Extended propsal Free Essay Example, 3000 words

Under the new concept, the target is rural and urban poor households, emphasising on women borrowers, and aims for the provision of finance for the purpose of asset creation and stressing the principle of â€Å"Borrower knows best† (Kaladhar, 1997 in Dhar, 2005, p. 10). Innovative features include the user-friendly delivery of credit and facilities, easy and fast disbursement of loans of small amount or short maturation, vigilance in maintaining high recovery rates through peer pressure, incentives such as access to large loans after successful settlement of the first loan, and employment of peer pressure and peer support to encourage savings. Micro-finance also now includes a broad range of financial and non-financial services, such as entrepreneurship development, capacity building, and skills upgrading. Under the new paradigm, financial intermediation with self-sustainability of institutions is emphasized, with the results measured in both quality and quantity of financing made available (Dhar, 2005). Dhar (2005) cites the following basic premises on which the operational framework of micro-finance rests are: a. A viable means for poverty amelioration is creation of self-employment programmes or projects. b.We will write a custom essay sample on Extended propsal or any topic specifically for you Only $17.96 $11.86/pageorder now Access to capital is a major constraint in forming micro-enterprises. c. The poor, specially the poor women, have the innate capacity to save and mobilize their savings into productive economic activities. d. Since credit can follow thrift, very small loans can be given to the poor to enhance their investment capacities. e. The borrower knows best how to utilize the money and then arrange for repayment of loans. f. Financial service delivery systems are decentralized and people’s organizations at as facilitators and intermediaries. g. Repayment periods are generally short. The amount of loan may be increased based on the borrowers’ past credit history to gauge his record of loan repayment. This is commonly known as the loan graduation process. h. Loans to members are not concessional and are usually quite high. i. Loans given by micro-finance institutions should involve simple procedures for reviewing and processing loan applications, and quick sanction and disbursement of money (Dhar, 2005, p. 11). Some researchers have questioned, though, the new directions taken by some micro-finance programmes, contending that it is questionable whether such services truly benefit women. There are those who argue that in many current models of micro-finance, the main, at times overriding, emphasis is financial sustainability, which tends to divert resources from strategies that would emphasize more empowerment and poverty alleviation (Mayoux, 2001).