Microfinance: Growth and Impact

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Questions and Answers

What was the primary motivation for the establishment of the Mounts of Piety by Franciscan monks in Europe?

To provide microloans to business owners

To combat the effects of famine

To offer insurance services to low-income families

To integrate the poorest populations into community life (correct)

Which country is noted as the birthplace of modern microfinance?

India

Kenya

Germany

Bangladesh (correct)

What significant observation did Muhammad Yunus make regarding the free market in Bangladesh?

It had failed to prevent famine (correct)

It created more jobs in rural areas

It encouraged savings among the population

It successfully reduced poverty levels

What service allowed nearly 200,000 households in Kenya to escape extreme poverty?

Money transfer by SMS Signup and view all the answers

Which financial product is NOT typically associated with microfinance?

Credit cards Signup and view all the answers

What potential GDP boost could digitalization of financial services represent for emerging countries by 2025?

$3.7 trillion Signup and view all the answers

How many microfinance institutions served customers according to the 2014 microfinance barometer?

1,045 Signup and view all the answers

What was one of the earliest forms of mechanisms for issuing loans to the destitute?

Microfinance institutions Signup and view all the answers

What is one of the principal goals of solidarity groups?

Attaining financial self-sufficiency Signup and view all the answers

Which aspect differentiates Community-Based Organizations (CBOs) from solidarity groups?

CBOs assume the eventual graduation of borrowers Signup and view all the answers

In the Grameen model, how many members typically form a borrowing group?

Five Signup and view all the answers

What was the primary target demographic for the microcredit program?

Women, who had been traditionally excluded from the financial system Signup and view all the answers

What principle does microcredit emphasize among its beneficiary groups?

Joint responsibility and solidarity Signup and view all the answers

What does the group lending model emphasize from the outset?

Strengthening the Grameen clientele Signup and view all the answers

What is a key feature of the group of groups lending model?

A center is formed by a minimum of five groups Signup and view all the answers

What milestone did the total amount of microcredits issued worldwide reach?

$87.1 billion dollars Signup and view all the answers

Which organization declared 2005 as the ‘International Year of Microcredit’?

United Nations (UN) Signup and view all the answers

How does individual lending differ from group lending in microfinance?

Individual lending assesses clients based on character Signup and view all the answers

Which financing feature is NOT included in microfinance lending products?

Government Grants Signup and view all the answers

What was the total amount in loans and investments in microfinance recorded in 2016?

€248 million euros Signup and view all the answers

What is the primary function of Community-Based Organizations (CBOs)?

To develop internal financial management capacity Signup and view all the answers

What notable achievement did Muhammad Yunus accomplish in 2006?

Won the Nobel Peace Prize Signup and view all the answers

What is a significant challenge that microcredit aims to address?

Fighting against the economic exclusion of impoverished populations Signup and view all the answers

What does the 'Group of Groups' model refer to in microfinance?

A structure involving solidarity groups within microfinancing Signup and view all the answers

Study Notes

Microfinance

Microfinance is the process of supplying financial services and products to people who are traditionally excluded from the banking system.
Microfinance originated in Bangladesh, and is now a global economic activity.
Microfinance is based on the idea that the free market cannot always solve poverty, and that loans can be used to help people improve their lives.
Microfinance relies on new technologies to expand access to financial services
Money transfers via SMS in Kenya enabled nearly 200,000 households to escape extreme poverty.
Digitalization of financial services could boost GDP by 3.7 trillion dollars for emerging countries by 2025.

Growth of Microfinance

In 2014, 1,045 microfinance institutions served 111.7 million customers.
Total amount of microcredits issued worldwide climbed to $87.1 billion dollars.
Microfinance aims to serve 500 million people awaiting financing and fight against the economic exclusion of 700 million people living in extreme poverty.

Microfinance Lending Types

Group Lending:
- Solidarity Group Lending: Member receive loans and make regular payments, with all members guaranteeing repayment.
- Group of Groups (Grameen Model):
  - Borrowers form a group of 5.
  - Multiple groups form a center.
  - Groups meet weekly to repay loans and meet with Grameen staff.
  - Center and group members screen and qualify loan applicants.
  - MFI issues loans to group members.
  - Each group member is liable, jointly or separately, for the loan.
Individual Lending:
- Loans are issued to one client without a guarantor.
- Loan eligibility is based on a client character assessment and cash flow analysis.

Impact of Microfinance

BNP Paribas has been involved in microfinance since 1989.
BNP Paribas has issued over €248 million euros in microfinance loans and investments in 2016.
BNP Paribas supported microfinance with 18% of its CSR activity in 2016.
BNP Paribas provided financial services to 309,000 people typically excluded from the traditional banking system.

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Description

Explore the evolution of microfinance and its role in alleviating poverty. This quiz covers key statistics, the origin of microfinance in Bangladesh, and its global reach. Understand how technology is expanding access to financial services and changing lives.