of the poorest levels of population. Despite mistrust to similar ideas, nonpayments under credits have constituted only 3 %. Only to Bangladesh today Grameen Вank has more than 2 thousand branches, and microcredits have already used over 7 million borrowers. 2005 even has been declared the United Nations the year of microfinancing, and in 2006 Muhammad has received a world Nobel prize «for attempts to initiate economic and social development from below».
There are 3 kinds of microfinancing:
- The Program of support poor, similar created by Junus. It is based on 2 principles – extension even the scanty sums (Junus provides crediting from $3) and only group loans.
- Extirpation with unemployment thanks to self-employment – has arisen in developed countries.
- System of support microbusiness, often having commercial underlying reason – the phenomenon existing in the CIS, the Eastern Europe and Latin America.
Since the moment of creation, (i.e. almost 40 years), microfinancing is the engine of economic development and poverty extirpation.
In 2010, according to the report of the Microcrediting Summit , 205 million in more than 80 countries could obtain the credit for a setting up or development of their business. Today microfinancing it not only microcrediting. Also, it assumes a complete spectrum of other financial services, expanding the borders by means of some innovations’ occurrence, for example, such as the mobile technologies providing access to bank services to inhabitants of rural districts.
Dealing with representatives of developing countries, not so close familiar with the banking subtleties, all financial organizations, providing similar services, should realise their share of responsibility. So, activity of organisations’ majority has a social orientation, without supposing excessive crediting and as result hit of clients in «a debt pit». Socially responsible microfinancing makes positive impact on public life by means of small-scale business stimulation, growth of self-employment, access expansion to appropriate education and health protection, and also improving quality of life that is almost the most important factor of activity assessment of the microfinancial organisations (MFO).
Some microcredit organisations providing the microfinancing programs for the most vulnerable national groups, also give to clients councils, trainings and social support. In developing countries microfinancing facilitates growth of women’s role in economic life. Earlier in the Muslim countries, women in banks weren’t listened without presence of the husband. However, despite it, Muhammad believed that women are more responsible and, at least, half of his clients will be they.
Influence of microfinancing on society also became a subject of a great number of scientific researches which have confirmed importance of financial services in vulnerability decrease of poor national groups. Influence on poverty reducing differs both from region to region, and depending on types of offered financial services. Researches concerning this question are take place until now.
The microfinancial sector continues its development.
Throughout a sevral years policy Smart Campaign directed on variety of principles integration on protection of clients’ interests is applied.
- 6 years existed the MFTransparency organisation allowing MFO to show the adherence to the pricing transparency. It published interest rates more than 400 МФО in 17 countries. However last March the organisation has ceased the activity.
- In February, 2009 Microfinance Information Exchange, Inc (MIX) has provided MFO with an Internet platform for granting of the important information in terms of social influence. The working Group on social influence and MIX Market, have developed standards of MFO social activity indicators.
- The tools used by MFO such as «Progressout of Poverty Index» – an index of population poverty and «Poverty Assessment Tool» – the tool of poverty measurement.
However, despite all recognised positive influence of microfinancing on well-being, idea of its founder were exposed time and again to criticism. For example, The Guardian’s journalist Madeleine Bunting argued, whether is microfinancing a neoliberal fairy tale. The basis for her article served a colaborative work of the economist from the Cambridge university Ha-Joon Chang and Milford Bateman – one of the most ardent microfinancing critics.
Throughout its prompt development, financial sector, in particular microfinancing, doesn’t follow any single model. One companies are more focused on poverty reducing, when for others the prime purpose – granting of financial services and benefit reception. Sometimes MFO calls itself social business, reinvesting all profit for expansion of scope of clients and a range of services. However MFO always need to remember the responsibility about its role in a society, and also to be guided by base principles which are a basis of trust and maintenance of sustainable and socially responsible development.