ASSESSMENT OF MICROFINANCE FOR POVERTY REDUCTION

ALYOU ALEM TEBEJE

Bachelor of Art, Metropolitan State University of Minnesota, 2003

Master of Business Administration, Argosy University,  2005

A Paper Submitted to Prof. Roxanne Eubank of Saint Mary’s University of Minnesota in Partial Fulfillment of the Requirements for the Degree

DOCTOR OF EDUCATION

MINNEAPOLIS, MINNESOTA

Copyright © 2005

Alyou Alem Tebeje

 

Abstract

This paper will assess the poverty focused microfinance, not just in terms of knowing and reporting on who we are reaching, but as a fundamental basis for building a sustainable program, which is designed around and which meets the needs of the poorest. It is hoped that this paper, and the methods outlined, will bring a new awareness, understanding, and commitment within the international development community to reaching the poorest families. The paper will urge an integrated strategy of economic development through its credit and savings makes it possible to affirm that the many microfinance institutions positive results and the international donors to take up the challenge of reaching the poorest.

Assessment of the Global Microfinance for Poverty Reduction

Introduction

In the past decade Microfinance has been recognized as an effective development intervention. Microfinance has been defined as: the means by which poor people convert small sums of money into large lump sums (Rutherford 1999). The Microfinance Project is designed under the overall framework of the priority economic development program (Fernando, 2004). Combined with other investments  (public works, employment counseling, and retraining) the project aimed at assisting people in making the transition away from unemployment and dependence on humanitarian assistance to active employment and income generation (Meyer, 2002).

The developing countries, contrary to popular belief, economic conditions have been getting worse over recent decades. (Daley-Harris, 2002) Today some 1.2 billion people suffer from chronic poverty, trying to subsist on less than $365 per year, which works out to only $7 a week. Simultaneously, the poorest 20 percent of the world’s population saw decreases in their meager share, from 2.3 percent of all wealth as it dissipated to a mere 1.4 percent (Brown, 2000).

Microfinance is becoming an ever important tool of poor countries development; provide great opportunities as well as important challenges to microfinance as an industry that is still maturing. Credit programs for small productive units initially farmers and later urban entrepreneurs have received foreign aid to promote their growth and facilitate their access to the formal financial system.

Background of the organization

Xyz Microfinance organization.

Microfinance has become an increasingly essential resource for the global development. The Microfinance project is designed to allow people who did not have access to credit the chance to borrow a small amount of money under the overall framework. It is just a small loan can help a family work its way out of poverty. Many people possess a strong entrepreneurial spirit, but have been overlooked by the formal banking sector because they lack collateral (Meyer, 2002). Microfinance is a financial system that offers access to credit and other financial services to poor people in many developing countries, as donors and international organisms designed to support the microfinance industry.

The organizational structure of XYZ Microfinance is intended to encourage, promote and lend support to the activities of regional and international partners. Microfinance agencies work with rural and urban low-income communities in developing countries. XYZ is NGOs (Non-Governmental Organization). The private and voluntary organizations which support micro and small enterprise programs in the developing world are needed. A sustainable banking system improves the ability of donors, governments, and practitioners to design and implement policies and programs to build sustainable financing institutions that are effective in reaching the poor.

NGOs are the major provider of microfinance. Microfinance has a social purpose, but despite the social content, it is really a commercial entity. (Amin & Ropa, 2003) Microfinance, first started in the 1970s, it has grown to become an industry of its own with thousands microfinance institutions worldwide. There is a rise in the numbers of organizations providing services to micro-entrepreneurs. Particularly from the mid-1990s, there has been an expansion in micro-finance services for micro enterprises from commercial banks (Forje, 1998) and especially from non-banking organizations.

Microfinance started to become more rigorous with the arrival of international NGOs. NGOs, who are microfinance specialists with programs worldwide, launched microfinance programs. The numbers of microfinance institutions in the developing countries have steadily increased making it one of the more active participants in the process of economic development with international NGOs, multilateral and bilateral donor agencies to further the access of microfinance for the poor (Wright, 2000).

All the key policy decisions related to the local initiatives project were made after consultations with all stakeholders (governments, microfinance institutions, banks, donors, and so forth), which resulted in better understanding of the principles of microfinance (Fernando, 2004). Microfinance institutions are given an opportunity to work in an environment that was supportive despite the initial skepticism of government officials about the concept of micro credit and loans disbursed by NGO (Fernando, 2004). The disagreements will slow down the government approval process. Bureaucratic obstacles in combination with design issues meant that the program did not disburse any loans for the first three years (Coleman, 2004).

Microfinance institutions include non-governmental organizations (NGOs), credit unions, non bank financial intermediaries, and even a few commercial banks. Microfinance Institutions forms alliances with other NGOs, for-profit, or governmental organizations, multilateral donor organizations, or implementing partners in the non-profit and private sectors. Many microfinance institutions are local, community-based and community-run organizations that may be supported by larger foundations and development NGOs or banks (Meyer, 2002).  Most NGOs’ identifies partners to create new opportunities to achieve mission driven results. The individual country governments do influence the microfinance community in a particular field, by establishing microfinance that promotes their policies.

Description of the population to be assessed

We going to asses 3 people 15 and 15 male age 17-65

The microfinance institutions to be assessed do not conduct formal poverty assessment (i.e., do not use measurement and scoring tools) rely on client selection criteria to determine whom the program will serve. The assessment is designed that microfinance institutions employ such client criteria as women only, residents of the same neighborhood or community. The selection criteria represent characteristics microfinance institutions use to define clients who are poor or very poor. Although not a poverty assessment tool per-selection criteria merit attention in this study for two reasons. First, they often result in the identification of clients who appear empirically to be poor. And second, such criteria often represent the only method a microfinance institutions uses to select its clients.

The participants discussed the topics of a particular interest to the practitioners that could be raised during the impact working group. Targeting the most remote and rural communities is priority in order to refine gender criteria to select for mothers with children or mothers who are single parents. For microfinance institutions that do wish to target the poor, these client selection criteria represent both the starting point and the bare minimum prerequisite for establishing a poverty targeting capacity. For without such criteria, the microfinance institution simply does not have a meaningful definition of poverty.

Organizational learning outcome to be assessed

The staff will assessed for competence of microfinance institutions that use highly sophisticated poverty assessment tools still employ criteria to define their target outcome. Outcome level: Client satisfaction with services, which will assess (differentiated by gender): client satisfaction with the access to microfinance services offered clients’ perceptions regarding the quality and relevance of microfinance services client satisfaction with the consequences of using microfinance services, and the change in clients’ lives brought about by the investments why clients decide to leave the program. After designing outcomes and service activities, faculty must consider the question: How can reflection be used to enhance a particular outcome? A key issue to consider is the timing of the reflection. Reflection activities before, during, and after the service activity can contribute to an outcome in different ways. Finally, staff must consider how the outcomes will be assessed.

Theory of Effectiveness

If the project meets its goals, microfinance customers would receive a better quality service, and product and customer as employee satisfaction would increase. The management would therefore see reeducation in level of complaints from the parties. To increase access of the poor, especially women, to financial services on a sustainable basis through strengthened microfinance institutions and an enabling environment.

Compare you population – people who are in the Micro-finance

Who you are really assign ( rural seating) and Urban settings Assess only specific population

Instrument Development

The microfinance institutions employee will be assessed in all three domains- the cognitive (knowledge or mind based), the psychomotor (skill based), and the effective domain. The assessment of the cognitive domain will be carried by paper ad pencil test and on the job test. The assessment instrument will take the form of an in class test consisting multiple choice and short answers questions. The three levels in the domain are awareness, distinction, and integration (this instruments which will be described in this paper).

Develop effective domain skills

The effective domain will be assessed by means of a checklist filled out by neutral observers and a self inventory done by observers by introducing performance-based monitoring. Cognitive domain includes content knowledge and the development of intellectual skills, recall or recognition of specific facts and concepts that serve developing intellectual abilities and skills. Assessments are built from these domains of learning. Participants are conceptually before we begin a learning activity, we measure their progress and/or achievement of the learning objectives and then participants will value and focus on material that will impact their knowledge.

The focus is on microfinance resources where they have greatest impact, and improve the quality of credit components in multi-sector programs. The assessment or rating services analyze and evaluate or rate that performance, sometimes using industry databases to compare the microfinance institutions with similar institutions. Supervisors are authorities, usually governmental, responsible for insuring acceptable performance.

The microfinance introduced the concept of institutional development plans for each partner institution, with the goal of improving the long-term sustainability of the microfinance industry. Microfinance institutions staff work with each potential partner institution to develop a plan tailored to the institution’s needs. This brief plan includes the institution’s development objectives, the identification of its operational weaknesses, and a specific plan of technical assistance, training events, and other types of support proposed by the microfinance institutions and technically verified by the team to overcome each major weakness. Consultative Group to Assist the Poor (CGAP), United Nations Development Program (UNDP) promotes the development of savings and other more client-responsive financial services among microfinance institutions in East Africa.

Construct matrix:

The review of the study is to understand how different types of micro finance services affect individual clients, their businesses and households. Provide information on impact and reaction to services of direct use to the microfinance institutions themselves. In terms of output the objective was to provide a number of in-depth case studies, which will form a platform for further analysis, expansion and follow up over time. The study examines the trend in profit, savings and wealth of poor households experiencing persistent negative shocks under different operating formats of microfinance schemes. Microfinance main objective is to reduce poverty by financing the poor, in other words to address the needs of the poor, microfinance schemes have to be more flexible.

Many international development banks such as African Development, Asian Development banks have developed a strategy for institutional microfinance covering the services provided by both formal and semi-formal sources (Coleman, 2000).  The strategy focuses on enabling policy environment; development of financial infrastructure; building of viable institutions; and improvement of the bank’s own capacity in microfinance assistance. The United States Agency for International Development (USAID) is vehicle for micro enterprise development activities. USAID objective is to provide micro-entrepreneurs, particularly women and the very poor, with greater and more reliable access to financial and non financial services needed to improve enterprise performance and household income.

Performance Assessments

The effective availability of microfinance could be the largest instrument of poverty alleviation. The financing project was provided based on the performance of each partner microfinance institution against mutually agreed upon performance standards related to institutional and financial performance. Furthermore, project financing was tailored as if, microfinance institutions were borrowing from commercial sources (with cost of capital of 3-5 percent per annum), and the reporting requirements were established similar to those of other financial institutions (Matin & Hulme, 2003). This approach provided incentives to microfinance institutions to strengthen their institutional and financial performance to meet the standards and develop appropriate internal policies and procedures that have helped them maintain impressively high quality portfolios.

According to Robinson (2001) microfinance must expand beyond credit into a wider range of financial products to meet the diverse needs of poor borrowers including savings, insurance, money transfer, remittances, etc. Most microfinance institutions originally provided financing to selected NGOs’, and those selected microfinance institution must be designed with the same business considerations as any other microfinance institutions. The selected microfinance institutions collapse, because of NGOs often causes a loan default crisis a few months after start up and plans should be put in place early to prevent it happening.

Risk Assessment

Microfinance institutions have increasingly relied on the design of viable financial institutions. Microfinance is too risky loans will not produce sufficient returns to justify investment. Identifying the key risks in microfinance business is necessary. Credit is a fragile financial instrument that offers purchasing power to take advantage of opportunities that already exist (Gonzalez-Vega, 1997).  Lack of protection for lenders and restrictions on foreign banks are negative perceptions. Politics can be a source of risk to microfinance institutions microfinance institutions as debt bailouts to placate important constituencies or pressure to extend additional credit during election campaigns can threaten the health of microfinance institutions. Microfinance seen as politically loaded, especially in emerging democracies, as politicians may try to use it for their own purpose.

Microfinance institutions increasingly accept loans from foreign investors; they are faced more and more with the issue of how to handle foreign exchange risk (Schreiner, 2003). Microfinance funds have dealt with currency risk by avoiding lending to microfinance institutions that have large dollar-based borrowing and large local currency loan portfolios, especially in countries with volatile currencies. The risks of currency depreciation currency crises in Mexico and Southeast Asia, dollar-based assets in microfinance were devaluations in the late 1990s (Fernando, 2004). Indeed, the costs of reducing currency risk can be high, and in many cases few alternatives are available. Microfinance institutions are the most widespread way to deal with currency risk has been to simply charge high enough interest rates and fees to offset any potential risk from currency devaluation.

Ethical Issues

The basic ethical issues around microfinance are a fair allocation with limited resources. The poor are at greater risk, because less access to resources. The challenge of expanding access to microfinance to growing numbers of low-income borrowers and lack of resources to poor are underserved.  And the political constraint arguments are the market value and revenue argument, and the monitoring role of the government. According to Parker (2000) microfinance has multiple concerns: humanitarian, as corruption undermines and distorts development and leads to increasing levels of human rights abuse; democratic, as corruption undermines democracies and in particular the achievements of many are developing countries. Corruption undermines a society’s integrity; and practical, as corruption distorts the operations of markets and deprives ordinary people of the benefits (Pitt & Khandker, 1998).

In addition, the issue of joint vs. individual liability raise question about the practice of microfinance institutions. Joint liability is only one aspect of group lending, designed to improve repayment, better screening and selection of new borrowers.  Most microfinance institutions are already operating in a purely peer-to-peer environment. Peer-to-peer loan system, allowing peers to better enforces the loan contract policies about the use of their networks. However, it may also increase drop-outs by putting excessive pressure on clients, generating conflict or harming social capital. However, the lesson for peer-to-peer designers is that without accountability in a network, it is difficult to enforce rules of social responsibility (Wright, G. (2000).

Mortality

Realizing the potential that will possibly exist that the individuals who will be randomly identified may not be living at the addresses or have the same telephone number as when they will receive services, over sampling will be utilized of a total of 20 microfinance participants

Bias control

Bias refers to the problem of attributing causation to a program with voluntary selection (Ghatak, 2000). Bias may occur in microfinance because of difficulties in finding a location at which the control group’s economic, physical and social environment matches that of the treatment group (Pitt & Khandker, 1998). Biases that are most evident to occur are socio-economic, linguistic, gender, tribal, and religious. The potential biases of microfinance should be addressed. Biases in microfinance exist or could potentially exist, including, capital requirements, loan loss provisioning, usury laws, documentation, and restrictions on the operations of financial entities. There’s still a long way to go in improving microfinance institutions around the world comparing older active borrowers to new borrowers will then introduce potential biases.

As Wright (2000) pointed out microfinance offer small-size loans, short loan duration, weekly payments and dependence on mutual guarantees promote the inclusion of the poorest poor or serve as a self-selection bias. The following are the main biases in micro-lending: entry requirements and limits on the activities of financial institutions, loan documentation, provisioning and capital adequacy requirements, downstream evaluation, location biases, interest ceiling. Most of these policy biases against microfinance identified the following bank regulatory areas (Jansson, 1997).

The most direct way to address the potential biases is to collect data on control groups, i.e., households that don’t now have access to microfinance. The big question is how do households with access to microfinance differ over time from those who don’t. Coleman, (2004) also uses the same survey data but reconsiders the estimation strategy to control for self-selection. He argues that the village bank methodology, which relies on self-selection by loan size and monitoring by frequent meetings, may not reach the poorest (Pitt & Khandker, 1998). As many wealthy households tend to be on village bank committees, the failure to control for this leads to systematic biases.

Scoring methodology

This paper has argued that credit scoring for microfinance can work. It is not as powerful as scoring for credit card or mortgage lenders in rich countries, and it will not replace the judgments of loan officers or loan groups based on informal, qualitative knowledge, but scoring does have some power to predict risk (and thus to cut costs) even after the group or loan officer makes its best judgment. Thus, scoring complements but does not replace current microfinance technologies. Furthermore, scoring not only helps to predict risk, but the process of making the scoring formula also reveals how characteristics of the borrower, the loan, and the lender affect risk. This knowledge is useful whether or not a microfinance lender uses risk predictions from scoring to inform daily decisions

Microfinance institutions the main objective is to reduce poverty by providing small amounts of credit to the poor, in order to generate self-employment in income earning activities. When the microfinance institutions loan officers use a credit scorecard to evaluate new applications, prospective borrowers without business experience would be given a lower score, making them less likely to qualify for a loan from the institution.

The main target group is poor women entrepreneurs (Pitt & Khandker, 1998), and the core methodology is a credit only approach with forced savings tied to the loan. Credit is given out in groups where the group guarantee becomes the loan collateral and groups are trained and required to sit for weekly meetings. Yet, the core credit led methodology is what keeps extreme poor out of the traditional microfinance portfolio.

The scoring technology systems can be a foundation for advanced capabilities, such as pricing loans based on individual client risks and more accurately provisioning against loan losses. Scoring develops a scorecard that loan officers use by inputting client data to create scores that predict several types of client behavior (Pitt & Khandker, 1998). Scoring enables loan officers to prioritize their efforts on clients most likely to respond to the microfinance institutions marketing effort and collections scoring: Maximizing the effectiveness of the arrears recovery process by assigning collection strategies based on the client’s profile (Matin & Hulme, 2003). It improves the efficiency of loan evaluations, recovery of arrears, and customer retention, offers a basis for variable pricing by including individual client risk in lending decision-making.

The scoring methodology is appropriate in open session, and reevaluating and rescoring the proposals in executive session.  Of course microfinance institutions come with the own prejudices, experiences and learning styles. For any lender, scoring is difficult, and scoring for microfinance is even more difficult. As discussed, the main difficulties are the organizational adjustments required to integrate scoring into the lending process. A second important difficulty is amassing an adequate data base. A third difficulty is that one size does not fit all; a scoring model developed from the data base of one lender will be much less powerful if applied to a second lender because of differences in the lending technology, the clientele, the competition, and the general economic environment.

Stability and predictability

Microfinance is working in the way intended to bring sustained relief from poverty. Microfinance institutions received grant support for their start-up fixed and operating costs for the first three years of operations (Daley-Harris, 2002).  This support declined from 100 percent of operating costs in year one to 50 percent in year two and to 0 percent in year three (Daley-Harris, 2002). Building financially sustainable institutions is the only way to reach the poor. Sustainability is the ability of a microfinance provider to cover all of its costs (Robinson, 2001). It allows the continued operation of the microfinance provider and the ongoing provision of financial services to the poor. Achieving financial sustainability means reducing transaction costs, offering better products and services that meet client needs, and finding new ways to reach the poor neglected from financial institutions. Today, all microfinance institutions cover their own operating costs from their own operating income and are not dependent on injections of outside funding to continue running (Wright, 2000).

The rationale for using performance based instrument

The objective of microfinance is the improvement of quality of life for poor people. Just like everyone else, poor people need a wide range of financial services that are convenient, flexible, and reasonably priced. The program designed to improve the quality of microfinance services and their impact on poverty through strengthening the development of impact assessment systems. Microfinance has become recognized as a valuable tool for increasing the livelihoods and reducing the vulnerability of the poor. . It has been quite successful in many countries, the utilization of credit for adequate income and employment generation is a cause of concern for most of the stakeholders. As a result, there has been a growing demand for information on successful approaches to project design and implementation.

Increased earning and savings provide poor people with some cushion from the day-to-day struggle of earning a living (Mosley, 2001).  The goal provides the means to achieve the other goals. Access to financial services enables the poor to fight the various dimensions of poverty and make improvements to their lives. Whether they save or borrow, evidence shows that when poor people have access to financial services, they choose to invest their loans, additional earnings, or savings in a wide range of activities and assets that benefit not only themselves but also their households.

Evaluation

Assessment or rating services analyze and evaluate or rate that performance, sometimes using industry databases to compare the microfinance institutions with similar institutions. Evaluate microfinance loan applications quickly, which has reduced the cost of review and made microfinance lending profitable. Develop the knowledge and cognitive skills necessary for the training audience to evaluate microfinance operations, evaluates microfinance institutions performance, management systems, financial resources, products and services, based on quantitative and qualitative data.  The ratings tool organizational sustainability also designed the methodology to apply the ratings tool and an appropriate weighting scheme, which emphasizes on microfinance institutions level of sustainability.

Methodology 

Due to the paucity of research examining the process of successful microfinance informal economies, the selection of  qualitative research approach as the most effective method to identify emergent themes.  The grounded theory methodology allowed the research subjects themselves to bring forward the key issues in their success.

Reliability and validity

Creating a financial system capable of lending to microfinance lender and low-income households is an integral part of the World Bank’s strategy for developing the indigenous private sector and alleviating poverty (Schreiner, 2003). Microfinance institutions consist of agents and organizations that engage in relatively small financial transactions using specialized, character based methodologies to serve low income households, micro enterprises, small farmers, and others who lack access to the banking system. Through microfinance, high degree of reliability and validity can be achieved (Meyer, 2002).

Reliability

Reliability informs us about how likely the same result is achieved or how likely the result will be repeated if the same scale is used to measurement. Validity tests whether the measurement reflects what it is meant to reflect, and is of three types: content validity, external validity and construct validity. However, lack of commonality in the choice of factors and indicators among the different single-item index measures may be due to the lack of a common conceptual basis. It will raise question about both reliability and validity.

Reliable and cost effective poverty targeting is being achieved in practice, and has been operational zed into the day-to-day operations of many microfinance institutions (Robinson, 2001). The method may be open to manipulation by participants or staff, the data is highly sensitive to this, and it would be very difficult for this manipulation not to create high levels of inconsistency. The relevance and validity as indicators; reliability and practicability microfinance are already more advanced in application than many past international years. Many years observance should be viewed as part of a continuing process to formulate effective approaches to sustainable microfinance. People who maintain that microfinance empowers poor people and raises their standards of living are being asked to prove it.

Sample selection

Microfinance institutions will, like any other financial institutions, be impacted by regulatory changes in all these areas and inappropriate policies will have detrimental effects on their ability to reach and serve their clients. As Ghatak (2000) indicate that sample selection bias may produced by an accidental bias in the sampling technique, as against deliberate or unconscious manipulation (credit recipient) group in all respects save that of not being a credit recipient.

There are two many obstacles surrounding microfinance, but the two largest existing obstacles are the lack of a revenue stream and finding the management necessary to guide such a project to successful completion. The first statement is true. Microfinance institutions alone cannot do all that it takes to eradicate poverty: we all know how high the demand is for financial services to the poor, and in developing countries. Microfinance alone does not improve roads, housing, water supply, education and health services, when properly harnessed and supported, it has made these and other sustainable contributions to the community. Perhaps the greatest contribution of microfinance is that it empowers people, providing them with confidence, self-esteem, and financial means to play a larger role in their development.

Attitude of the Subjects

A letter will be sent to each participant sharing the intent of the study, introducing the researcher and identifying the partnership. The letter will be an attempt by the researcher to refresh the individual’s memory with regards to their involvement in the microfinance institutions success on behalf their clients. Samples will be retained and fully utilized for research studies. The researcher will not attempt to identify participant.

Validity

The belief appears to be that once sustainability of the microfinance institution has been guaranteed, The purpose of this study is to develop a new instrument to measure the perceptions entrepreneurs have of their entrepreneurial goals and verify its metrical qualities. The results show that the newly devised instrument has the desired metrical qualities: construct validity, content validity, predictive validity and strong internal consistency or reliability. The analysis of threats to validity of conclusions from quasi-experimental designs is familiar to quantitative evaluators.

The goal is to conduct evaluations that are credible and adequately meet the needs of key stakeholders, given the conditions under which such evaluations need to be undertaken. The four categories of threats to conclusion validity, namely: Internal validity, why inferences that the relationship between the two variables is causal may be incorrect. External validity inferences about how study results would hold over variations in persons, settings, treatments, and outcomes may be incorrect. Statistical conclusion validity inferences about co-variation between two variables may be incorrect. Construct validity inferences about the constructs that characterize study operations may be incorrect. If these constructs demonstrate reliable validity, the goal is to create a filtering instrument that will empower micro-lenders to target appropriate interventions for each type of entrepreneur.

 Procedures will be standardized with a time line established and training provided to placement specialists. The graduate assistant involved in data entry with individuals will be unaware of the hypotheses and unable to identify the participant characteristics of the individuals or groups. Realizing the potential that will possibly exist that the individuals who will be randomly identified may not be living at the addresses or have the same telephone number as when they will received services, over sampling will be utilized. A total of 20 microfinance participants will be added.

Content validity

Alternatively, a panel of experts will take the responsibility of examining the test. Preferably, industry and scholar experts will be chosen for the assignment of examining.

The instrument itself, the way how the assessment will be administered, and lastly in the inferences made from the results of the test, these constitute the three forms of bias occurrence, notably. A review panel can comprise by individual experts from every different religious affiliation, a bilingual, scientist, economist, business people an anthropologist, and among many, however biases that are most evident to occur are socio-economic, linguistic, gender, tribal, and religious, however, a neutral outside professional scholar will be considered in the administration of the instrument. Evidently, this examiner or monitor has to be one who is familiar with issues that are related to education. A room which provides a degree of familiarity, and comfort to the participants is where the test will be conducted.

The participants will be permitted to pick a place or space of their own preference. It will be made certain that the room temperature is appropriate and conducive for the participants. Nevertheless, it is of paramount significance to point out that unpredictable factors that might possibly interfere with the examinees concentration, mood, and performance will therefore be uncontrollable, e. g. rain, excessively high or low temperatures. As far as the test format is concerned, participants would be familiar with it. The appropriate and necessary essential examination materials will be in place during the exam so that the students will be able to function with them.

Data Analysis

The data upon entry into SPSS data base will be organized by variables. The data will be summarized and reported with correlation coefficients Pearson r and Spearman reporting statically significant findings.

Selecting item type

The individual achievement constitutes the assessment. It will be basically oriented on process and product. When participants prepare, plan, and demonstrate a vast range of knowledge and skills. In addition, participants will utilize all the domains and the observer attentively can take notice of the theoretical as well as physical practical skills besides to the entrepreneur skills of the individual. Ideally, although microfinance practice activities compel for collective work, however when an individual seeks for

Loan, the loan amount is offered based on the individual’s achievements, knowledge, qualities, and performance.

Implementation

 Each process in the study will possess a guide developed for implementation on time lines established and personnel involved in conducting the study. The researcher will observe the different processes being used and documented observations.

Subjects Maturation

As time will pass between the services and this study the strategy assured each subject included in the pool will be employed for at 80 days.

Testing

The characteristics of the data gatherers/researchers will include different groups from different ethnic and social backgrounds. All data will be collected under the same conditions and in the different location with the survey read to each participant by the principle researcher. The data tested whether participation in the microfinance program for very poor borrowers has a more positive effect on various outcome measures than it does for average borrowers. Demographic or personal information obtained for the survey will be pulled from membership files.

Confidentiality

Participants will be verbally informed that the information shared in writing (letter to the individual) of how confidentiality and anonymity of individual subjects will maintain during the study. Informed names will not be on the survey. The number will be the tracking devise as the data will be analyzed. Within the training confidentially and protecting anonymity of each participant in the study will be reviewed and written process shared for the study. Written consent is normally required, unless otherwise justified. If written consent will not be obtained, you must still provide a copy of the script that will be used to obtain verbal consent from the subjects. There should be a signature line for the subject and one for the researcher.  Witness signatures are not required in most circumstances.

Professional Standards

All processes and procedures of the study will be outlined prior to beginning the study. The researcher will be aware of the potential ethical violations of the integrity and moral obligations in conducting research and will follow and abide by the established schedules, and will adhere to the established process. A log will be kept of observations throughout the process of potential threats; it will be reviewed prior to writing the research findings to determine impact of the threats observed.

Achievements

The majority of these microfinance organizations are donor funded, which is an obstacle to their scalability and sustainability. Robinson (2001) mentioned more than 7,000 microfinance institutions worldwide, less than 100 can claim financial self-sufficiency. Forje (1998) after analyzing many microfinance institutions data, there was a relationship between the poverty level of those who participated in micro loans for a year or more, and those who had just begun. Those who participated in micro loans on average earned more money per day.

In addition, there was a relationship between the economic status of those who participated in micro-loans, and those who had never participated in such loans, and also between those who had discontinued participating in microfinance. The vision of many governmental and nongovernmental organizations is to fight against mass poverty, food insecurity, many other problems and the creation of strategies and programs that will enhance family, create viable microfinance programs (Meyer, 2002). Microfinance is an important tool in combating poverty by providing the poor within a community with critical financial services which they generally cannot access.

This assessment tool is designed to assess the microfinance financing the poor in developing countries include the participatory poverty assessment carried out by the World Bank in collaboration with the government and non Government bodies (Pitt & Khandker, 1998). Microfinance services contribute to development by adding value: benefits to society should exceed costs. Most of the costs and benefits are borne by the providers and users of the services, but there may also be important side effects, or what economists call externalities, on other people and society at large. These are referred to below as wider impact. The day-to-day business of microfinance is primarily concerned with direct impacts. Here the key equation is whether costs of provision are less than the benefits to clients. If they are then business is possible, with benefits shared between provider and user according to the price that is struck between them. Schreiner (2003) states that the scope for business can be enhanced by lowering the cost of provision of the services, as well as by developing new products that better serve the needs of clients. They are mostly privately owned, limited companies and offer professional skills and expertise in a specific domain of microfinance.

Microfinance aims at providing access to financial services vital to the poorest. Microfinance offering financial support for investment projects in the small business domain (Mosley, 2001). Microfinance used to be the domain of donors and experimental credit projects but it has evolved into an industry. Almost exclusively the domain of donors and experimental credit projects, institutional microfinance has evolved during the last decade into an industry with prospects for financial viability, offering a broader range of services and significant opportunities for expansion (Schreiner, 2003). This strategy will help us to be more effective and consistent in meeting the diverse requirements of this industry. But microfinance institutions can attract deposits and provide products and services to the poor at competitive prices.

Microfinance an instrument against poverty

Microfinance is a powerful instrument against poverty. The acceptance of scoring in an organization also requires a proven track record. One of the greatest strengths of scoring is that it can establish a track record even before being put to use. Access to microfinance can be an effective way of helping marginalized millions poor people to improve their lives. The poor constitute the vast majority of the population in most developing countries, but an overwhelming number of the poor continue to lack access to basic financial services. Access to sustainable financial services enables the poor to increase incomes, build assets, and reduce their vulnerability to external shocks. Microfinance allows poor households to move from everyday survival to planning for the future, investing in better nutrition, improved living conditions, and children’s health and education.

Microfinance has proven to be an effective and efficient mechanism in poverty reduction the world over. The experience of microfinance programs points to strong evidence that the access to financial services play an important role in the economic development of poor communities. Microfinance is a key policy strategy for poverty alleviation. Access to credit enables households to accumulate wealth and assets, which allow them to better economic and social security. The big accomplishment in microfinance, microfinance does put food on the table which is no small accomplishment.

Today, the emphasis is on building sustainable microfinance institutions that can increase both scale and outreach to the poor through a range of reliable financial services (including savings, payment transfers and insurance, as well as credit) with decreasing dependence on external donor funding, as microfinance has become recognized as a valuable tool for increasing the livelihoods and reducing the vulnerability of the poor. Despite this progress in the industry, many challenges remain the largest share of total production in developing countries and involved a high percentage of the population.

 

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