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The Impact of Microcredit: a Concrete Help or a Mere Utopia? Analysis of this Poverty-Alleviating Model through its Different Stages of Development.

Greta Orsi - Università Cattolica del Sacro Cuore di Milano - [2005-06]
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  • Tesi completa: 70 pagine
  • Abstract
    The decision to deal with this subject is to provide a clear vision of an important innovation in the world of the finances - the concept of microcredit - which is considered one of the most popular and effective efforts to win the biggest and most pressing challenge the world faces today: the elimination of poverty. The aim is to understand what it consists of, how it is used, what benefits it provides and above all if it can be considered an efficient means to defeat poverty and to offer better opportunities to start new businesses to people that are normally excluded from traditional access to credit.
    Poverty is multi-dimensional, and by providing access to financial services, microcredit plays an important role in the fight against the many aspects of poverty.
    However, there is an ongoing debate regarding whether microcredit loans have the power to truly change established political and economic relationships. Improving the ability of microcredit and of microfinance to reach the poorest is one of the core themes of many institutions and agencies.
    Through this course, we can also better understand, more in general, what people can actually do in order to improve the world we live in.
    But there is another reality that we often tend to ignore: the reality of poor people, of immigrants, of the inhabitants of the Third World, of those who find it difficult even to survive.
    Many opportunities can be offered to these people, in order to allow them to achieve a better standard of living. Just one of this opportunities is MICROCREDIT.
    In this work, I will analyse the different aspects of this topic and investigate its development through time to see whether it has been able and will be able to change things, and to try to give an answer to the question: is microcredit a mere utopia or it can be considered as a concrete help?
    It is certain that microcredit has been changing people's lives and revitalizing communities since the beginning of trade. From the Microcredit Summit it emerges that microcredit initiatives are programmes that extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families.
    Microcredit and also microfinance have changed the lives of people in the world's poorest and also richest countries. Access to even modest financial services can bring people enormous power. With access to a range of financial tools, families can invest according to their own priorities (school fees, health care, business, nutrition or housing).
    In 2005 the Census Bureau released its annual report on poverty, claiming that it has risen by more than 1.1 million people from 2003 to 2005. There are now more than 1.2 billion poor people in the world. (According to World Bank data).
    The number of people without health insurance also rose, from 45 million in 2003 to more than 50 million in 2005.
    Moreover, studies have shown that of the 4 billion people who live on less than $1400 a year, only a fraction have access to basic financial services.
    Nevertheless, recent research has revealed the extent to which individuals around the poverty line are vulnerable to shocks such as illness of a wage earner, weather and theft. These make huge demands on the limited financial resources of the family unit, and the absence of effective financial services can drive a family so much deeper into poverty that it can take years to recover.
    It is estimated that the number of people who suffer serious and permanent malnutrition are around 800 million. These are men, women and children who, due to lack of food, have suffered irreversible damage to their health and are condemned to die in a brief period of time or to vegetate in serious stages of disability (blindness, insufficient development of cerebral abilities, etc.)
    This is a manifestation of the so-called “vicious poverty circle”: low per capita production, low per capita consumption, low per capita investment, since everything that is produced is necessarily consumed, and even then is not enough. Consequently, little or zero growth of the per capita product, and so on; microcredit is designed to break this chain.
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