Microfinancing: An Intro

By Michael Mak
Summary
Basic concept
 Microfinancing encompass the provision of
financial services and the management of
small amounts of money through the
range of products and a system of
intermediary functions that are targeted at
low income clients
 Includes: loans, savings, insurance, transfer
services

Microloans 

http://www.economicswebinstitute.org/essays/microfinanceghana.htm
 Micro loans
 What are they?


 Small loan to purchase productive assets

boosting revenue allowing repayment over a
short period of time in small instalments
without the guarantee of collateral


 The size is kept small in three dimensions (see

next slide)


http://www.economicswebinstitute.org/glossary/microfinance.htm
 MicroLoans – keeping it small
The size is kept 
small in three 
dimensions 

http://www.economicswebinstitute.org/glossary/microfinance.htm
 What does microloans prevent?
 Eliminates “loan sharks” that provide loans to
the poor at high rates, exploiting the
emergency need for money


 Avoid the cycle of growing indebtedness and

heavy pressure for repayment, avoiding
menaces and violence


http://www.economicswebinstitute.org/glossary/microfinance.htm
Microcredit vs. loans

Microcredit Loans
relatively low interest rate There is no limit on the loaning


No collateral is required amount and borrowing period

Advantage s Group member can support

you

Limit with loan amount and Interest rate is high

borrowing period they request collateral for

Need to be a member and pay securing the loan

Disadvantages
membership fees


http://www.accu.or.jp/litdbase/material/pdf2/mt/mt06.pdf
 Ensuring payment

http://www.accu.or.jp/litdbase/material/pdf2/mt/mt06.pdf
 How to pay back

http://www.accu.or.jp/litdbase/material/pdf2/mt/mt06.pdf
Summary
 Why target women?
 Gender inequalities in developing countries
inhibit economic growth and development
 Women are disproportionately represented
among the world’s poorest people – 70% of
the 1.3 billion people living on less than $1
per day are women
 Women spend more of their income on
households, so when their income increases,
welfare of whole family is improved
 Promote gender equality and women’s equal
access to financial resources

Empowering women through microfinance
 What is empowerment?

In order for a woman to be 
empowered, she needs 
access to the material, 
human, and social 
resources necessary to 
make strategic choices in 
her life .  However, 
resources are not enough – 
need ability to utilize these 
resources

Empowering women through microfinance
Does Credit automatically lead to
empowerment
 Basic theory: microfinance empowers women
by putting capital in their hands and
allowing them to earn an independent
income and contribute financially to
households and communities
 However, the ability of a woman to transform
her life through access to financial services
depends on many factors
 Individualsituation and abilities
 Status of women as a group
 Environment
 Need to properly access and evaluate the
needs of women to maximize effect of
microcredit
Empowering women through microfinance
 Empowerment leads to:
 Greater impact of decision making
 Increase in self confidence

 Impact on women’s status and bargaining

position within the household
 Strengthening of economic autonomy

 Improvement of women’s status in their

community
 Political empowerment (rarer)

Empowering women through microfinance
 Case study in ghana: Sinapi Aba Trust
(SAT)
Nana Addai

“Before joining SAT, I did not have much money, so I had to collect the 
goods from somebody, sell them, and give her the profit before she would 
give me some. . . . Every week I would have to render accounts to the 
supplier—what had been bought, what is left, etc., before she would give 
me other goods to sell. . . . Because I now have my own money, I am able to 
negotiate well for good prices and . . . if what my suppliers are selling is not 
nice, I can go to a different store to purchase what I think people will buy. . 
. .The time that I spend with my business has reduced because I now have 
my own money, unlike the past where I was working for somebody so I had 
to be able to sell all day long before she would give me my share. So always 
I was tired and in a rush to make sure that I spend more time at the 
business to ensure that people buy it. But now I have my own business and 
money, and I can organize myself better to get time to rest.”

Empowering women through microfinance
Important points for success
 Need to provide business training that is
designed to complement their existing skills
and address their most pressing needs
 Improve general education and literacy
initiatives
 Foster balance between family and work
responsibilities
 Increase dialogue on social and political issues

 Workshops and experience in decision making

and leadership
Summary
 Microcredit in Ghana
 Microcredit is not new in Ghana, rather it has
been common practice
 First microcredit was probably established in
Ghana in 1955 by missionaries
 Susu, one of the current microfinance
schemes in Ghana, is thought to have
originated in Nigeria and spread to Ghana
from the early 1900s


Microfinancing: A working paper
 Three broad types of microfinance in
ghana

Microfinancing: A working paper
 Microfinance Existing in Ghana
 The Rural and Community Banks,
 · Savings and Loans Companies
 · Financial NGOs
 · Primary Societies of CUA
 · Susu Collectors Association of GCSCA
 · Development and commercial banks with microfinance
programs and linkages
 · Micro-insurance and micro-leasing services.
 Association of Rural Banks (ARB)
 · ARB Apex Bank
 · Association of Financial NGOs (ASSFIN)
 · Ghana Cooperative Credit Unions Association (CUA)
 · Ghana Cooperative Susu Collectors Association
(GCSCA)

Microfinancing: A working paper
Summary
TVG statement
 Economic Empowerment: provide micro-
loans to women in rural villages in Northern
Ghana so that they can begin to end the
cycle of poverty for themselves and their
families.
What we need to do
Economic plan
Formulated Question
 Through assessing the need for microcredit
loans in a community and the resources in
TVG, how can we create and initiate a multi-
staged economic plan that involves business
training, education, and entrepreneurship so
that women can be empowered through
starting their own businesses?