What is Micro-credit and why ?
Simple Steps of Micro-credit Management System
Role of Micro-credit to improve the Socio-Economic Condition of the poor
Poor people are failed to fulfill their basic needs due to Poverty, Mal-nutrition, Illiteracy, Unemployment, Working capital, Disasters, Un-equal distribution of wealth etc. To address this situation and improve their socio-economic condition, micro-credit program was started.
In micro-credit process to up lift the ill fate of the poor, they are organized under special issue and groups are formed. The poor are provided training to build up awareness and guidance for proper investment of the loan money. At the time of providing loan special steps are taken to monitor the borrower’s improvement at his family level.
Agriculture is the main profession of the people in our country. But ownership of most of the land property is being possessed by only a few persons. The people dependent on agricultural work has got no other work throughout the year. The farmers used to loss their crops in the field due to natural calamity. Sometime they loss/expanded their capital & property due to health problem of their own and their family members. In these circumstances, micro-credit program plays a very important role to create employment for the poor. As a result of inspiring for education and family planning, undesirable problems and expenditure are reduced. Micro-credit program, in the same way, helps a lot to the urban slam dwellers, to increase their income and ensure their better and healthy life.
Through micro credit process preference can be given and capital money may be provided to the women to build up their awareness, capacity for bringing them in the profit earning activities. As a result income of poor family’s increases and the women get the opportunity to participate in the decision making meetings.
Due to combined decision making, the development of the family is ensured. Micro-credit system creates the opportunity to work for around the year. In micro-credit process all decisions are taken through the society/committee and that’s why the fellow feelings among the committee members increase.
Landless and Wealth Less In Micro-Credit Process
Landless: In view of the micro-credit process, that family which has less then 5 decimal cultivable lands will be recognized as land less.
Wealth less: In view of the micro-credit process, that family which has the total property worth taka less then the sale value of .50 decimal/one acor of land of that area is recognized as wealth less.
Overall, those families which are not capable to meet primary basic needs of life are treated as poor and can be classified as landless and wealth less in the eye of micro-credit process.
Who are the poorest families ?
In view of the micro-credit process, generally the poorest families in developing countries as the bottom 50% of those live below their country’s poverty line or those living on less than $1 a day adjusted for purchasing power parity. In the industrialized world, who live below the poverty line. The World Bank estimates that 1.2 billion people (roughly 240 million families) are living on less than US$1 a day.
Why target Women ?
Experience shows that women are a good credit risk, and that women invest their income toward the well being of their families. Women themselves benefit from the higher social status they achieve within the home when they are able to provide income. Women are often responsible for the upbringing of the world’s children and the poverty of the women generally results in the physical and social underdevelopment of their children.
Work Level Segmentation of Micro Finance
Deference between general banking and micro-credit process
|General Banking System||Micro-credit System|
|Landless and wealth-less are not allowed to get loan||Landless and wealth less are allowed to get loan.|
|Committee formation is not required, individual and organization are allowed loan based on their financial strength.||Formation of committee or group is a must. Discipline of the individual activities and of the organization are taken into consideration along with the capacity for investment, loan is provided|
|Social status or confidence of the borrower is not taken into consideration.||Social status or confidence of the borrower is taken into consideration.|
|Loan is provided on the basis of mortgage.||Loan is provided on the basis of mortgage.|
|Loan is repaid through midterm or long term installment as per contract.||Loan in realized through weekly/fortnightly/ monthly installment or as per contract.|
|No provision for meeting of the borrowers.||There is a provision for holding meeting among the borrowers.|
|Regular saving is not mandatory for the borrowers||Borrowers are to deposit their saving regularly.|
|No training is provided to the borrowers.||Training is provided to the borrowers.|
|The borrowers are to go to the bank for the repayment of the loan||Installment is collected at the doorsteps of the borrowers.|
|To get loan, recommendation form the unconcerned persons are required.||Recommendation from the society is required.|
|One staff can invest much money among a few borrowers.||One staff can invest comparatively less money as loan.|
|Operational cost is comparatively less.||Operational cost is comparatively high|