Sample Research Paper On Microfinance Research Paper
Microfinance Research Paper
The subject of this research paper is the role of Kiva micro financing in the Ghanaian economy. Ghana is a nation that has a population of approximately 25,708,108 residents. The population density of Ghana is 101.5 residents per square kilometre. The GDP per capita in Ghana has been assessed at $3,500. The thesis statement that will be reviewed is the criteria for microfinance funding in Ghana. The works of Akinlawon et al. (2013), Egyir and Akudgu, (2009), CIA (2013), Kiva (2012), Kiva (2014), Morvant- Roux (2008), Paarlber (n.d.), Rojas (2012), UNICEF (2015), Valadez and Buskirk (2009) were accessed in the formulation of the research.
Kiva is a not for profit organization that enables people to apply the internet as a means of enabling entrepreneurs with funding by means of the Internet. The mission statement that has been declared by Kiva is “To connect people through lending to alleviate poverty” (Kiva, 2012).
Kiva applies two operational models. These operational models are delineated as Kiva.org and Kiva .zip. In both of the operational models, the story of the person who requires micro financing is applied as a personal information resource in order to facilitate the lenders’ capacity of connecting with the entrepreneurs. Kiva .zip is based on a system of field associates that manage the loans when they arrive at the destination. The field associates may be not for profit institutions, banking institutions, educational facilities and social enterprises. Kiva does not earn interest on the loans that are generated. Kiva receives support by means of donations from the consumers, national institutions, corporations, loans and grants. The Kiva organization is located in San Francisco, CA. The organization is composed of 109 staff members. The President of Kiva is Premal Shah and the primary officers are Jessica Jackley and Matt Flannery (Kiva, 2012).
Microfinance is a form of providing credit in the model of small loans. The loans are extended to individuals who do not possess credit or collateral. These borrower reside in the rural areas of Ghana. The perspective that is applied by Kiva was created by Muhammed Yunus. Muhammed Yunus was a Bangladeshi who had been the recipient of an American university education. Yunus noted that a substantial proportion of the global population had been restricted from the acquisition of resources that could alleviate their impoverished condition. The Grammen Bank in Bangladesh was formed as a result of Yunus’ insight (Kiva, 2012).
The Kiva organization has been able to distribute more than $498,939,550 in loan proceeds that originated from more than one million lenders. The loans proceeds were distributed to more than one million borrowers. There have been more than 625,000 loans that have been made through Kiva. The size of the average loan is approximately $417.21. The conventional Kiva user has facilitated over ten loans. The present repayment rate of the Kiva associates is almost 99%. The word Kiva is translated from the Swahili word for unity (Kiva, 2012; Kiva, 2014).
Criteria for Borrowers
Kiva associates with field associates that direct their endeavors toward targeted population that are of the most modest means in the rural areas. This activity is conducted notwithstanding the additional expenses and challenges incurred by Kiva and the field associate. A few of the field associates look to provide services for the individuals at distinct indexes of poverty. The borrower’s needs are demonstrated on the profile that is submitted to Kiva. The field associates have distinct venues for the targeting of their markets. The target population can be derived from rural areas where the residents are poorer than the urban population. The additional criteria options include the application of assessment tools in order to evaluate the needs of each of the borrowers. The products that are offered may include loans to solidarity groups and smaller loans (Kiva, 2014).
An example of one of the borrower’s profile demonstrates the lending criteria that is applied by Kiva and the field associates is Edwina. In Accra, Ghana, Edwina is a parent who is in her middle ages. Edwina is a member of the Tsuishitoo group. The members of the Tsuishitoo group share the proceeds of the loans that are derived from ID Ghana. The members of the Tsuishitoo group ensure that each borrower repays the loan. This is Edwina’s seventh Kiva originated loan. She has applied the previous loans to add to her soft drink, plastic bowls, diapers and detergents charcoal inventory. Edwina makes a reasonable profit selling soft drinks, charcoal, plastic bowls, diapers and detergents. She markets soft drinks, charcoal, plastic bowls, diapers and detergents from the morning to the evening every day. Edwina works to support her family (Kiva, 2014).
Another example of Kiva’s criteria is derived from Cecilia’s profile. Cecilia is a parent of two children. She is from Chokor, Ghana and is 42 years of age. She is a member of the Fruit for Life Farm group. Cecilia is requesting her ninth Kiva originated loan. Cecilia has a retail outlet that has been established for eight years. Cecilia and the members of the Fruit for Life Farm group will apply the proceeds of the loan to purchase food products which they will sell at a retail price. The food products that they sell are vegetables, noodles, sugar, milk, Lipton tea and Milo. The profits derived from the sale of the food products will be applied to feed her family. The loans are processed through the ID Ghana which is a Kiva field associate (Kiva, 2014). Twenty five dollars will be applied from the course fund account towards the financing of the Fruit for Life Farm group’s loan.
Kiva also has the specific criteria of looking for individuals who are members of vulnerable groups. An example of members of a vulnerable group would be the members of the southern Sudan region that have the outcome of being persons who have been internally displaced with the status as refugee. The other vulnerable populations are women, unbanked agricultural entrepreneurs, youth, people who are afflicted with HIV, individuals with disabilities and minorities. The knowledge of the demographic areas is possessed by the field associates who have the opportunities of creating alternative products that include student loans. The primary goals is to serve high risk borrowers who do not have access to credit or collateral in underserved urban and rural areas (Kiva, 2014).
In the Kiva lending model, individuals may select to lend the amount of twenty five dollars to provide to an agricultural entrepreneur. There is no restriction on how n many loans can be made by the lender. There is a requisite that the borrowers publish their profiles online, in order to provide the lenders with the greatest access to information. The criterion that may be applied in making the loans available to the agricultural producer in a developing nation would be the following:
The review of the borrower credit history and the ability of reviewing the performance history of the associate institution that will be administrating the loan.
The climate and the socio- political context must be evaluated. The GDP and the foreign export policies must be reviewed.
The financial characteristics of the nation where the agricultural producer is receiving the funds must be reviewed.
The feasibility of the project that is being funded must be explored. The requisite of the agricultural produce that is being harvested must be reviewed and the tools that are being applied by the farmer must be examined (Kiva, 2012).
Micro Financing Project Steps
Assisting agricultural producers in developing nations is perceived by many as being an altruistic opportunity and a small business endeavor. Many of the recipients of micro financing perceive the loans that are made as an opportunity for economic development. The characteristics of economic development is that its enables the alleviation of impoverished conditions. The technological innovations of the past decade has enabled many of the residents of less developed nations to communicate with the residents of industrialized nations. Consequently, the process of micro financing between members of industrialized nations and members of less developed nations has been established. Kiva is the response to the needs of the consumers in the industrialized nations who would like to exercise social responsibility and justice. Kiva is the response to the agricultural producer of the less developed nations who require micro financing in order to increase agricultural production (Kiva, 2012).
Limitations and Challenges of the Project Selection
The agricultural producers that are located in the nations of the developing world do not have the capacity of competing with the subsidized organizations of the industrialized nations. The regional marketplace provides the loan candidate with a stable livelihood, and limits the agricultural producer from acquiring any items that may provide sustainable progress. The taxes that must be paid on goods is distinct in the developing nations. The continuous competition conjoined with the social and political conditions of the nation has the outcome of influencing the production of the agricultural sector in the developing nations (Kiva, 2012).
The activities that are provided by Kiva are directed toward the rural and lower income areas of the developing nations. Many of the rural areas have infrastructures that are inadequate. The developing countries are subject to the influences of the production cycles and the climate. The agricultural income that is derived is seasonal and the financial returns are limited. The prices that are applied in the purchase of agricultural products is subject to volatility and there are relatively few agricultural producers who can provide guarantees (Kiva, 2012).
Ghana is a nation that is located in West Africa. The capital city of Ghana is Accra. The nation of Ghana is bordered by Ivory Coast and Burkina Faso. The GDP of Ghana is approximately $45.55 billion and the GDP per capita is $3,500 (CIA, 2013, UNICEF, 2015).
Economic production is one of the key characteristics of living. Economic production is also a determinant of the manner by which people fare in the world. From the beginning of history, humanity has applied agriculture in order to sustain its survival. The agricultural sector has been the recipient of increased growth over the past few years. The growth of the agricultural sector is growing in correspondence to increased requisite for food. A nation that is healthy is a nation that is self-sufficient in food resources, demonstrates political stability and independence while facilitating economic development and social justice (Akinlawon et al., 2013; Egyir & Akudgu, 2009; Morvant- Roux, 2008; Paarlber, n.d.; Rojas, 2012; Valadez and Buskirk, 2009). Notwithstanding, the human resources and land resources that are available, there are a number of countries that are facing dilemmas in the area of agricultural production.
In the case of Ghana, the average agricultural producer requires the ability of being able to cultivate cotton, tomatoes and bananas for export. Notwithstanding the concerted efforts of a number of nations and organizations, Ghana requires reinforcement in the context of agricultural economics. A number of agricultural producers in Ghana require micro financing in order to increase their capacity for agricultural production (Akinlawon et al., 2013; Egyir & Akudgu, 2009; Morvant- Roux, 2008; Paarlber, n.d; Rojas, 2012; Valadez and Buskirk, 2009).
Standards for Investing in Ghana
The levels of poverty in Ghana are becoming greater. The requisite of poverty alleviation in order to increase the standard of living in the area that is known as the Horn of Africa is required. Ghana is a nation that is composed primarily of agricultural producers. There are three agricultural areas in Ghana. These areas are designated as the following areas:
The highland central area in the vicinity of Mount Afadjato.
The valley plains areas.
The lowlands coastal areas.
In Ghana, approximately three quarters of the residents are reliant on the production of animal husbandry, fishing and agriculture. The total contributions of these sectors to the Ghanaian economy is approximately 56%. The low contribution of the animal husbandry, agricultural and fishing fields is that there scarce human resource pools available from which to draw labor. There is low investment in the infrastructure. The decreased economic potential hinders the growth of the agricultural sectors. The comprehensive adult literacy index in Ghana is approximately 71.5%. The increase of the GDP per capita has been 7.9% (CIA, 2013; UNICEF, 2012).
Kiva is a micro financing portal that supplies the people of developing nations with opportunities for receiving funding. The micro financing enterprises are also perceived as a lucrative endeavor. The micro funding is seen to be a circumstance in where all participants win. In the circumstance of Ghana, it has been ascertained that the agricultural sector offers an inherent growth potential that is prone to risks. The risks are attributed to the dwindling growth of the economy. It is perceived that with the application of micro financing, the policies would enable the agricultural producers’ conditions to improve.
Akinlawon, I., Otchere, A., Pomerantz, J. R., & Smith, L. (2013). The future of microfinance in Ghana: A case study. Cornell Institute for Food, Agriculture and Development: 15.
CIA (2013). Ghana. The World Factbook. CIA.
Egyir, I., & Akudugu, M. A. (2009). Rural women and microfinance in Ghana: Challenges and prospects. In Proceedings of conference organized by the International Labour Organisation, Accra Ghana on Financing Local Economic Development in Ghana: Old Problems, New Strategies. 26th–27th March.
Kiva (2014) About Kiva. Kiva.
Kiva (2012). The Kiva team. Kiva.
Morvant-Roux, S. (2008). What Can Microfinance Contribute to Agriculture in Developing Countries? FARM: Proceedings of the International Conference.
Paarlber, R.L. (n.d), Agricultural development and the third world market for U.S. farm exports. Wellesley College and Harvard University.
Rojas, S. (2012), Financial Inclusion: Financial Services for the Unbanked. Institute for Global Law and Policy, Harvard University.
UNICEF (2015). Ghana statistics. UNICEF
Valadez R and Buskirk B (2009). From Microcredit to Microfinance: a business perspective. Pepperdine University.
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