Microfinance plays a significant role in promoting development in a country as it enables people to access loans buy insurance, and save money. More so, microfinance institutions are of great help to individuals living in poverty. Large banks rarely give out loans to individuals who have no assets and they do not also consider small lending small loans. However, with the increased growth of micro-financing especially in the developing countries, socioeconomically deprived individuals can now hope to better their lives through the small credits that these establishments allow them to borrow (Yu et al., 2014). By being able to access loans, save, and purchase insurance, among other financial services offered by microfinance foundations, people become more focused on the future and work toward improved lives.
Another benefit attributed to microfinance is that it empowers women. Typically, women account for the larger percent of micro-borrowers. The main reason why females are targeted by microfinance institutes is that they are considered more responsible and less likely to default when they borrow compared to their male counterparts. Microfinance enables women to acquire financial freedom which they utilize to better their families (Yu et al., 2014). For instance, women who seek credit through microfinance start businesses and pay school fees and buy food for their children through the profits they get. Eventually, by facilitating women growth, the entire society develops.
One of the main pitfalls of microfinance is that borrowers often return the loans with high interest rates. In other words, microfinance loans are expensive. A significant number of microfinance programs often charge an interest of over 20 percent of the loan (Yu et al., 2014). This may be difficult for loan seekers to make profits that will enable them to expand their businesses and better their lives after repaying the credit costs.
Another drawback of microfinance is that it does not offer business training to borrowers. Education on business is important as it enables one to evaluate the market and determine which business will be most profitable based on the available capital (Yu et al., 2014). However, many microfinance institutions often assume that their loan recipients are entrepreneurs who know how to grow in business. Perhaps, if these organizations taught its customers how to thrive in business, microfinance loans would be more sustainable.
- Describe the benefits and drawbacks of NGOs with respect to development
The small nature of NGOs enables them to easily respond to the needs of the local communities. Their little size and adaptable organization enable NGOs to maintain a strategic distance from the unpredictable strategies and governmental issues that bigger administrations use to settle on choices or sort out assets (Sinnar, 2018). In a given UN philanthropic task, for instance, the choice to act may itself take a very long time of conciliatory wheeling and dealing, even before the different organizations included (UNICEF, UN High Commission for Refugees, World Food Program) plan and dispatch their ventures. NGOs, on the other hand, can start a task with more prominent speed.
Moreover, the single, particular concentration and the ability of NGOs is a second, related preferred standpoint, predominantly in charge of the accomplishment of gatherings like Amnesty International or Human Rights Watch. NGOs can concentrate seriously on human rights research and attention, undistracted by different motivation (Sinnar, 2018). On the other hand, bunches like the United Nations have vast administrations, convoluted working methodology, and various mandates that can make the accomplishment of a solitary objective troublesome.
The thin focal point of NGOs in principle is a quality however as a general rule can result in exclusive focus. In mounting compassionate tasks, alleviation associations can focus on their helpful command – giving therapeutic consideration or disseminating sustenance proportions to come to those in need – yet in doing as such they regularly compound different issues.
NGOs have been successful so frequently in view of their tight commands, yet complex crises request substantial scale, incorporated methodologies with which NGOs are not natural nor fit for taking care of. NGOs’ unopinionated approach and nonpartisanship have comparably made issues (Sinnar, 2018). Helpful alleviation NGOs depend on the two core values: that alleviation is a director of people all over the place, paying little respect to group or alliance, and that philanthropic association ought not to take sides in contention. Impartiality, in any case, is less demanding to proclaim on paper than keep up in the field. At the point when NGOs are at the cutting edge of compassionate activity, as they much of the time may be, “objective” regularly signifies “politically oblivious”.
- Are stock markets beneficial for development?
Stock markets promote growth as they result in investment gains. One of the essential advantages of putting resources into the share trading system is the opportunity to develop your cash. After some time, the share trading system will in general ascent in esteem, however, the costs of individual stocks rise and fall day by day. Interests in stable organizations that can become will, in general, make benefits for financial specialists (Brown et al., 2013). In like manner, putting resources into a wide range of stocks will help construct your riches by utilizing development in various divisions of the economy, bringing about a benefit regardless of whether a portion of your individual stocks lose esteem.
Stock markets also encourage diversification. For financial specialists who place cash into various kinds of speculation items, a securities exchange venture has the advantage of giving broadening. Securities exchange ventures change esteem freely of different sorts of speculations, for example, bonds and land (Brown et al., 2013). Holding stock can enable you to climate misfortunes to other speculation items. Stock likewise adds hazard to a portfolio, just as the potential for substantial, quick gains, helping speculators stay away from hazard unwilling or excessively moderate venture techniques.
- Describe the role of banking in development?
Banking encourages development by empowering people to save. Bank pulls in investors by presenting appealing store plots and giving prizes or return as premium. Banks giving various types of store plans to its clients. It empowers people to make saving money propensities or sparing propensities among individuals (Lee, 2013). Banking also plays a main role in capital formation. Wealth is a standout amongst the most critical elements of any business or industry. It is the backbone of a business. Banks are useful to build capital development by gathering deposits from contributors and changing them into credits and loans to businesses.
Banking is also responsible for the ease in trade and commercial operations. Today, exchange and trade assume essential job between any nations. Thus, the cash exchange ought to be easy to understand. A modern financial institution encourages its clients to send assets to anyplace and get assets from anyplace of the world (Lee, 2013). An all-around created managing an accounting framework gives different alluring administrations like versatile keeping money, web saving money, charge cards, Visas and so forth. These sorts of administrations secure and facilitate the exchanges. Along these lines, banks create exchange and business.
- Why do countries with more democratic forms of government tend to do better with development?
Countries with more democratic governments perform well when it comes to development mainly because they highly exercise the will of the people. The type of leadership of a nation plays a significant role in enhancing or downgrading its economic growth. By respecting the will of the people, democratic leaders, unlike autocratic leaders are less likely to engage in corruption which has adverse effects on the economy. For instance, bribery hinders long-term based foreign and domestic investments which are key drivers for economic growth (Berdiev, Yoonbai Kim, and Chun-Ping, 2013). As such, more self-governing countries do well because they are less corrupt.
Berdiev, Aziz N., Yoonbai Kim, and Chun-Ping Chang. “Remittances and corruption.” Economics Letters 118, no. 1 (2013): 182-185.
Brown, James R., Gustav Martinsson, and Bruce C. Petersen. “Law, stock markets, and innovation.” The Journal of Finance 68, no. 4 (2013): 1517-1549.
Lee, Chien-Chiang. “Insurance and real output: The key role of banking activities.” Macroeconomic Dynamics 17, no. 2 (2013): 235-260.
Sinnar, Shirin. “Mixed blessing: The growing influence of NGOs.” Harvard International Review 18, no.1 (2018): 54-55.
Yu, Vincent, Rahim Damji, Vrushank Vora, and Lokesh Anand. “Regulation on Microfinance: Effect upon Profitability and Loan Diversity.” UChicago Undergraduate Business Journal (2014): 1-20.