Microfinance: An Alternative Means of Healthcare Financing for the Poor

39According to recent World Health Organization estimates, every year 25 million households (more than 100 million people) are forced into poverty by illness and the struggle to pay for healthcare. This coupled with the lack of basic health infrastructure in rural and remote areas aggravate the health conditions of the poor, leaving them in a perpetual state of poverty. Access to health services and health protection is a key component of the fight against poverty as good health is a major driver of economic development and a necessity for the poorest nations’ climb out of poverty.

An efficient healthcare system is critical in breaking the vicious cycle of poverty and poor health. Moreover, it is critical in meeting the Millennium Development Goal (MDG) of “marked improvements in the health of the poor by the year 2015.” For many developing countries, the goal of providing affordable healthcare to all has been an arduous task. In an attempt to improve access to affordable healthcare, a number of sub-Saharan African countries adopted several models of healthcare financing, most of which have been wholly unsuccessful at reaching the poor. These healthcare financing models range from a “free health care for all” model to a fee collection at the point of service popularly referred to as cash-and-carry model. Funding for the “free health care for all” was unsustainable because governments were unable to generate sufficient tax revenues. Consequently, very limited public expenditure was dedicated to public health, particularly in the rural areas. Likewise, the “cash-and-carry” healthcare model made healthcare accessible only to those who could afford it, excluding the poor from health care utilization.

Recent interventions by NGOs in the form of community based health insurance schemes or Mutual Health Organizations (MHOs)1 have been fairly successful in improving access to healthcare. In 2003, realizing the potential that MHOs have to increase healthcare utilization and protect people against catastrophic health expenses, the government of Ghana became the first country in Africa to set up MHOs in every district in Ghana through the National Health Insurance Act. As of January 2007, approximately seven million people (35% of the total population) have enrolled in MHO. Enrolment in MHOs is low, especially among the poor. Many, particularly those in the informal sector, still have difficulties joining MHOs due to the irregularity of their incomes. Individuals who become members of MHOs eventually abandon their memberships because of their inability to make payments on their dues and insurance premiums.

Continue reading “Microfinance: An Alternative Means of Healthcare Financing for the Poor”

Microfinance as a Means of Reaching People who are Poor by Stan Parish

38My friends joined the group after learning from me. They started their own shops. They are sending their children to school now, and they have postponed the marriage of their children from 18 years to 21 years.

So says Ms. Primelan of Nathamalaituhur Village in rural South India, a beneficiary of microfinance and one if its successes.

Microfinance began 30 years ago as an experiment in a marketplace in rural Bangladesh. It has since become a financially viable industry with a global repayment rate of 97 percent and astonishing annual growth.

Continue reading “Microfinance as a Means of Reaching People who are Poor by Stan Parish”

Beware of Bad Microcredit

37Companies are racing to add poverty-reducing microcredit initiatives to their corporate social responsibility (CSR) activities. Their hearts may be in the right place, but these well-intentioned efforts can backfire.

Don’t misunderstand: Microcredit can raise borrowers’ standard of living and help reduce poverty. In the past three years we’ve brokered investments in more than 150 carefully selected microcredit programs and have seen positive effects firsthand, including improved school enrollment, women’s empowerment, better nutrition, and increases in household incomes.

Yet little evidence exists that microcredit borrowers, on average, commonly, directly, and quickly escape poverty, as many assume. Poverty, as always, is resistant to silver bullets, no matter how popular and appealing to donors they are. And if a company supports the wrong microcredit program, it may not only fail to reduce poverty but also tarnish its own good name.

Continue reading “Beware of Bad Microcredit”

Microfinance – evolution, and microfinance-growth, of India

36The present paper highlights the micro-finance & evaluates the position of micro-finance. The concept of microfinance is not new in India. Traditionally, people have saved with and taken small loans from individuals and groups within the context of self-help to start businesses or farming ventures. Majority of poor are excluded from financial services. Micro finance is a programme to support the poor rural people to pay its debt and maintain social and economic status in the villages.

Micro-finance is an important tool for improving the standard of living of poor. Inspite of many organizations of micro finance, micro finance is not sufficient in India. The study explores some suggestions to make micro finance more effective. The potential for growing micro finance institutions in India is very high. Microfinance market in India is expected to grow rapidly, supported by government of India’s initiatives to achieve greater financial inclusion, and growth in the country’s unorganized but priority sector.

Microfinance has evolved rapidly into a global movement dedicated to providing access to a range of financial services to poor and near-poor households. The organizations that provide these services, known as microfinance institutions (MFIs) may operate as formal micro banks, non-bank financial institutions, non-governmental organizations, or community-based financial institutions. These providers offer a range of financial services from small business loans to savings accounts, money transfers, insurance, and consumer loans.

Continue reading “Microfinance – evolution, and microfinance-growth, of India”

Microfinance: What It Is And How To Get Involved

35What is microfinance?
The term “microfinance” describes the range of financial products (such as microloans, microsavings and micro-insurance products) that microfinance institutions (MFIs) offer to their clients. Microfinance began in the 1970s when social entrepreneurs began lending money on a large scale to the working poor. One individual who gained worldwide recognition for his work in microfinance is professor Muhammad Yunus who, with Grameen Bank, won the 2006 Nobel Peace Prize.

Yunas and Grameen Bank demonstrated that the poor have the ability to pull themselves out of poverty. Yunus also demonstrated that loans made to the working poor, if properly structured, had very high repayment rates. His work caught the attention of both social engineers and profit-seeking investors. (Learn more in The Who, What And How Of Microfinance.)

Historically, the goal of microfinance was the alleviation of poverty. For many years, microfinance had this primary social objective and so traditional MFIs consisted only of non-governmental organizations (NGO), specialized microfinance banks and public sector banks. More recently, the marketplace has been evolving. For example, some non-profit MFIs are transforming themselves into profit-seeking institutions to achieve greater strength, sustainability and market reach. They are being joined in the microfinance marketplace by consumer finance companies, like GE Finance and Citi Finance. “Big-box” consumer retailers, like Wal-Mart, Elektra and Tesco are beginning to emerge as consumer lenders and a few are venturing into microfinance. Although most MFIs still consider poverty alleviation the primary goal, selling more products to more consumers is the primary motivation of many new entrants.

Continue reading “Microfinance: What It Is And How To Get Involved”