Research Proposal on the Role of Microfinance in Socio-Economic Development
Role of Microfinance in Socio-Economic Development
The economy of a country is the backbone of financial development and
employment of the people. Together with good governance, a strong economy
will nonetheless lead a nation to progress. Economic policies should benefit the
local businesses and its working population.
Entrepreneurs are in tight competition in the ever-changing market and
face challenges of globalization and rapidly changing technology among others.
Commitment, innovation and hardwork are needed to quickly adapt and survive
in the growing market.
Although many people are plagued by financial crisis, the willingness to
survive in everyday life is inevitable. But problems in money could be avoided if
right management is maintained among your budget.
Finance, or simply the management of money, refers to acquiring and
using of money. Financial plans should be clearly discussed among businesses,
especially for socioeconomic development.
The economy is basically composed of two kinds of enterprise, the macro
and the micro. The macro enterprises are the giant corporations and
multinational companies, while the micro enterprises refer to the small-scale
businesses and mostly informal kind of employment. The macro enterprises
plays the larger part of economic progress of the country. It provides more than
half of employment for the labor force. They continually grow inside the country
and even internationally. But, keep in mind that however big or small an
enterprise is, it still plays a role in the economic output of a country.
The World Bank suggests that almost 30 percent of employment is
generated from the informal micro enterprise in the developing countries. And an
additional 18 percent comes from formal small and medium scale enterprise. It is
indeed an essential part of the economy especially for those who cannot work in
the formal giant sectors. The informal self-employment is easier to start with
rather than bureaucratic employment process. However, micro enterprise faces
more problems in raising finance due to its small circulating funds and investors
are skeptical if it could really generate revenues.
Finance is the lifeblood of any enterprise regardless of its size.
Microfinance is the method of financial management used by micro
entrepreneurs. It emerged in the need to empower the under-privileged class of
the society. Generating their own money through their own hardwork and
management boosts their self-worth and helps their human development.
Typically, micro finance clients are small-income generating people that
can’t afford formal financial institutions that provide medium scale enterprise.
They are usually farmers, artisans or self-employed small-scale merchants that
have an unstable source of income.
Non-government organizations and microfinance institutions bridge the
gap between the investors that has surplus of money and the microfinance
clients. Dealings between the financer and the aspiring entrepreneurs are set
through mutual decisions and compromises. Small loans are provided to start
their own businesses or grow their existing small scale enterprise, though interest
should be paid in a specified time. Through a diverse range of financial
management, it would likely succeed starting from building assets, stabilizing the
business and then eliminating the risks.
However, microfinance helping the people from the poverty threshold does
not necessarily guarantee drastic economic lift. It is not a miraculous solution to
poverty. But, it could still be a cure in decreasing the number of poor people and
increasing the number of middle-class families.
The dramatic effect of microfinance is not enough in helping the economy.
Proper execution on the plans and methods involved is the key to its success.
Responsible takeover on your business is essential to not waste the chance to
start a new micro enterprise. Except that you have control over your own income,
it also boosts your confidence knowing the fact that you’re independent.
There are a lot of ways innovated to grow the economy and help its
people at the same time. But, no matter how simple or complicated the method
is, determination and commitment is important through the process.
Sapovadia, V.K., Microfinance: The Pillars of a Tool to Socio-Economic Development