Tuesday, May 10, 2011

Microfinance: New And Improved!

Recently, microcredit system is being modified in different ways in order to improvise the system for better and become more accessible to needy people. One example is Farz Foundation’s microcredit system in Pakistan. Unlike the original idea, this system does not provide credit to poor people; rather it provides a person with raw materials along with the specific skill that will help him/her to become self-sufficient. The system believes that there is always a room for innovation to be introduced to already existing structures as there is always the danger of spending the credit on the items of daily use rather than sustainable work opportunities.

The system works in this way: a woman is provided with the necessary material and skill to successfully run a business of any kind (say, making and selling artificial flowers). What works in this case is the fact that instead of extending credit, she is being provided the raw material along with the skill. Not only business facilities, but also other options could be added to this system such as, the provision of health and education facilities to the community so that each individual keeps on learning during this process. Farz Foundation believes that by adopting this method, microfinance becomes a well-organized business as well as a community services, and incidence of default is reduced to the minimum level. At a time when the world economies are shrinking, and people at large losing their jobs worldwide, this method could be used to offset the impact of recession in the developing world.

Farz Foundation claims that, this method carries a significant potential that can be confirmed by their success rate of 80% in various projects. The program is now limited to some regions of Pakistan and is still in its experimentation process. But there is no denying the fact that the program has considerable potential as a tool to reduce global poverty if utilized in other parts of the developing world.

-Nisha Noor