Individual Topical Review Paper- Outline!

Innovation of interest: My innovation of interest is Microfinance. Microfinance is an interesting economic innovation with many benefits and limitations. Hence, I would like to explore this area. However, to further narrow down my topic, I would focus on microcredit. Microcredit is part of microfinance and may be defined as small loans that are given to people in poverty to start small scale businesses.

Rationale for selection: I have chosen Microfinance (microcredit) as my topic because it is undoubtedly a disruptive innovation. Microfinance is a novel way to engage people in poverty in self employment to allow socioeconomic development to occur.

The idea of microcredit began in 1970s in Bangladesh and has since helped improve lives of many people not only in Bangladesh but many developing countries around the world.

·         Executive summary

This paper will explore microcredit and the extent to which it has brought both economic and social change in people’s lives. The paper would also recognise the present day limitations of microcredit and how may it improve and expand in the future.

·         Background introduction

Microfinance is the provision of financial services to low income clients to stimulate self-employment. Microcredit is part of microfinance and refers to provision of small loans to low income clients who may have no or little access to conventional form of loans due to lack of collateral.

·         Historical perspective

Microcredit originated only about 3 decades ago by Muhammad Yunus in Bangladesh and Grameen bank is the microfinance organisation where Yunus began the concept of microfinance. One of the major sources of credit for the poor was private lenders. However, they offered credit at high interest rates and also required collaterals. Poor people such as farmers would often get exploited due to lack of collaterals and/or high interest rates.  

      Problem of indebtedness trapped them in poverty cycle.

·         Current situation

Today, microfinance through microcredit has allowed the poor to start their small size businesses. Microfinance is expanding to various countries in Asia, Africa and Latin America through various microfinance institutions.

Highlight the social and economic impacts (positive and negative) of microcredit

Potentials of self help groups and other services of microfinance may also be highlighted.

Present day criticisms and limitations of microcredit such as lack of information/awareness, funding etc will also be explored

·         Future Consideration

-The use of internet to increase awareness about microfinance and microcredit.

-Possibilities of government involvement to establish legal and proper regulations for the system to run efficiently and to run more microfinance banks

-Solve the problem of lack of funding through increased involvement of government and international organisations such as World Bank and United Nations

-Would each individual have the ‘right to credit’?