2.7: MICROFINANCE IN DEVELOPING ECONOMIES
The importance and the power of microfinance to the poverty
reduction gained recognition in recent years especially among individuals and
institutions. They started with provision of micro-credit services, which
involved high transaction costs. Microfinance gained prominence in 1980's
although early experiment dates back 34 years such countries as Bangladesh and
Brazil.
The success of microfinance has been a result of focusing on
the poor least developing countries. According to the (New Times, 2006), loans
are usually granted without usual collateral demanded by main stream banks and
other financial institutions. The poverty is multi dimensional, by providing
access to financial services; microfinance plays a role against poverty. The
microfinance institutions provide incomes from various businesses that help not
only in the business activities expansion but also contribute to households'
income on food security, children's school education. Through to microfinance
institutions, the women capacity, confidence and empowerment were building.
The business sector in Rwanda is dominated by both local and
international organizations. They include international cooperation agencies,
Embassies, UN organizations; projects through ministries and bank financial
institutions. They intervene in microfinance sector by providing funds to
facilitate credit distribution to the population. Most of the customers are
from Banque populaire and that microfinance institution and ONG's are found in
the all provinces but still this does not mean all population has access to
financial services.
According to the World Bank(2002), Microfinance enhance the
ability of poor household to increase incomes, build assets and reduce their
vulnerability in terms of stress, especially women headed families.
According to the (TADAO Chino, 2003), ADB's microfinance
development strategy focuses on mainly five areas;
· Creating policy environment conducive to
microfinance;
· Developing financial infrastructure to broaden
microfinance services and expand the participation of private institutions;
· Building viable institutions to enhance sustainability
and expand outreach services;
· Supporting pro-poor innovations and;
· Supporting social intermediation to increase capacity
of the poor in microfinance market.
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2.8: THE ISSUE OF POVERTY
2.8.0: Introduction
Understanding poverty is essential if appropriate
interventions are to be designed. There is need to know the causes of poverty
in rural areas, government and NGO. It is necessary to know how far their
addresses these causes of poverty.Therefore, this section reviews the
literature and it covers definition of poverty and its extent and theories.
According to (Robinson M.1996;120), poverty is most
fundamental social economic problem since there is need for survival and
therefore, having the means to survive is universal.
Since 1990's, poverty has remains a pervasive problem in many
developing countries and predominantly in rural areas.
Approximately 116 million of people in developing countries,
which is one third of population in these countries are poor( Umalele
;1987;61), who pointed out that rural areas are more affected by poverty than
in urban areas especially in Africa and Asia where rural poor account for more
than 82%. For Rwanda communities, they have undertaken and carried out
self-help projects including; building of roads, communal places, care of sick,
the orphans, acting as moral obligations.
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