Introduction
Most developing countries are faced with the problem of poverty and microfinance institutions can play a major role in alleviating this menace. The microfinance institutions famously known as MFIs provide relatively cheaper loans to small businesses and the poverty-stricken people in the society. My study aims to determine the impact of microfinance institutions in the alleviation of poverty in society. I am interested in this topic because, in some parts of the world such as in Bangladesh, the Grameen Bank which is a microfinance institution has improved the lives of poor women, especially in the rural areas. According to Khandker, microfinance has provided small loans for the poor women in the rural areas of Bangladesh without the need for collateral thus improving their living standards (263). This can be replicated in other countries in the world where there is a high level of poverty.
Research Questions
The study will be based on the following questions:
- What is the potential of microfinance in the reduction of poverty in society?
- How do microfinance institutions lead to the establishment of small businesses by the poor people in society?
Research Objectives
The main objectives of this study are to determine the effects of microfinance in the alleviation of poverty and improvement of the welfare of people.
- To know whether microfinance institutions contribute to the alleviation of poverty in a poor society.
- To find out how microfinance institutions lead to the establishment of small businesses by poor individuals in society.
Literature Review
The poor people and the poverty menace has become a topic of concern in many international meetings held all over the world (Marr 511). Poverty reduction is among one of the many aims of millennium development goals. Microfinance has played a major role in the mitigation of poverty especially in the developing countries of the world. Hughes (9) argues that microfinance leads to a significant increase in the rate of savings by the poor people and also the rate of self-employment through the establishment of small businesses.
Research Approach
The research methodology to be used will be by the use of questionnaires that will be distributed to small businesses and low-income households. The questionnaires will aim to find out how microfinance institutions have impacted the lives of poor people and whether microfinance has improved their welfare. The questionnaires will also find out from the small business owners whether they have used the services of microfinance institutions and how their services have led to the growth of their businesses. The data will then be analyzed to find the impact of microfinance on both small businesses and the poor in society (Marr 515).
Works Cited
Christie, Pat. “Microfinance should be a key G8 development tool: Final Edition.” The Ottawa Citizen. 2002: A.15. Print.
Hughes, Helen. “Trade or Aid? Which benefits developing countries more?” Economic Papers: A journal of applied economics and policy 22.3 (2003): 1 – 19. Print.
Khandker, Shahidur. “Microfinance and Poverty: Evidence Using Panel Data from Bangladesh.” The World Bank Economic Review 19.2 (2005): 263 – 286. Print.
Marr, Ana. “Studying group dynamics: an alternative analytical framework for the study of microfinance impacts on poverty reduction.” Journal of International Development 14.4 (2002): 511 – 534. Print.