Does Microfinance Really Eradicate Poverty in Africa?

Petrus S. Hamukwaya
First National Bank, Namibia

Johanna Pangeiko Nautwima
Trust Investments, Namibia

 

Summary

Microfinance (MF) has a long history and known as a supply of microloans to people or businesses that are at the bottom of the pyramid. It has been widely accepted that it caters for the needs of those who lack access to finance such as bank credit facilities offered by banking institutions. MF impacts have therefore been a subject of many controversies particularly in Africa and many developing economies. Many people particularly those who live in rural and informal sectors provided some evidences that MF has improved their living conditions, created employment, gave them access to better health and nutrition, access to education and farming technologies. Many theories on Microfinance and development has therefore emerged over the years and many scholars could also provide empirical evidences that microfinance creates financial inclusion by empowering women, creating direct link to rural savings, and financial education among others. It became therefore justifiable that Microfinance addresses inequality and promotes resource distribution in the developing economies. Microfinance can formally be traced back in the 1970s, when Mujammand Yunus, an economics professors at Bangladesh University and a founder of Grameen Bank, started making small loans to local villagers even though his ideas by the time was not really clear of where it will end. Over the years, most of the recipients of microfinance benefits were lowincome earners who are typically self-employed or who are employers of micro informal businesses. Majority of these borrowers uses these loans then for agricultural and rural activities like farming. Microfinance has widely grown from the traditional of microcredits. It becomes more relevant to poor borrowers because it has an extension of supplying micro insurance, micro savings, financial education, fund transfers, remittances, and electronic payment and resources mobilizations. Download the full article