The main reason why developing countries cannot move up is that of the number of people who live in poverty. These individuals mostly rely on their government for help. Others turn to criminal activities just to get by.
Eradicating poverty will most likely move the economy in an upward direction. This is where microfinance comes in. With the help of microfinance, a lot of people are given the chance to move up the ladder. They finally have the opportunity to become more financially stable.
Microfinance is a way of providing small loans in the form of credit to people who don’t have access to capital. The money will then be used to start a business or another endeavor that may be deemed necessary to improve their standard of living.
Provide for the needs of the family
There are a lot of poor people who cannot even provide for the basic needs of their families, let alone other important stuff like health insurance. During troubled times, people who have already moved their way up will likely fall back to where they started. Microfinance helps individuals to become more financially resilient. They can use the money lent to them in the best possible way. Whether it is to start a business or to simply make the family’s standard of living more stable, it is up to them. The goal is to cater to the needs of the household and move on, and upward, from there.
Loans are available for people with low credit scores
One of the reasons why a lot of people just cannot get a leg up is because they have poor credit scores. In as much as they want to start a business, they are unable to do so. Their loan applications, especially from trusted banks and lending institutions, always end up getting rejected. Microfinance does not have the same requirements or standards as these traditional banks.
Women are more empowered
Many families depend mostly on men to provide for their needs. They work hard while women are left at home taking care of the kids. This might seem like a really traditional definition of a family, but it is still evident especially in more conservative and economically depressed societies.
Microfinance empowers women and provides them with opportunities to do well on their own. While taking care of their kids, they can run their own business using the money that was lent to them. Those who are victims of domestic violence are now more capable of leaving the relationship just because they are financially able. They no longer have to worry about the future of their children.
Children are also educated
Microfinance helps establish a business culture at home. There are a lot of people who are afraid to start a business because they were not exposed to this environment at a young age. When children are exposed to this type of situation through their mothers, they become more interested.
The influence of microfinance in poorer countries has been highly documented. You can read more about microfinance at the website of Sharone Perlstein who is an expert in this field.