Microfinance in Vietnam - 1 Professor Christian Lentz Geog 64 Vietnam December 7 2015 Microfinance in Vietnam Microfinance is the provision of a broad

Microfinance in Vietnam - 1 Professor Christian Lentz Geog...

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Professor Christian Lentz Geog 64 Vietnam December 7, 2015 Microfinance in Vietnam Microfinance is the provision of a broad range of financial services such as savings, loans, payment services, money transfers and insurance to poor and low-income households and their micro-enterprises. Microfinance is a way to give people access to new opportunities and it has the potential to increase household income and help families manage their money. In addition, microfinance also includes issues such as leadership development, trust building, small business management and education (Christen et al, 1996). The microfinance industry has been growing rapidly in poor countries like Vietnam because non-governmental organizations (NGOs) and international donor organizations see microfinance as a way to provide more efficient aid to poor families in rural areas. Providing microfinance to the poor is a common solution to resolve poverty and it has the potential to be an effective and powerful tool for poverty reduction. This paper analyzes the pros and cons of microfinance in light of other developing countries and assess microfinance in Vietnam. The goal of many microfinance programs is to reduce poverty through the accumulation of social, human, financial and physical assets. By providing financial and other related services to poor households, microfinance reduces poverty and allows households to make smart and productive investments (De Aghion and Morduch 2006). A study done in 1998 by Pitt and Khandker about the three micro-lending institutions in Bangladesh found microfinance reduces poverty and vulnerability by promoting asset accumulation, which is a way for families to exit 1
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chronic poverty. This is because assets help reduce people’s vulnerability and they are less affected to fluctuations to shocks in the short term (Hulme and McKay, 2005). This is one of the most widely cited studies that suggest that microfinance has significant and positive contribution to poverty reduction in Bangladesh. The pro of microfinance is that it has the ability to have an immediate impact on a wide range of poverty reduction targets such as income, health, nutrition, and education. Another advantage is its cost-effectiveness because the donor investment is recycled and reused (Wright, 2000). Microfinance is cost-effective compared to alternatives such as formal rural financial intermediation, targeted food interventions, and rural infrastructure development projects (Christen et al, 1996). In addition, microfinance has the potential to become sustainable
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  • Fall '15
  • Lentz
  • Poverty, Microfinance Institutions

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