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Questions and Answers
What is the primary objective of microfinance?
What is the primary objective of microfinance?
- To encourage large-scale investments in corporations
- To offer high-interest loans to small businesses
- To provide free grants to the impoverished
- To enhance financial inclusion for low-income individuals (correct)
Which of the following statements best describes the importance of microfinance in relation to poverty reduction?
Which of the following statements best describes the importance of microfinance in relation to poverty reduction?
- Microfinance solely focuses on large enterprises to boost the economy.
- Microfinance is a replacement for government welfare programs.
- Microfinance only targets urban areas for development.
- Microfinance provides access to financial resources for those traditionally excluded. (correct)
How has microfinance evolved historically since its inception?
How has microfinance evolved historically since its inception?
- It was initially designed only for wealthy investors.
- It has remained static with no significant changes over the years.
- It has developed into a broader service for various entrepreneurial needs. (correct)
- It started as a tool exclusively for agricultural funding.
Which of the following best defines microfinance?
Which of the following best defines microfinance?
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What is a common misconception about microfinance?
What is a common misconception about microfinance?
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Study Notes
Introduction of Microfinance
- Microfinance provides financial services to low-income individuals and small enterprises that lack access to traditional banking.
- Aims to empower the underprivileged by facilitating savings, credit, and insurance options.
Definition and Concept of Microfinance
- Microfinance encompasses a range of financial services, including microloans, savings accounts, and insurance for underserved communities.
- Emphasizes social objectives alongside financial viability, promoting economic self-sufficiency.
Historical Background and Evolution
- Traces back to the 1970s, with Muhammad Yunus pioneering microcredit in Bangladesh.
- Evolved into a global movement with numerous institutions providing microfinance services worldwide.
- Gained significant recognition in the 21st century as a viable method for development and poverty alleviation.
Objective of Microfinance
- To provide financial inclusion for marginalized populations, enabling them to start or expand small businesses.
- Aims to improve quality of life through increased income, education, and health outcomes.
- Encourages entrepreneurship and self-employment, driving economic growth in local communities.
Importance and Impact on Poverty Reduction
- Microfinance offers a lifeline to those excluded from conventional financial systems, contributing to poverty alleviation.
- Supports women's empowerment by providing them with financial independence and participation in economic activities.
- Studies indicate a positive correlation between access to microfinance and improvements in living standards, education, and health.
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