BENEFITS OF MICROCREDIT
- Reduction of VulnerabilityMicrocredit programs aid against crises by building household assets for those in need. These assets can bring in extra profit if they need to because they can be sold. Also, they can be used to verify credit worthiness when dealing with lending agencies or businessmen. These additional assets provide more security for families because they are diversified; diversified assets cut the risks of loss. Furthermore, other aspects such as skills training and female empowerment also help families cope with crises. Microcredit teaches people to hold their own place in society, thus allowing the cycle of poverty to stop.
- Increased ConsumptionMicrocredit programs cause an increase in household consumption. A researcher from Bangladesh found that for ever 100 taka (unit of currency in Bangladesh) lent to a female borrower, their household consumption was raised by 18 taka. Even small increases in consumption can lead to better health and well being for the entire family. Providing a greater stability for families has huge long term positive effects for ending poverty cycles within families.
- Reduced Income PovertyBorrowers of Microcredit tend to make more money over time. Once the cycle of poverty stops, and there is stability in the household, many borrowers go on to make profitable investments and may be able to lift their entire family out of poverty altogether. On average, 15% of participants in Bangladesh rise up from poverty after three years of participation. The poorest of the poor will see a 25% reduction in poverty after the first year. Any rate of reduction of poverty certainly warrants optimism.
- Boosting Self-EsteemSimply put, participants experience a sense of pride when they create or expand a business successfully. Many learn new trades or management skills causing them to have a sense of ownership in what they have accomplished and they feel worthy of a place in society. This boost in self-esteem causes many women to want to continue being successful, causing a halt in the cycles of poverty that once surrounded their lives.