World economics: microfinance

private investments;
human development index (HDI);
development indicators

in discrete, partly arbitrary, groups
Sociological perspective (position in division of labour, occupations, education)
Political (capacity to forge identities and articulate common demands)
'Middle Class'
Middle class is a description given to individuals and households who fall between the working class and the upper class within a societal hierarchy. In Western cultures, persons in the middle class tend to have a higher proportion of college degrees than those in the working class, have more income available for consumption and may own property. Those in the middle class often are employed as professionals, managers and civil servants.

we use for income poverty (40, 50, 60% of median household disposable income), i.e. various OECD studies used different definitions
general definition of the middle class used here: people in 5th to 9th decile of the distribution (Palma ratio). At this stage, not much evidence that alternative definitions would lead to similar conclusions

ELSEWHERE

greater contiguity with upper classes that with ‘working class’: statements about the fate of the middle class immediately gain strong political attention (e.g. press debates in US, Canada, Germany, others)
Growth of middle-classes in emerging countries, bringing with it new demands which political system are unable to answer (e.g. street protest in Israel, Brazil, Arab Spring, etc.)

also increases with return from an investment. An individual or company can accumulate capital in various ways some of which include investment purchases and investment savings. Return from an investment can also lead to capital accumulation, specifically from occurrences such as investment profits, rent, interest, royalties or capital gains. Entities often increase their holdings in profitable assets to provide for greater capital accumulation. Investors can also regularly contribute to a capital base to accumulate capital and generate capital gains.

Nobel Prize in Economics in 1987. He has made a huge contribution to our understanding of the factors that determine the rate of economic growth for different countries.
Growth comes from adding more capital and labour inputs and also from ideas and new technology.

Solow model believes that a sustained rise in capital investment increases the growth rate only temporarily: because the ratio of capital to labour goes up.
However, the marginal product of additional units of capital may decline (there are diminishing returns) and thus an economy moves back to a long-term growth path, with real GDP growing at the same rate as the growth of the workforce plus a factor to reflect improving productivity.
A 'steady-state growth path' is reached when output, capital and labour are all growing at the same rate, so output per worker and capital per worker are constant.
Neo-classical economists believe that to raise the trend rate of growth requires an increase in the labour supply + a higher level of productivity of labour and capital.
Differences in the pace of technological change between countries are said to explain much of the variation in growth rates that we see.

idea of catch-up growth when a poorer country is catching up with a richer country – often because a higher marginal rate of return on invested capital in faster-growing countries.
The Solow model predicts some convergence of living standards (measured by per capita incomes) but the extent of catch up in living standards is questioned – not least the existence of the middle-income trap when growing economies find it hard to sustain growth and rising per capita incomes beyond a certain level.

provided to unemployed or low-income individuals or groups who otherwise have no other access to financial services.
While institutions participating in the area of microfinance are most often associated with lending (microloans can be anywhere from $100 to $25,000), many offer additional services, including bank accounts and micro-insurance products, and provide financial and business education.
Ultimately, the goal of microfinance is to give impoverished people an opportunity to become self-sufficient.

Microfinance services are provided to unemployed or low-income individuals because most of those trapped in poverty or with limited resources do not have enough income to do business with traditional financial institutions. Despite being excluded from banking services, however, those who live off of as little as $2 a day do attempt to save, borrow, acquire credit or insurance and make payments on their debts. As a result, many look for help from family, friends and even loan sharks, who often charge exorbitant interest rates.
Microfinance allows people to safely take on reasonable small business loans in a manner that is consistent with ethical lending practices. Although they exist all around the world, the majority of microfinancing operations occur in developing nations, such as Uganda, Indonesia, Serbia and Honduras. Many microfinance institutions (MFIs) focus on helping women in particular.

from business start-up capital to educational programs that allow people to develop the skills necessary to succeed as an entrepreneur. These programs can focus on such skills as bookkeeping, cash flow management and even technical or professional skills. Unlike typical financing situations, in which the lender is primarily concerned with the borrower having enough collateral to cover the loan, many microfinance organizations focus on helping entrepreneurs succeed.
In many instances, people looking to join microfinance organizations are first required to take a basic money management class. Lessons focus on understanding interest rates and the concept of cash flow, how financing agreements and savings accounts work, how to budget, and how to manage debt.
Once educated, customers are then allowed access to loans. Just as one would find at a traditional bank, a loan officer approves and helps borrowers with applications and oversight. The typical loan, sometimes as little as $100, does not seem like much to many in the developed world. But to many impoverished people, this figure is enough to start a business or engage in other profitable activities

and they institute specific repayment plans with payments due at regular intervals. Some require loan recipients to set aside parts of their income in a savings account used as insurance in case of default; if the borrower repays the loan successfully, he has use of this account, of course.
Because many applicants cannot offer any collateral, microlenders often pool borrowers together, as a buffer. After receiving loans, recipients repay their debts together. Because the success of the program depends on everyone's contributions, a form of peer pressure helps ensure loan repayment. For example, if an individual is having trouble using his or her money to start a business, that person can seek help from other group members or from the loan officer. Through repayment, loan recipients start to develop a good credit history, allowing them to obtain larger loans down the line.
Interestingly, even though the borrowers often qualify as very poor, repayment rates on microloans are often higher than the average rate on more conventional forms of financing. For example, the microfinancing institution Opportunity International reported repayment rates of approximately 98.9% in 2016.

existed since the 18th century. The first occurrence of microlending is attributed to the Irish Loan Fund system, introduced by Jonathan Swift, which sought to improve conditions for impoverished Irish citizens.
But in its modern form, microfinancing became popular on a large scale in the 1970s. The first organization to receive attention was the Grameen Bank, which was started in 1976 by Muhammad Yunus in Bangladesh. On top of providing loans to its clients, the Grameen Bank also suggests its customers subscribe to its "16 Decisions," a basic list of ways the poor can improve their lives. The "16 Decisions" touch on a wide variety of subjects ranging from a request to stop the practice of issuing dowries upon a couple's marriage to ensuring drinking water is kept sanitary. In 2006, the Nobel Peace Prize was awarded to both Yunus and the Grameen Bank for their efforts in developing the microfinance system.

Bank – Discipline, Unity, Courage and Hard work – in all walks of our lives.
2.0 Prosperity we shall bring to our families.
3.0 We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest.
4.0 We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.
5.0 During the plantation seasons, we shall plant as many seedlings as possible.
6.0 We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.
7.0 We shall educate our children and ensure that they can earn to pay for their education.
8.0 We shall always keep our children and the environment clean.
9.0 We shall build and use pit-latrines.
10.0 We shall drink water from tubewells. If it is not available, we shall boil water or use alum.
11.0 We shall not take any dowry at our sons' weddings, neither shall we give any dowry at our daughters wedding. We shall keep our centre free from the curse of dowry. We shall not practice child marriage.
12.0 We shall not inflict any injustice on anyone, neither shall we allow anyone to do so.
13.0 We shall collectively undertake bigger investments for higher incomes.
14.0 We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her.
15.0 If we come to know of any breach of discipline in any centre, we shall all go there and help restore discipline.
16.0 We shall take part in all social activities collectively.,

http://www.grameen.com/16-decisions/

of the Grameen Bank on impoverished women in Bangladesh. The bank provides micro loans of about $60 each to the poor
loaning $2.3B to 10 million women

http://www.grameenamerica.com/

http://www.grameenamerica.org/2016annualreport/

poor clients. Formed in 1998, it has grown to become one of the biggest microfinance operations in the world. SKS works in a similar fashion to the Grameen Bank, pooling all borrowers into groups of five members who work together to ensure loan repayment.
There are other microfinance operations around the world. Some larger organizations work closely with the World Bank, while other smaller groups operate in different nations. Some organizations enable lenders to choose exactly who they want to support, categorizing borrowers on criteria like level of poverty, geographical region and type of small business. Others are very specifically targeted: There are those in Uganda, for example, that focus on providing women with capital required to undertake projects such as growing eggplants and opening small cafés. Some groups tend to focus their efforts only on businesses which are created with the intent of improving the overall community through initiatives like education, job training and clean water.

May, the company had said the decision to change the name was taken as its core had undergone a transformation, equipping it to play a major role in fulfilling the national priority of financial inclusion.  The company is among the largest microfinance companies in India. It has presence across 18 states covering 1,00,000 villages, catering to its 63.65 lakh women members.  The company was mired in serious controversy in late 2010 due to rising spate of suicide .. 

CAREFUL AS TO NOT SERVICE THE RICH NOW: MUHAMMAD YUNUS

Muhammed Yunus , founder and managing director of Grameen Bank said that the youth of today aided with technology should make the social impact that the previous generations could not. Yunus said that unemployment is no longer a worry of the developing nations as countries like large chunk of youth in Italy and Greece too are suffering from joblessness.
ET asked him on the sidelines of One Young World what are the challenges faced in microfinance where one hand you have banking lice .. ET asked him on the sidelines of One Young World what are the challenges faced in microfinance where one hand you have banking licenses rolled out and on another, ponzy scams are preventing many from investing in them. Yunus said that often there are some who start micro-financing thinking of it as another business where they need to rake in the profits and then get greedy. He said the Reserve Bank of India granting licenses to some of the micro-finance institutes was a step in the right direction, but cautioned that those banks now need to be careful that they should stop lending the poor and go back serving the rich.

https://economictimes.indiatimes.com/industry/banking/finance/micro-finance-firms-in-india-with-banking-license-need-to-be-careful-as-to-not-service-the-rich-now-muhammad-yunus/articleshow/49846358.cms

people have directly or indirectly benefited from microfinance-related operations. The International Finance Corporation (IFC), part of the larger World Bank Group, estimates that more than 130 million people have directly benefited from microfinance-related operations. However, these operations are only available to approximately 20% of the 3 billion people who qualify as part of the world’s poor.
In addition to providing microfinancing options, the IFC has assisted developing nations in the creation or improvement of credit reporting bureaus in 30 nations. It has also advocated for the addition of relevant laws governing financial activities in 33 countries.
The benefits of microfinance extend beyond the direct effects of giving people a source for capital. Entrepreneurs who create a successful business create jobs, trade and overall economic improvement within the community. Empowering women in particular, as many MFIs do, leads to more stability and prosperity for families.

which include
the transformation of microfinance providers,
the sizable supply gap for basic financial services,
the expansion of funding sources supporting the industry and the use of technology.
As the industry has developed, there has been a shift from specialized NGOs to an increasing number of regulated and licensed MFIs which stress that sustainability and impact go hand in hand. Furthermore, The World Bank Group is working with private microfinance institutions and stakeholders to incorporate responsible finance practices into all aspects of business operations. When done responsibly, private microfinance can have significant development impact and improve people’s lives.

from micro-entrepreneurs starting their own water supply business in Tanzania to a $1,500 loan allowing a family to open a barbecue restaurant in China, to immigrants in the U.S. being able to build their own business, microfinance has sometimes falls under criticism.
While microfinance interest rates are generally lower than conventional banks', critics have charged that these operations are making money off of the poor – especially since the trend in for-profit MFIs, such as BancoSol in Bolivia and the above-mentioned SKS (which actually began as a nonprofit organization (NPO), but became for-profit in 2003).
One of the largest, and most controversial, is Mexico's Compartamos Banco. The bank was started in 1990 as a nonprofit. However, 10 years later, management decided to transform the enterprise into a traditional, for-profit company. In 2007, it went public on the Mexican Stock Exchange, and its initial public offering (IPO) raised more than $400 million. Like most other microfinance companies, Compartamos Banco makes relatively small loans, serves a largely female clientele, and pools borrowers into groups. The main difference comes with its use of the funds it nets in interest and repayments: Like any public company, it distributes them to shareholders. In contrast, nonprofit institutions take a more philanthropic bent with any profits, using them to expand the number of people it helps or create more programs.

financial institutions and other large corporations have launched for-profit microfinance projects. CitiGroup (NYSE:C), Barclay's (NYSE:BCS) and General Electric (NYSE:GE) have started microfinance divisions in many countries, for example. Other companies have created mutual funds that invest primarily in microfinance firms.
Compartamos Banco and its for-profit ilk have been criticized by many, including the grandfather of modern microfinance himself, Muhammad Yunus. The immediate, pragmatic fear is that, out of desire to make money, these MFIs will charge higher interest rates that may create a debt trap for low-income borrowers. But Yunus and others also have a more fundamental concern: that the incentive for microcredit should be poverty alleviation, not profit. By their very nature (and their obligation to stockholders), these publicly traded firms work against the original mission of microfinance – helping the poor above all else.
In response, Compartamos and other for-profit MFIs counter that commercialization allows them to operate more efficiently, and to attract more capital by appealing to profit-seeking investors. By becoming a profitable business, their argument goes, an MFI is able to extend its reach, providing more money and more loans to low-income applicants.
For now, charitable and commercialized MFIs co-exist.

should be the ultimate criteria for assessing the development of a country, not economic growth alone. The HDI can also be used to question national policy choices, asking how two countries with the same level of GNI per capita can end up with different human development outcomes. These contrasts can stimulate debate about government policy priorities. The Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and have a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions.
The HDI simplifies and captures only part of what human development entails. It does not reflect on inequalities, poverty, human security, empowerment, etc.