Mi Cr Ocr Edi T Ba Nki Ng

MI CR OCR EDI T BA NKI NG A TOOL FOR POVE RTY ALLEV IATIO N

MICRO-CREDIT BANKING: A TOOL FOR POVERTY ALLEVIATION Poverty exist in a society where people live below minimum material and social level, it is multi dimensional concept is present both social as well as material dimension, it is much easier to quantify material needs that is food ,clothing ,healthcare ,sanitation, literacy rate and security. It is growing concern in third world .over the years this problem has exacerbated recognizing the situation NGOs and governmental agencies working to eliminate poverty . In trying to determine the root cause of poverty, we come across that shortage of capital is major hurdle for the poor in becoming self sufficient.Initial capital if channeled effectively can help reduce poverty to a greater extent. The purpose of such capital is to jump-start a business or any work that can make the individual self-sufficient. Micro credit being immediate and tangible benefit to the poorest members of the society while promoting social change and empowerment too. A micro-credit program is the first step to poverty alleviation and an improved standard of living. As long as development is concern we tend to check the result in terms of GDP or any other satiable index that conveys the situation but it does not bring out the actual profiles of the ground realities. Micro credit has established its usefulness in providing immediate substantial benefits and long-term structural help to the poorest of the third world countries. Not only it provides material assistance it also give social teaching. Since the end of the Second World War and de-colonization process started .Those countries concentrated on large-scale on governmental infrastructure and on industrial development .but the major area to be neglected in this process is the human development. In 1970s oil embargo hits them to a large extend the world comes under the financial crises. In 1980s private development banking crises ,aid donors has poured large quantities of aid into developing countries with relativity little concern for outcomes ..with the financial belt-tightening of the 1970s and 80s ,these donors begins to look more closely at the outcomes of their programs Through there were certain development programs and rebuilding processes that started the end of the Second World War but they were not sufficient to help alleviate the situation of the poor. Large portions of the donations were making there way fro the development projects into the hands of a few rich and powerful businessmen, industrialist, and politicians. By direction the limited capital available in the hands of a few rich and powerful people which spread at large have and have-nots .Dishonesty and fraud in both government as well as private sectors caused much ambiguity about effectiveness of development programs that are meant to improve the overall standard of living but fail to do so. There has been continues growth of newer and safer concept that are innovated and more successful than the predecessors. It is in the context of micro credit come onto the

world stage it is the brainchild of Prof. Dr. Mohammad Yunus in 1973 with the name of Grameen project later names it as Grameen bank in 1983 .. The key elements of a successful micro credit program making it user friendly for the poor ,reduce risk and overheads costs and most important it should target only the poorest of the poor. But over the years many modification have been made to the micro credit program as proposed by Prof. Dr. Mohammad Yunus to suit local needs. Other essential necessary for successful results are weekly meetings and payments schedules ,group focused meeting and a minimum educational level. Poor are capable of participating in the economic activity and helping themselves but training of there people is imperative any credit system .community participation reduces the risk of nonrepayment by allowing the community to monitor the performance of borrowers this implies that creditor would not required collateral while giving out loans. Community participation in the whole process and administration and management of the system reduces, the overheads costs and makes it possible for the creditors to formed small loans. The most significant problem faced by commercial banks that provide micro credit to the market are high overhead costs in processing small loans to many land less and poor people with hundred percent risk involve and no security. But the intensive, local and self administration keeps the cast of micro credit system low and thus it become possible to give loans in small quantities.Moreover, the system is flexible due to local management and problems can be worked out without having to go the bank its self. This flexibilities further reduce the banks, administration cast creditors required guarantee of the people taking the loan from persons who are closely associated to them .in effect this create a very strong peer pressure system among the groups to force repayment. Thus it becomes possible to give out loans without collateral. The other benefits of having local management are that most problems can be worked out without having to go the bank itself. This flexibility further reduces the bank’s administrative overheads. Micro –credit has also proven to be a good financial risk for the banks them selves. While there are high administrative overhands to processing such a large number of small loans, several micro-credit programs have demonstrated that they can achieve very high rates of repayment. There are large socio-economic difference it is best to separate the groups entirely as with women and men. If the rich and landed are allowed into the program they will exert undue influence over the poorer and gain a significant advantage over them. Good communication channels at all levels are necessary for smooth operation of the programs involving minimum at a high level. This will not only make the program more approachable by the poor but also create an atmosphere that always allows every one to benefits at a speedy rate. The question rises will micro credit sustainability operated not on two sides one is inflow of capital to the bank other is out flow of the capital. And the second question will it encourage the growth the new markets. In as much as it increases income and savings ,encourage commercial production of non-traditional goods and organizes communities around self-development its development will be sustainable, And the inflow of the capital to the bank increases

therefore the banks can give more loans to others which increase the out flows of the capital therefore the bank circle go to be grower and grower and operation expand more and more. So the sustainability is good Once every one in the local area has increased their out put ,the result may be inflationary rather than growth producing. But for the moment micro-credit seems to be doing a superb job of fostering sustainable growth on the local level .whether this growth will noticeable trickle up into the economy is unclear, but fairly likely The discussion come up this it works and largely achieves its goals of poverty reduction and empowerment for the poor and landless peoples .wages, income and life standard go up if its works effectively.