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2. Does the Microfinance Lending Model Actually Work?
- Author:
- Rafael Gómez and Eric Santor
- Publication Date:
- 09-2008
- Content Type:
- Journal Article
- Journal:
- The Journal of Diplomacy and International Relations
- Institution:
- School of Diplomacy and International Relations, Seton Hall University
- Abstract:
- Microfinance institutions (MFIs) have expanded throughout the developing and developed world and now serve over 10 million households worldwide. Despite the relative poverty of their clients, MFIs have been able to extend credit to poor households, while still maintaining high repayment rates and financial sustainability. Much of this success has been attributed to MFIs innovative use of peer group lending—the practice of allocating loans to individuals with little or no collateral—but with social capital in the form of peers who are also co-applicants and who in many cases are jointly liable. Practitioners and pundits attest to the ability of group lending to increase incomes, consumption, and the stock of human capital for those households facing severe credit constraints. Recent theoretical and empirical work, however, has begun to cast doubts on many of these claims. Not surprisingly, the apparent success, or lack thereof, of peer group lending has drawn the attention of numerous development researchers.
- Topic:
- Poverty
3. Romanticizing the Poor Harms the Poor
- Author:
- Aneel Karnani
- Publication Date:
- 09-2008
- Content Type:
- Journal Article
- Journal:
- The Journal of Diplomacy and International Relations
- Institution:
- School of Diplomacy and International Relations, Seton Hall University
- Abstract:
- A libertarian movement that emphasizes free markets to reduce poverty has grown strong in recent years. The think tank World Resource Institute advocates 'development through enterprise' and emphasizes business models driven by a profit motive that engage the poor as producers and consumers. The Private Sector Development network, part of the World Bank, focuses on private sector led growth in developing countries. CK Prahalad a prolific exponent of this perspective argues that selling to the poor people at the 'bottom of the pyramid' (BOP) can be profitable and simultaneously help eradicate poverty. The BOP proposition has caught the attention of senior executives and business academics. Many multinational companies (such as Unilever and SC Johnson) have undertaken BOP initiatives; the world's top CEOs have discussed this topic at recent sessions of the World Economic Forum. Several business schools (such as University of Michigan and University of North Carolina) have set up BOP centers.
- Topic:
- Economics and Poverty
- Political Geography:
- Michigan and North Carolina
4. Microinsurance for Brazil: The GILR-Bond
- Author:
- Bernardo Weaver
- Publication Date:
- 09-2008
- Content Type:
- Journal Article
- Journal:
- The Journal of Diplomacy and International Relations
- Institution:
- School of Diplomacy and International Relations, Seton Hall University
- Abstract:
- Microfinance, in general, worries about alleviating poverty in the developing world. But, how do the poorest people avoid falling into poverty traps on their way to the middle class? What recourse do people have from becoming poor due to illness, natural disaster, or the loss of assets like livestock? Microinsurance is insurance that caters to the lowest income groups in a country and serves those who are not usually served by private insurance. The microinsurance enterprise is comprised of several components and issues. First, microinsurance relies on massive market penetration. For microinsurance to work effectively, insurance contracts must be sold to vast numbers of people at very low rates and provide coverage against losses that are usually not large. Thus, microinsurers sell millions of contracts to turn a very small profit, with even total revenue volumes being small.
- Topic:
- Poverty
- Political Geography:
- Brazil