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Microcredit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment, or a verifiable credit history. It is designed to support entrepreneurship and alleviate poverty. Many recipients are illiterate, and therefore unable to complete paperwork required to get conventional loans. As of 2009 an estimated 74 million people held microloans that totaled US$38 billion. Grameen Bank reports that repayment success rates are between 95 and 98 percent.
Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings and checking accounts; microinsurance; and payment systems, among other services. Microfinance services are designed to reach excluded customers, usually poorer population segments, possibly socially marginalized, or geographically more isolated, and to help them become self-sufficient. ID Ghana is an example of a microfinance institution.
Grameen Bank is a microfinance organization and community development bank founded in Bangladesh. It makes small loans to the impoverished without requiring collateral.
A loan shark is a person who offers loans at extremely high interest rates, has strict terms of collection, and generally operates outside the law.
Predatory lending refers to unethical practices conducted by lending organizations during a loan origination process that are unfair, deceptive, or fraudulent. While there are no internationally agreed legal definitions for predatory lending, a 2006 audit report from the office of inspector general of the US Federal Deposit Insurance Corporation (FDIC) broadly defines predatory lending as "imposing unfair and abusive loan terms on borrowers", though "unfair" and "abusive" were not specifically defined. Though there are laws against some of the specific practices commonly identified as predatory, various federal agencies use the phrase as a catch-all term for many specific illegal activities in the loan industry. Predatory lending should not be confused with predatory mortgage servicing which is mortgage practices described by critics as unfair, deceptive, or fraudulent practices during the loan or mortgage servicing process, post loan origination.
Poverty reduction, poverty relief, or poverty alleviation is a set of measures, both economic and humanitarian, that are intended to permanently lift people out of poverty.
The bottom of the pyramid, bottom of the wealth pyramid, bottom of the income pyramid or the base of the pyramid is the largest, but poorest socio-economic group. In global terms, this is the 2.7 billion people who live on less than $2.50 a day.
Opportunity International is a 501(c)(3) nonprofit organization chartered in the United States. Through a network of 47 program and support partners, Opportunity International provides small business loans, savings, insurance and training to more than 14 million people in the developing world. It has clients in more than 20 countries and works with fundraising partners in the United States, Australia, Canada, Germany, Switzerland, Singapore, Hong Kong and the United Kingdom. Opportunity International has 501(c)(3) status as a tax-exempt charitable organization in the United States under the US Internal Revenue Code.
Aga Khan Agency for Microfinance (AKAM) is a microfinancing agency of the Aga Khan Development Network.
Financial deepening is a term used by economists to refer to increasing provision of financial services. It can refer both a wider choice of services and better access for different socioeconomic groups. Financial deepening can have an effect on both individuals' and societies' economic situations.
LAPO is a Nigerian organisation with a microfinance bank dedicated to self-employment through microfinance and an NGO, a non-governmental, non-profit community development organization focused on the empowerment of the poor and the vulnerable.
Bharat Financial Inclusion Limited or BFIL is a banking & finance company (NBFC), licensed by the Reserve Bank of India. It was founded in 1997 by Vikram Akula, who served as its executive chair until working. The company's mission is to provide financial services to the poor under the premise that providing financial service to poor borrowers helps to alleviate poverty. In 2011, the company operated across 11 Indian state.
Financial inclusion is the availability and equality of opportunities to access financial services. It refers to a process by which individuals and businesses can access appropriate, affordable, and timely financial products and services which include banking, loan, equity, and insurance products. It is a path to enhance inclusiveness in economic growth by enabling the unbanked population to access the means for savings, investment, and insurance towards improving household income and reducing income inequality
Intermediation involves the "matching" of lenders with savings to borrowers who need money by an agent or third party, such as a bank.
An alternative financial service (AFS) is a financial service provided outside traditional banking institutions, on which many low-income individuals depend. In developing countries, these services often take the form of microfinance. In developed countries, the services may be similar to those provided by banks and include payday loans, rent-to-own agreements, pawnshops, refund anticipation loans, some subprime mortgage loans and car title loans, and non-bank check cashing, money orders, and money transfers. It also includes traditional moneylending by door-to-door collection. In New York City, these are called check-cashing stores, and they are legally exempted from the 25 percent criminal usury cap.
Women's World Banking is a nonprofit organization that provides strategic support, technical assistance and information to a global network of 55 independent microfinance institutions (MFIs) and banks that offer credit and other financial services to low-income entrepreneurs in the developing world, with a particular focus on women.
Tonga Development Bank (TDB) is a development finance institution that promotes Tonga's economic and social advancement through a variety of banking services.
A payday loan is a small, short-term unsecured loan, "regardless of whether repayment of loans is linked to a borrower's payday." The loans are also sometimes referred to as "cash advances," though that term can also refer to cash provided against a prearranged line of credit such as a credit card. Payday advance loans rely on the consumer having previous payroll and employment records. Legislation regarding payday loans varies widely between different countries and, within the United States, between different states.
The impact of microcredit is a subject of much controversy. Proponents state that it reduces poverty through higher employment and higher incomes. This is expected to lead to improved nutrition and improved education of the borrowers' children. Some argue that microcredit empowers women. In the US and Canada, it is argued that microcredit helps recipients to graduate from welfare programs. Critics say that microcredit has not increased incomes, but has driven poor households into a debt trap, in some cases even leading to suicide. They add that the money from loans is often used for durable consumer goods or consumption instead of being used for productive investments, that it fails to empower women, and that it has not improved health or education.
Gary Rivlin is an American journalist and author. He has worked for several different publications, including the Chicago Reader, the Industry Standard, and the New York Times.
References
- ↑ "Google bans ads for bail bonds services". Inside AdWords. May 7, 2018.
Studies show that for-profit bail bond providers make most of their revenue from communities of color and low income neighborhoods...
- ↑ Rivlin, Gary (9 June 2010). "Fat Times for the Poverty Industry". The Atlantic. Retrieved 22 July 2013.
The pawnbroker, the subprime auto lender, and the rent-to-own operator might say the same. These and other merchants, part of what might be called the poverty business...
- ↑ "EXPOSÉ on THE JOURNAL: The Business of Poverty". Bill Moyers Journal. Retrieved 4 June 2010.
- ↑ Grow, Brian. "The Poverty Business". Business Week. Archived from the original on November 2, 2007. Retrieved 4 June 2010.
- ↑ Rivlin, Gary (June 2010). Broke, USA: From Pawnshops to Poverty, Inc.—How the Working Poor Became Big Business. HarperBusiness. ISBN 978-0061733215 . Retrieved 22 July 2013.
- ↑ McNay, Don (29 July 2011). "Legalized Loan Sharks". The Huffington Post. Retrieved 22 July 2013.
The poverty industry has given huge contributions to lawmakers. According to the Citizens for Responsibility and Ethics in Washington, payday lenders donated more than $1.5 million to federal office holders during the 2010 election cycle.
- ↑ Arp, Frithjof; Ardisa, Alvin; Ardisa, Alviani (2017). "Microfinance for poverty alleviation: Do transnational initiatives overlook fundamental questions of competition and intermediation?". Transnational Corporations. United Nations Conference on Trade and Development. 24 (3): 103–117. doi:10.18356/10695889-en. hdl: 10419/170696 . S2CID 73558727. UNCTAD/DIAE/IA/2017D4A8.
- ↑ Arp, Frithjof (12 January 2018). "The 34 billion dollar question: Is microfinance the answer to poverty?". Global Agenda. World Economic Forum.
