When microfinance and megafinance meet

Scott attended the 2012 G20 summit in Mexico where he represented the Macquarie University. Scott is studying a Bachelor of Actuarial Studies & Economics, as well as being a member of the Global Leadership Program.

Executive Summary 

Sustainable and effective methods of eradicating global poverty are of high priority on the agenda of the G20. This is because poverty reduction is generally associated with an increased standard of living, a higher level of education and greater economic opportunities for individuals. Furthermore, nation states which engage in poverty reduction strategies can simultaneously transition their economies from dependent ones to diverse and sustainable ones. 

The paper assesses microfinance collectively as a tool and through its main services, namely credit, savings and insurance, highlighting merits and limitations of each. Analysis of the above leads to innovative ways for the G20 to add value to this movement. 

Motivation for the G20’s involvement is evident with social inclusion as a permanent agenda item. The G20 has recognised microfinance as a key to reduction of poverty. I recommend that more concrete action be taken by the G20, through funding of MFIs and supporting the introduction, development and efficiency of microfinance by working alongside governments to fulfil the Nine Principles for Innovative Financial Inclusion. 

The issue of women in microfinance is identified and analysed. The oppression of women as individuals and as a community is addressed. Microfinance enables women to develop their capacity for financial management. The G20 is a catalyst to change the systematic disadvantage of women, drawing the significance from the experience of the Grameen Bank of Bangladesh of the transition for women. 

The paper concludes that microfinance is valuable for the reduction of poverty. . It also recognises that poverty cannot be solved with microfinance as the only model. The limitations of microfinance are examined, identifying the appropriate context for microfinance institutions (MFIs).

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