MICROFINANCE PROJECTS

Microfinance Projects

Cross-Country Study of the Ain Determinants Of Success In Microfinance Projects

Introduction

Microfinance is an activity that is associated with the provision of financial services, as a rule, beginners to small businesses and is an effective tool in achieving better access of small enterprises to financial resources and, most importantly, allows many companies to start with starters scratch my own business. In economic theory, refers to a specific micro-finance and credit relations between financial institutions and small forms of management in terms of territorial proximity and personal contact on the accumulation of financial resources and providing a simplified on the principles of payment, short term, repayment, confidence and trust of the development of the economy. The aim of microfinance is to create a highly dynamic and efficient system of lending to small businesses for additional stimulation of production and distribution of goods and services, as well as to assist budding entrepreneurs in acquiring experience profit and capital accumulation (Karlan, D. 2007, pp. F52).

Background

Microfinance is a flexible form of the classic bank loan, which allows easily starting a business without start-up capital and credit history, and also contributes to the solution of at least three tasks:

Increase in the number of entrepreneurs;

Growth in tax revenues;

A credit history for the further development of the subjects of MP through the banking sector.

Microfinance institutions provide services to businesses that complement the services of commercial banks, thus strengthening the whole financial system. Conditions exhibited by commercial banks, are often prohibitive for employers (especially collateral). Microfinance institutions are carried out with a profit and low-risk small-sized financial transactions that are not attractive to commercial banks. Microfinance programs carried out by:

Specialized microfinance institutions that are engaged exclusively in providing loans and are funded from external sources;

Credit unions are organizations with a collective membership, which are created to provide financial services to its members, and are wholly or mainly funded by equity or savings of their members. As a rule, they do not have access to external sources of funding;

Agricultural credit cooperatives - organizations with a collective membership, such as credit unions, working primarily with farmers and businesses associated with agricultural production;

Funds to support entrepreneurship.

Microfinance programs can be implemented through state and municipal funds to support small businesses that are in accordance with the applicable statutes of these organizations provide small business loans without a bank license (Hermes, N. and Lensink, R. 2007, pp. F1).

Credit policy of microfinance should be flexible and easily transformable, depending on conditions. Only in this case, the practice of microfinance will expand, and he will become the most popular and affordable tool for small business support.

Contrary to popular belief, microfinance is not a purely philanthropic sector - it generates income. According to the International Bank for average revenue largest microfinance institution is 2.5% (adjusted for inflation and net of subsidies). Yet the social function of microfinance higher than the economic. Microfinance helps millions of poor people around the world to start a business, to join the world economic relations and, consequently, improve the ...