Podcast
Questions and Answers
What was the primary motivation for the establishment of the Mounts of Piety by Franciscan monks in Europe?
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?
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?
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?
What service allowed nearly 200,000 households in Kenya to escape extreme poverty?
Which financial product is NOT typically associated with microfinance?
Which financial product is NOT typically associated with microfinance?
What potential GDP boost could digitalization of financial services represent for emerging countries by 2025?
What potential GDP boost could digitalization of financial services represent for emerging countries by 2025?
How many microfinance institutions served customers according to the 2014 microfinance barometer?
How many microfinance institutions served customers according to the 2014 microfinance barometer?
What was one of the earliest forms of mechanisms for issuing loans to the destitute?
What was one of the earliest forms of mechanisms for issuing loans to the destitute?
What is one of the principal goals of solidarity groups?
What is one of the principal goals of solidarity groups?
Which aspect differentiates Community-Based Organizations (CBOs) from solidarity groups?
Which aspect differentiates Community-Based Organizations (CBOs) from solidarity groups?
In the Grameen model, how many members typically form a borrowing group?
In the Grameen model, how many members typically form a borrowing group?
What was the primary target demographic for the microcredit program?
What was the primary target demographic for the microcredit program?
What principle does microcredit emphasize among its beneficiary groups?
What principle does microcredit emphasize among its beneficiary groups?
What does the group lending model emphasize from the outset?
What does the group lending model emphasize from the outset?
What is a key feature of the group of groups lending model?
What is a key feature of the group of groups lending model?
What milestone did the total amount of microcredits issued worldwide reach?
What milestone did the total amount of microcredits issued worldwide reach?
Which organization declared 2005 as the ‘International Year of Microcredit’?
Which organization declared 2005 as the ‘International Year of Microcredit’?
How does individual lending differ from group lending in microfinance?
How does individual lending differ from group lending in microfinance?
Which financing feature is NOT included in microfinance lending products?
Which financing feature is NOT included in microfinance lending products?
What was the total amount in loans and investments in microfinance recorded in 2016?
What was the total amount in loans and investments in microfinance recorded in 2016?
What is the primary function of Community-Based Organizations (CBOs)?
What is the primary function of Community-Based Organizations (CBOs)?
What notable achievement did Muhammad Yunus accomplish in 2006?
What notable achievement did Muhammad Yunus accomplish in 2006?
What is a significant challenge that microcredit aims to address?
What is a significant challenge that microcredit aims to address?
What does the 'Group of Groups' model refer to in microfinance?
What does the 'Group of Groups' model refer to in microfinance?
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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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