Micro financing need to focus on job creationon
- Wednesday, July 29, 2009, 6:00
- From the Editors
- 2 comments
Conventionally MFIs are more a financing intermediaries rather than catalyst of growth and booster of employment opportunities. It is more focused on replacing traditional moneylenders, However with visionary leadership it is possible to transform these institutions as change agents and catalyst of much desired sustainable and environment friendly economic growth by funding projects conceived and managed by them along with farmers and artisans. There is already some move though not very distinctly visible but gradually evolving in this direction. Global Jagat is perhaps one such illustrative example worth following
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souren has written 1 stories on this site.
Retired banker and teacher of banking with a special thrust on micro lending to poor
2 Comments on “Micro financing need to focus on job creationon”
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If Microfinance is to be a force for economic development and not only a provider of sustenance lending, then it must move away from the weekly installment loan model to a true Finance approach. A person cannot grow a job building business making weekly installment loan payments.
Longer term, and larger lending is necessary. This creates risk and the MF is risk averse. Getting the MFI to take on the key issue of job development is an unlikely outcome for many. BRAC and GRAMEEN, plus a few others aside. The MFI is too focused upon the money and not enough upon the social mission.
Look at the problem caused by SPM … If there is no Social Mission (no BDS) then, in my opinion, there is no Microfinance but Micro Banking. I fear most MFI’s will not be serious supporters of job creation.
[Reply]
Niraj Kumar Reply:
October 10th, 2009 at 5:41 pm
It’s myth that microfinance can lead to substantial job creation. We see microfinance as panacea for all ills. We must understand the limitations of microfinance. Microfinance doesn’t create economic opportunities by itself, rather it helps in exploiting the economic opportunities. Economic/Job opportunities can be created only through investment in business infrastructure and policy environment. Such large scale investments can only be made by state or big corporations. Unless we create substantial economic opportunities for poor, don’t expect microfinance to do wonder. Bangladesh is classic example, where despite large coverage of microfinance services for nearly four decades, it hasn’t made significant dent in poverty, as people mostly use microfinance for consumption smoothening and not for income smoothening due to limited economic opportunities, as state or corporations hasn’t made enough investment to create such opportunities on large scale.
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