MICROFINANCE IN DEVELOPING ECONOMIES Dissertation

MICROFINANCE IN DEVELOPING ECONOMIES - Dissertation manikinHowever, microfinance units cannot be equally supremacyful in all economies, became they all have different demographics and social structures. in spite of the fact that many nations have seen success following the inclusion of microfinance units, it cannot be established that all emergent nations would experience a similar degree of success. This present paper will examine the scope of success of microfinance units in Saudi Arabia through an examination of the profitability and efficiency of operations of these monetary units in the economy. In most of cases it is an inefficient financial system which is found to be the prime reason behind the also-ran of microfinance units, which is why it is required to examine the extent to which the financial system of a nation is capable of expression such a responsibility, before arriving at any conclusion. This paper will conclude that Saudi Arabian banks are currently in a po or state to make the microfinance movement a success. However, if necessary measures are undertaken, the trend could be reversed. Chapter 1 Introduction 1.1 Definition and Brief History Microfinance institutions are amenable for boosting the social status of a poorer section of a nations population by providing financial assistance. Their prime function, however, is that of microcredit, which involves forwarding loans on a cooperative basis to groups of people so that no unity individual is liable. This helps to reduce their shoot down substantially (Feigenberg, Field & Pande, 2010). Their popularity among the poorer sections of federation, which comprise a major part of exploitation economies, has even spurred normal commercial banks to adopt some of their strategies. Microfinance institutions might be owned by politics bodies or non-governmental ones, and they might also be involved in tasks other than forwarding credit to poorer sections of society (Consultative Group to As sist the Poor, 2011). The concept of microfinance has spread across the globe from a small region in Bangladesh where Muhammad Yunus, an economics professor at the University of Chittagong, advanced nearly $30 to a group of poor villagers. An classic term of this loan was that the entire group as a whole stood liable for the debt, so that the burden was divided equally among the individuals in the group. The initial loan helped the villagers to generate a continual flow of coming(prenominal) income and, eventually, sustain their respective households. When Yunus noted the importance of such loans advanced on cooperative terms, he discrete to popularise the concept across Bangladesh. Such a measure was understood as an important stepping nether region towards poverty eradication. Yunus initiated the construction of Grameen Bank in 1983,