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Friday, May 25, 2018
How Does an Ant Do Its Banking?.......With Microfinance
At the micro-finance presentation yesterday, after speaking with other classmates, we discussed a number of points that we believe bring up valid points for sustainability. This is our discussion mixed with some personal opinion: 1) Mixing an HIV/AIDS initiative may be good for Uganda in the short run, but hard to sustain in the long run with employees that are not primarily focused on finance. Banking needs to evolve and offer services to most people in the public sector in order for the country to thrive with financial equality. 2) Interest rates and collateral expectations are somewhat questionable. From an economic standpoint, micro-finance interest rates of 100%+ are incredibly disastrous to an economy. However, with a developing economy, it is often the only option for people who cannot attain loans through banks. 3) The rule of saving 1,000 UGX per week is good for developing a savings habit. However, this amount may hold expectations too low for those who hope to escape poverty. In reality, poverty is everywhere and sometimes we have to get off of our 23% credit card interest rates to realize just how good we have it.
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I think one way to sustain micro finance and help it evolve is to connect the two banking systems (the formal and informal). As one woman from the young mother's group pointed out, the communities collectively amass a significant amount of money that the banks are missing out on. The banks would be eager to connect the two systems in some way. I am not sure exactly how the connection between the systems would work, since there is still the issue of access. But, perhaps it can be made easier for a group to access the banks than for individuals. If the two systems were connected in some way, then the community would have access to beneficial banking services that would further grow their businesses.
ReplyDeleteMy project is to help update a website for Sew Empowered, which is a 6 month program that teaches women how to sew. After completing the program give women are supposed to get loans to help them start up their own businesses. One woman used her loan to buy her own sewing machine and a fridge to start her business of selling soft drinks and sewing. I think programs such as this one could be good for the Ugandan economy because it brings more opportunity to people in the rural areas by teaching them a skill that they can capitalize off of.
ReplyDeleteI too found the presentation on microfinance very fascinating. I am very appreciative to Reach Out and the women of the microfinance communities for letting us come to their homes to learn how they make a living. I have trouble judging the quality of the system because I don't know from what backgrounds the women come. As far as I am concerned, they may not be able to get out of poverty right now, but these women are able to pay for their childrens' educations; the children will likely not raise their children in poverty, or they will continue the cycle of education. Education is a key factor is development (especially the education of women).
ReplyDelete-Kathleen M.
I think the most important thing about Microfinance is trust. People who get involved in this kind of banking system have to trust one another as well as the people giving them the original loan. This comes from the people in charge having an efficient system that works for everyone. The laws for the banking system must be followed or there are issues that will arise. I think it is a great way for local and small businesses to manage their money however, I do not think this type of banking will work for large businesses.
ReplyDeleteThe interest rates are pretty high, however, the system the women in the community have in place seems to work for them. Especially when it is also teaching them good saving habits, which is needed to obtain the loan and use it for things in the community or for the women to use individually on things like materials needed to make and sell the beads and other items to provide for their families. yes its higher than our interest rates, but for their economy, it seems to be beneficial.
ReplyDeleteI think in Uganda Microfinance is the way to go. This gives communities a way of banking and understanding what it means to run a business. Having a set of rules and regulations that you have to follow gives them a sense of community and leadership these small villages may need. After learning about how the have their rules and who is in charge I noticed there was a lot of mutual trust between most of the people in the community. This seems to come from those rules because if someone does not follow or keep up their end of the bargain it is hard to keep the business running.
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