Targeting Microfinance as a Tool to Alleviate Poverty Essay

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Microcredit lending (aka microfinance) is an economic policy that has become a particularly popular tool as a means to alleviate poverty in developing countries. A large majority of microfinance is focused towards low income individuals in Latin American countries. The idea of microfinance is such that a non-governmental organization, financial institution, or a private lender gives an individual with entrepreneurial aspirations a small loan as start-up capital for their business. The amount of the loan is typically between 25 USD and 200 USD. The recipient is charged an interest rate in return for the loan. Some microfinance programs incorporate educational workshops to individuals in areas of business management, accounting …show more content…
As women take advantage of this new opportunity, it will have influence economically and socially on the family members and community surrounding them for generations to come. I believe that microfinance programs, coupled with educational assistance can have a positive effect for development in Latin American countries. Furthermore, I believe targeting programs to women will have an even higher success rate.
Targeting lending to women can have short and long term social, economic, and political costs. The empowerment of women tends to create tension in the household. In some cases the male of the house will take actions to create disempowerment for the woman. Some studies have shown that the women act as collection agents for their sons or husbands. The male uses the money for purposes other than intended, while the woman carries the risk of credit. Reports have shown violence increased in the household after women are enrolled in programs. Research shows this is probably because the man feels less important and as though his role is being extinguished, so lashing out is the reaction. As microfinance programs gain popularity, some lenders are taking advantage of the philanthropic idea by charging steep interest rates. Some contracts seem to be at such high rates, that the common borrower will never be able to repay, making them…

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