Unit Name:development FinanceUnit Code:CFM 301Assignment:The impact of microfinances to economic growth and development of a country; stating the measures the government should put in place to manage MFI’s towards this goal.
IntroductionMicrofinance, also known as microcredit, has emerged as a movement in Kenya and inthe larger part of the world. There has been unprecedented growth of MicrofinanceNGOs in this country over the past two and a half decades. Kenya can be consideredthe best concept of Microfinance. This country provides models of recognised globalsignificance in several aspects of Microfinance, viz., scale of operation, modes andpractices of Microfinance, wider financial services, and poverty alleviation. Theexperience of Kenya is increasingly being replicated in many developing countries. Thesector is now in transition in terms of process and operational strategies. ThisAssignment discusses growth of the sector, its impact and some upcoming issuesincluding the challenges. The discussion is focused on the impact of microfinances toeconomic growth and development of a country and it will state the measures the governmentshould put in place to manage MFI’s towards this goal..Microfinance Institutions main featuresMicrofinance Institutions, in simple terms, can be described as institutions that oferrsmall loans to poor households to foster self-employment and income generations. Theloans largely go to rural landless, disadvantaged women and marginal farmers whodepend largely on selling their labour. The terminology of Microfinance was originallyknown as microcredit and has undergone a change in recent time. MicrofinanceInstitutions generally involves the following features:1*Small loans, for both working capital and assets 2*Collateral free, substituted by group guarantees or compensatory savings
3*Access to repeat and larger loans4*Intensive supervision and close monitoring5*Secure savings products6*