In class we studied a very particular system of loan: the microloans. We saw that there are organizations that specialize in this type of loan such as Microloan foundation which we will later on explain its roles. To what extent do micro-finance institutions help reducing poverty?
In a first part we will to (remove) define what exactly the micro loans are and their advantages . In a second part we will to explain the problems that can create.
We will see what a microloan is by evoking how it’s working, for whom and for what.
Microloans are small loans, generally there are for people who want to run a little(small) businesses like hairdressing or a shop. Microloan is working to give there people the working chance they need (gives people an opportunity for employment by providing required finances) . In class we saw that some organizations have a target group, for example Microloan foundation, they lend money only to young woman, in Malawi and Zambia-two countries in southern Africa .They help them to become self-sufficient (reliant) by lending them to launch their own businesses . Indeed, with this small amount of money these people will be able to make investments for their project. They can , for example, buy new equipment or well make new infrastructure. Every week they review the progress of their borrowers and when the woman (a borrower) pays back they use that money to give another loan for another woman (, the funds are used to service another loan).This kind of organization in poor countries can create jobs and bring down the levels of unemployment. This will help (in turn, this helps ) boost the living standards of family, and also to carry out other economic activities like send their children to school.
But the system of microloans has some disadvantages. Generally, the borrowers are without experiences and even some are illiterate and so don't know to take care of their money and finish to can't be able to pay back(the borrowers are inexperienced hence do not manage their finances well and may fail to bay back the loans). That's why in certain cases they are in worse situations than they were in the beginning and sometimes it's so disastrous that they kill themselves(leads them to commit suicide) . It results also from this lack of experience that some people would like to make profit of the situation by asking(charging) an interest very high(ver high interests) and often exceeding 100% in some countries because the interests are not limited by laws in these countries(breakdown these long sentences into shorter better sentences). This increases the risk that the loan will not be repaid(chances of the loans not getting repaid). Hence lack of experience can be a disadvantage in understanding the loan situation and to have the best possibility to pay back. This system we call the loans sharking.
We can conclude that micro-credit is not the miracle we are all waiting(hoping for) to stop(end) poverty in the world.... However, to avoid the disadvantages we should make on loan conditions (not making sense). Moreover it does not allow get rich but it can permit to have better meet these needs for a poor country so it is only a solution in the short run.(not sure what you meant here)
