Poverty Measurements and Relevance of Micro-credit
Poverty Measurements and Relevance of Micro-credit
poor in a way that will allow the reader to imagine the extreme helplessness, and a state of extreme
destitute amongst the people under discussion. The poorest of the poor, as they are more commonly
referred to, have also sometimes been called the ‘hardcore poor’ (Hashemi, 1997), the ultra-poor
(African Development Bank, 2002) or the ‘chronic poor1 ’. While this paper does not aim to redefine
who are the poor, it will use the term ‘poorest of the poor’ to identify the group of people
who are economically on the outer edges of survival and managing to continue their existence
and live with or below an average $1 per day.
Poverty is commonly defined as ‘the inability to attain a minimal standard of living’ measured in
terms of necessary basic needs and services. Furthermore, the concept of a ‘poverty line’ has
internationally become accepted as an indicator of poverty which measures the monetary amount
needed to purchase a basket of estimated minimum calorie intake and the social services needed
to live a healthy life, below this estimated line an individual or household is considered poor
(African Development Bank, 2002; Lipton, 1997). Poverty is therefore characterized by the inability
of individuals and households to acquire sufficient resources to satisfy their basic needs.
Furthermore, poverty is not static. Research shows that some people may be suffering from poverty
from time to time, while others are permanently poor. Therefore, poverty within the present
discussion is identified to indicate when the ‘net outcome’ of the process of change experienced
by an individual or household is socio-economically negative or unchanged, also sometimes referred
to as ‘vulnerability’ status. (UNDP, 2001, Glewwe and Hall 1998; Grooteart and Kanbur 1995).
In view of the recognition that poverty was contextual, that it was not static, and that it was
relative, micro-credit was introduced as a mechanism for the poor to pursue poverty reduction
activities which were within their means and capacities (von Pischke, 1996). Micro-credit
programmes were meant to help the poor generate income and alleviate poverty sustainably (Chao-
Beroff, 1999). It became an important development concept since the 1980s, especially after the
many publications and reports on the positive experience of the Grameen Bank.
The Grameen Model (Yunus, 1989), which made micro-credit even more popular, specifically for
women, and included for the first time a community approach to poverty reduction and challenged
serious obstacles to borrowing, such as collateral, male guarantor or co-signer for female clients,
and repayment modalities. A further development took place in this model through some
experiences in Latin America, such as that of Americans for Community Co-operation in Other
Nations (ACCION), which introduced a business approach to micro-credit, through cost-recovery
and management as well as individual lending within the group (Berenbach and Guzman, 1999).
Therefore, micro-credit evolved further into a development and poverty reduction mechanism based broadly on the Grameen model and other local experiences. The most commonly found
micro-credit delivery channels in the low-income African countries are: profit making micro-finance
institutions, credit unions, and village banks (Holt, 1994). However, it is the MFIs that most of
the time have a better rural and urban outreach network and more money to inject, due to their
access to multiple fund sources. The discussion will attempt to highlight the differential impact on
poverty reduction and will give analytical perspective on micro-credit panacea.
ECONOMIC RESEARCH PAPERS
NO 74
(January 2003)
Factors Impeding the Poverty Reduction Capacity of Micro-credit: Some Field Observations from Malawi and Ethiopia
by
Sunita Pitamber
Poverty Measurements and Relevance of Microcredit - To learn more about this author, visit African Development Bank's Website.
Like this article? Share it with your friends
Some recent studies on poverty have attempted to put forth terms and classifications of the very
poor in a way that will allow the reader to imagine the extreme helplessness, and a state of extreme
destitute amongst the people under discussion. The poorest of the poor, as they are more commonly
referred to, have also sometimes been called the ‘hardcore poor’ (Hashemi, 1997), the ultra-poor
(African Development Bank, 2002) or the ‘chronic poor1 ’. While this paper does not aim to redefine
who are the poor, it will use the term ‘poorest of the poor’ to identify the group of people
who are economically on the outer edges of survival and managing to continue their existence
and live with or below an average $1 per day.
Poverty is commonly defined as ‘the inability to attain a minimal standard of living’ measured in
terms of necessary basic needs and services. Furthermore, the concept of a ‘poverty line’ has
internationally become accepted as an indicator of poverty which measures the monetary amount
needed to purchase a basket of estimated minimum calorie intake and the social services needed
to live a healthy life, below this estimated line an individual or household is considered poor
(African Development Bank, 2002; Lipton, 1997). Poverty is therefore characterized by the inability
of individuals and households to acquire sufficient resources to satisfy their basic needs.
Furthermore, poverty is not static. Research shows that some people may be suffering from poverty
from time to time, while others are permanently poor. Therefore, poverty within the present
discussion is identified to indicate when the ‘net outcome’ of the process of change experienced
by an individual or household is socio-economically negative or unchanged, also sometimes referred
to as ‘vulnerability’ status. (UNDP, 2001, Glewwe and Hall 1998; Grooteart and Kanbur 1995).
In view of the recognition that poverty was contextual, that it was not static, and that it was
relative, micro-credit was introduced as a mechanism for the poor to pursue poverty reduction
activities which were within their means and capacities (von Pischke, 1996). Micro-credit
programmes were meant to help the poor generate income and alleviate poverty sustainably (Chao-
Beroff, 1999). It became an important development concept since the 1980s, especially after the
many publications and reports on the positive experience of the Grameen Bank.
The Grameen Model (Yunus, 1989), which made micro-credit even more popular, specifically for
women, and included for the first time a community approach to poverty reduction and challenged
serious obstacles to borrowing, such as collateral, male guarantor or co-signer for female clients,
and repayment modalities. A further development took place in this model through some
experiences in Latin America, such as that of Americans for Community Co-operation in Other
Nations (ACCION), which introduced a business approach to micro-credit, through cost-recovery
and management as well as individual lending within the group (Berenbach and Guzman, 1999).
Therefore, micro-credit evolved further into a development and poverty reduction mechanism based broadly on the Grameen model and other local experiences. The most commonly found
micro-credit delivery channels in the low-income African countries are: profit making micro-finance
institutions, credit unions, and village banks (Holt, 1994). However, it is the MFIs that most of
the time have a better rural and urban outreach network and more money to inject, due to their
access to multiple fund sources. The discussion will attempt to highlight the differential impact on
poverty reduction and will give analytical perspective on micro-credit panacea.
ECONOMIC RESEARCH PAPERS
NO 74
(January 2003)
Factors Impeding the Poverty Reduction Capacity of Micro-credit: Some Field Observations from Malawi and Ethiopia
by
Sunita Pitamber
Poverty Measurements and Relevance of Microcredit - To learn more about this author, visit African Development Bank's Website.
Like this article? Share it with your friends
 | |
 |
No article feedback found. |
| |
Leave Your Feedback |
 | |
| |||
|
To learn more about the Evan Elite Author Program please contact us. |
 | |
|  |
Subscribe to African's articles
 | |
|
|  |
 | |
|
| |
 | ||
 |
||
 |
||
 |
||
|
| ||
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"
Click Here To Learn More |
|
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
 |
 Referral Strategies Online Marketing Tools Mirror Marketing Customer Focus Tips for QuickBooks Backup |
|
 | ||
 |
Top 50 Geek Business Blogs
Top 50 Geek Business Blogs | |
 |
The Top 10 GTD Times Posts
Best Posts for Productivity | |
| ||
 | ||||
| ||||
|
| ||||
| ||||
|
|
|
|
|
||||||||||||
|
Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
|
|
|
| ||||||||||||
| ||||||||||||
|
|
||||||||||||