“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do.” Steve Jobs
With the basic motive to provide small loans to poor people, microfinance has reached to new aspects of financial inclusions. Microfinance, the term used in the context, provides financial support through credit facilities to the underprivileged, which are dispossessed from social and economic perspective. With the passage of time, microfinance has targeted small entrepreneurs in need of funds for their businesses and want to pull themselves out from the crucial circle of poverty.
Microfinance Fact Sheet
The World Bank, along with International Finance Corporation (IFC) and other world leading organizations, is working to improve livelihood of poor by granting them micro loans, the measures are taken to reduce poverty and raise socio-economic perspective of living standards.
According to IFC report (June, 2013) on microfinance, “The microfinance industry is having approximately $60 to $100 billion business worldwide. Even, the industry growth rate is also high that is 20% per annum which has been observed in last 5 years.”
| Microfinance Industry | Approx. $60 to $100 billion business |
| Industry growth rate | 20% Per annum in last five years |
| Source: IFC (June, 2013) |
The report further puts light on the fact that microfinance sector is still able to reach less than 20% of its target market that is comprised of 3 billion low income people. According to World Bank, poor are earning less than $2USD per day which is an alarming sign.
The Global Development Research Center’s website informed that as per World Bank’s developing countries estimate, there are more than 7000 microfinance institutions catering approximately 16 million potential customers. The industry possessed total cash turnover of $2.5USD billion. The latest figures of IFC (2014) showed $519 million investment in 47 MFIs projects.
The Concept of Empowerment
The word empowerment has been used in multiple aspects including women empowerment, employee empowerment and others. The simple definition of empowerment is delegation of power or authority or giving of ability. However, in broader perspective, empowerment is used to describe a comprehensive array of ideas, encompasses several policies and intervention strategies associated with the growth phenomena and combating challenges.
The Concept of Entrepreneur
Entrepreneur is a person who brings creative ideas into practice by taking initiative and risks to bring his ideas into the real world. As per the definition that our beloved entrepreneurs love to adhere to, as entrepreneur is a person who chooses to work according to his own rules. An entrepreneur’s skills, expertise, strategies, hard work and passion are the things that keep a business running and managing the resources efficiently and effectively for its survival.
Microfinance as the Means of Entrepreneur Empowerment
People were having ideas and skills but they lacked funds for their businesses. Microfinance has identified this basic need of small business owners and came up with the opportunity to provide micro loans to both males and females. Initially, the motive of microfinance was to empower women but later on the concept advanced to allow males to get loans for their businesses. In developing countries, we have seen remarkable growth in this industry.
Previously, farmers were having lands but did not have enough money to buy fertilizer and seeds, though they have the knowledge how to sow, look after the crops and harvest. The Microfinance Institutions (MFI), along with non-government organizations, has worked together in giving loans to people living in rural areas. The amount of loan, though, was limited but was enough for farmers to grow crops. As soon as they harvest their crop, the farmers use the money they get after selling crops to pay the loan back. This directed them to use their existing resources in building a consistent mean of income.
Likewise, MFI’s worked with women, in rural and even in urban areas; women have the skills of sewing, embroidery, pot painting and other ideas, which they used to build their business and microfinance helped them. Thousands of small businesses came into existence and started earning regular income, which did not only reduce their poverty but improved their living standards, good food, and basic clothing for their survivals.
There is a misconception that poor wants to remain a poor, the thing, which causes many people to shrink away from helping them. Microfinance has wronged the belief to a considerable level, they need an opportunity to use creative ideas to work their way up the poverty line. The third world countries, Pakistan, Bangladesh, India, Myanmar, Ghana, Kenya, Uganda, Tunisia, Sri Lanka and a lot more developing countries have benefitted from microfinance in alleviating poverty. Microfinance has not only provided opportunity for better living but also enabled these people to arrange for their kids’ education, better living environment, transportation and a healthy life.
There are thousands of examples available who have availed loan from NGOs and MFIs and now having business at international level. MFIs and NGOs like Bangladesh Rural Advancement Committee (BRAC), ASA International, IFC, Orangi Pilot Project-Orangi Charitable Trust (OPP-OCT) Pakistan, Kashf Foundation Pakistan, Bandhan India, Grameen Bank Bangladesh, Fundación Mundial de la Mujer Bucaramanga Brazil, Amhara Credit and Savings Institution Ethopia and a lot more are working for “IMPROVEMENT”.
The NGOs, with the help of MFIs, provides trainings so that people know about investment, management of their budget and expenses while investing in their own business. Some of the institutions are providing trainings to enhance skills, guidance on how to improve their social and economic aspects, how to save money to repay their loans on time and how to invest more in their businesses.
Microfinance Empowering Entrepreneur Model
Let me show you how microfinance works in empowering entrepreneur with the help of a model. Microfinance Institutions’ key responsibility is to provide loans to people who are having small business or have resources available like land or plot and equipment to start a new business on small scale. The overall decision of how to use the loan in the best interest of business is solely of the entrepreneur. If the person has taken the right decision at the right time, he has all the means and chances of becoming successful entrepreneur. On the other hand, if the person has wrongly utilized the available means like he/she has given that amount to any of the family member to invest in business and that person wastes it, the person will remain in poverty circle.
Empowerment is only possible when the amount is utilized in particular business. Nowadays, NGOs and MFIs are providing trainings on resources management like human resource, finance and other necessary resources, which are important for a business to have its operations run smoothly. The proper training related to one’s business, how to reduce expenses, decrease wastage of resources, get the best quality products for production at low cost and a lot more.
The mitigation of risks is possible through trainings. Proper functionality of business, to reach the potential customers and markets, creation of trust and your credibility to payback all the loans on time is crucial for existence. It means proper guidance by MFIs is given to people and it is the main part that emphasizes entrepreneurs to work harder. Proper mentoring and monitoring of MFIs and NGOs, plays a vital role in entrepreneurial empowerment.
Empowerment is of two kinds; Social Empowerment and Economic Empowerment. Economic empowerment improves as income of people increases, which will improve their productivity as they will spend more money on productivity (resources like better raw material, equipment and better human resource) leading to effective control on all the available resources.
Improvement in economic aspects will also help in empowering the social aspects of life like better food, health, education and better living standards. The overall empowerment leads to better position in the society and community that builds respect and trust. This will accentuate economic and social growth of entrepreneurs, their families and on the whole the society.
One of the most important qualities of entrepreneurs is their responsibility to pay back the loan on time. They not only work for themselves, rather for the betterment of society and people as part of their society.
Financial Inclusion
The broader financial ecosystem have major impact on Financial Inclusions (The latest term of microfinance), with the main objective to serve poor better through the medium of financial markets. According to (Ehrbeck et al., 2012), “A major challenge is how to create the broader interconnected ecosystem of market actors and infrastructure needed for safe and efficient product delivery to the poor.”
This means that there are multiple risks and challenges involved for entrepreneurs to provide the best quality product at reasonable prices. Previously, the aim of microfinance was to empower the poor, but now the motto of financial inclusion is to empower businesses or entrepreneurs so that they can provide better product to serve poor and other social classes. To cater the basic needs of poor, entrepreneurs or businesses have to come up with better products that are available at low cost and are fulfilling the basic needs and wants of deprived.
A new direction has been given to microfinance and empowerment of entrepreneurs and businesses. We hope for the best that this new concept of financial inclusion will help in empowering poor people to get food, education and also improve socio-economic factors of life.
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