Microfinance

2. Literature review

In this part, I described different theories and readers will look on previous research on the research topic and discussed microfinance, its different models and how microfinance contributes in poverty alleviation, and theories about entrepreneurship and social entrepreneurship.

2.1 Microfinance

Due to poverty poor are unable to get loans from the commercial banks because they have lack of collateral and guarantee as they have no education and experience in doing business and banks incurred high expenses on small loan transactions so the commercial banks are not willing to provide loans to poor people. Micro finance becomes one of the tools to finance such people for their business to alleviate their poverty and to give social benefits on sustainable way. According to (Ledgerwood, 2000) “Microfinance has evolved as an economic development approach that provides benefit to low-income women and men. The term refers to the provision of financial services to low –income clients, including the self employed.” According to (Agion & Morduce, 2005) due to microfinance many probabilities arise such as increasing market reducing poverty and fostering social change. Micro finance is not just source of giving loans but also address the issues of poverty alleviation, social impact on poor and educating poor to saving by providing micro loans to the poor people.

Microfinance — Much More Than Simply Credit -ADB’s microfinance development strategy defines microfinance as providing a broad range of financial services such as: money transfers deposits insurance loans payment services to poor and low income households and their micro-enterprises. We can say from these elaborating statements that microfinance is a form of financial service that is designed for poor to improve their lives in sustainable way.

2.1.1 Microfinance Activities

Microfinance usually gives finance only for micro enterprise. MFIs encourage people to lift up their...