The issue of finance, in general, and microfinance, in particular, is very important for growth and development of an economy, a particularly under-developed economy. Wants are unlimited and the resources are limited. But, we cannot deny the fact that earth has an adequate amount of resources to meet and satisfy the needs of all but not sufficient amount of resources to satisfy the gluttony and greediness of even one individual. In contemporary times, rich are getting richer, while as the poor are getting poorer. Therefore, microcredit and microfinance is a welcome step with shared comforts and welfare nets in order to accomplish individual as well as collective goals- particularly social and economic goals. Microfinance groups are feasible, reasonable, and sustainable substitutes to realize the goalmouths and objectives of agriculture development in general and rural development in particular which permit communities involvement in all the rural development tasks.
The most popular view of micro-credit and micro-finance comes from Muhammad Yunus, a Bangladeshi financier, social entrepreneur, economist, and civil society groundbreaker, who was bestowed with the Nobel Peace Prize for innovating the notions of microcredit and microfinance and setting up the Grameen Bank (The Noble Prize, 2006). The man and the Grameen Bank were conjointly awarded the Nobel Peace Prize in 2006 for their outstanding determinations through microcredit to drive the economy on the path of economic and social development whose benefits will trickle down to the poor.
Microcredit and microfinance are basically loans which are given to innovators and entrepreneurs who are incapable of meeting the requirements for traditional bank loans and their repayment accomplishment cum success rates are sandwiched between 95 and 98 percent (Grameen Foundation, n.d.). Usually, microfinance is comprehended as an approach to renovate and patch-up credit markets and unbridle and improve the productive capabilities of poor people (Hulme and Mosley 1996) who are generally self-employed.
Microfinance transforms businesses of customers thereby providing physical capital (Yunus, 2016), human capital and social capital which would ultimately raise the income and output levels of the borrowers. It is beyond what is seen and observed. Microfinance is not a narrow term; rather it is a multi-dimensional term encompassing not only entrepreneurial but household finance as well because it produces benefits by offering wide series of liquidity for a wide collection of requirements rather than merely increasing income of trade and business (Robert & Jonathan, 2017). It innovated credit markets by paving way for credit contracts, predominantly group lending and lending in installments (Ghatak and Guinnane, 1999).
Microcredit and microfinance standpoint suggests that deep-seated, far-reaching and proactive initiatives and programmes are required to achieve social and economic development that is both socially just and economically sound and henceforth socially as well as economically viable and desirable. Every generation wants to get the greatest benefits from the available resources but such a thing would be quite awful and cataclysmic if we ignore the poor and down-trodden people. So, we should use our resources most cautiously and prudently so that we are able to achieve trickle-down growth. If we fail to protect and benefit our poor masses then in such a case we may fail the very purpose of sustainability, inclusive growth and social development in the first place and microfinance and micro-credit, in the second place.
It is very important for underdeveloped economies, to meet the basic needs of food, clothing, and shelter. Moreover, different models of microfinance and microcredit will succeed if they provide safety nets to the poor, prospects for them to become successful entrepreneurs, and increase their productivity levels. Microcredit and microfinance are the best ways to make people realize the benefits of savings and investment, groups/collective efforts, high productivity, and innovations. They are the ways and means to generate physical capital, human capital and social capital, drivers to growth and development, which are indebted to the pioneer of microfinance, Muhammad Yunus (2006). Microcredit is the extension lead of microloans to needy and penurious borrowers that naturally are deficit of supportable credit history or security stable employment. It boosts entrepreneurship.
Such initiatives by Yunus made people believe that a capable leader can very well translate visualizations into real-world action for the benefit of millions of people, particularly the poor. The typical models of microcredit and microfinance provide financial solutions to budding entrepreneurs, agricultural solutions to farmers in general and poor and small farmers in particular. They encompass know-how, skill applications and modern business models intended to reinforce cooperation and group efforts for the long-run goals and targets of a successful business. Therefore, budding entrepreneurs need to visit the fundamentals of microcredit and microfinance to be successful in their respective businesses.
The Noble Prize 2006. (2006).The Noble Peace Prize for 2006: Muhammad Yunus. Retrieved from https://www.nobelprize.org/prizes/peace/2006/press-release/
Cull, Robert J.; Morduch, Jonathan J. (2017). Microfinance and economic development (English). Policy Research working paper; no. WPS 8252. Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/107171511360386561/Microfinance-and-economic-development
Ghatak, Maitreesh and Timothy Guinnane. (1999). “The economics of lending with joint liability: theory and practice.” Journal of Development Economics 60: 195–228.
Hulme, David and Paul Mosley (1996). Finance Against Poverty, Vol. 1, London: Routledge.
Yunus, Muhammad. (2008). Creating a World without Poverty: Social Business and the Future of Capitalism. New York: PublicAffairs.
Yunus, Muhammad. (2016). Nobel Lecture. Oslo, Norway. Retrieved fromhttps: //www.nobelprize.org/mediaplayer/?id=88
Yunus, Muhammad Quotes. Retrieved fromhttps://www.goodreads.com/author/quotes/1254841.Muhammad_Yunus
Grameen Foundation. N.d. What We Do. Retrieved fromhttps://grameenfoundation.org/what-we-do
The author is a Research Scholar, at the Department of Economics, Central University of Kashmir, an Academic Counsellor, IGNOU STUDY CENTRE 1209,S.P. College, Srinagar and Editor in EPH – International Journal of Business and Management Science & Asian Journal of Managerial Science. She is also an Ezine Articles Expert Author; IJRULA title awards, 2018 winner (Best Researcher, 2018) and can be reached at: firstname.lastname@example.org