Micro credit -Dissatisfied donors -Market failure -Win-win situation -Incentives to work.

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Presentation transcript:

Micro credit -Dissatisfied donors -Market failure -Win-win situation -Incentives to work

Market failure - No collateral -Money lenders, pawnbrokers

Micro credit today 29 million borrowers (1999) Ambition 100 million /2 billion people reached

Famous examples Grameen BankBangladesh Banco SolBolivia Bank Raykat Indonesia

History Bangladesh famine 1974 Mohammed Yunus, economics teacher Started to give small personal loans Founded Grameen Bank Million members 1996

Mechanisms Group lending Increasing loan size Weekly repayment and bank meetings

Social impacts Improve women's position Increase school attendance Better self esteem Many have been lifted out of poverty

But, no win-win situation 1 % of programs financially sustainable Probably 5 % of NGO programs will be Programs that target the poorest only cover 70 % of the costs. These programs will have to stop or raise interest rates to survive without further donations.

Discussion More poor people can be helped if the money is recycled in financially sustainable programs. That means higher interest rates for the poor Should poverty alleviation for the poorest of the poor be self financing?