Among all paths to poverty alleviation, Micro Finance has proved it an effective one. First launched around two decades ago in Bangladesh, Micro Finance is the major financial mechanism in developing countries, providing essential financial services to millions of farmers, shopkeepers, and small entrepreneurs and improving their economic status substantially. In addition, Micro Finance is not only philanthropical but also profitable: in general, the recovery rate of loans provided by Micro Finance Institutions(MFIs) is higher than that of banks, even MFIs require a higher premium.
Yet Micro Finance is no magic bullet. Although MFIs play a similar role to banks, they can not function as fully as banks. Both MFIs and banks provide essential financial services for individuals and businesses, which consequently facilitates economic development. Unlike banks, however, MFIs are isolated in a small region and rely mostly on donation. Furthermore, while banks have numerous options of savings and loans for their clients, most MFIs can provide only term deposits and loans, limiting their capability to capital accumulation and resource distribution.
Yet Micro Finance is no magic bullet. Although MFIs play a similar role to banks, they can not function as fully as banks. Both MFIs and banks provide essential financial services for individuals and businesses, which consequently facilitates economic development. Unlike banks, however, MFIs are isolated in a small region and rely mostly on donation. Furthermore, while banks have numerous options of savings and loans for their clients, most MFIs can provide only term deposits and loans, limiting their capability to capital accumulation and resource distribution.
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