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An Analysis Into The Brain Drain Phenomenon Economics Essay

For the past 60 years, The Philippines has had a world-leading reputation for preparing highly skilled nurses and healthcare workers for the purpose of exporting to countries in high demand of said services (Brush and Sochalski 2007:37). Simultaneously, the health care shortages in these high-income countries have resulted in “accelerated nurse recruitment, mobility, and migration” (Perrin, Hagopian, Sales and Huang 2007:219); leaving The Philippines itself with a “dangerous shortage” of nurses and healthcare workers (Overland 2005). This phenomenon is often referred to as a “brain drain”: qualified skill leaving its own country. This is a large issue relevant to development as it boasts implications for all parties involved; the country of emigration, the country of immigration, and the correlated healthcare systems as well as economies are all impacted. In connection to development one could also ask, does such mass movement further contribute to the First World’s success and further detriment the struggles of Third World nations? As an undergraduate student, concerns for me could lie in the area of job availability upon completion of school. Will I be competitive in the health care field or will preference be given to the reputably skilled, foreign-trained nurses? Thus, I will argue that although the mass nurse migration occurring in the Philippines is good in many ways, it has significant negative implications for the country; largely pertaining to the labour and employment, trade, and health sectors (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1414).
Push and Pull Factors For nurses in The Philippines there are many reasons to leave the country in search of work in higher income countries like Canada and the United States. There are reasons not only to leave the islands (“push” factors) but also reasons to come to North America (“pull” factors). In both instances, factors can be economically related, work related, as well as socio-politically related (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1412).
In starting with reasons to leave The Philippines as a qualified nurse, the obvious might pertain to low wages; in a country where the healthcare budgets are minimal, low salary and weak benefits packages are elements that send employees looking elsewhere (Perrin, Hagopian, Sales and Huang 2007:219). On top of this, due to lack of investment in the health care sector, “poorly resourced and unsafe working environments have been identified as key motivators of migration,” (Brush and Sochalski 2007:43). From a logical standpoint, any skilled individual would opt to work in a clean and technologically advanced environment if the opportunity presented itself. Add on the fact that the cleaner and more equipped environment promises more financial benefit? Seems to be a pretty obvious choice, does it not? Tack onto all of this that The Philippines also encompasses a “tight domestic labour market”, and it pushes one into migrant work even further (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1406). In a country where the budget for health care is intolerably low, the wiggle-room for job availability will be correspondingly low too. Despite professional training and high level education, jobs will not be available due to a lack of resources. And this proves true regarding nursing in The Philippines. If one wishes to work domestically and is able to find a job, however, the next push is the current nurse-to-patient ratio. Forty to sixty patients per nurse is a ratio that is dangerous for not only the Filipino society (regarding the lack of care) but is also increasingly dangerous for the nurses themselves (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1414). To be run off of one’s feet, working inhumane hours, and being paid unbearable wages has very minimal appeal to it. Especially when there is a place that entices the workers using quite the opposite strategies…just an ocean away.
To pull is defined as to exert a drawing force; to move or go (Dictionary.com).
Factors that attract nurses and other Filipino healthcare workers to North America have this exact defined affect. The pull factors: “higher income, better living and working conditions, opportunities to travel and opportunities for skill development and career advancement,” (Perrin, Hagopian, Sales and Huang 2007:220). As with the factors that push nurses away from The Philippines, money seems to be the ultimate regarding the pull that North America has on the migration. It is claimed that nurses can “make in 1 year what it would take over 20 years to earn at home,” if they work overseas (Brush and Sochalski 2007:40). Numerically, it is an average of US$2,040 a year in The Philippines versus the potential of US$48,000 offered in countries abroad (Brush and Sochalski 2007:40). This makes for a financial difference so remarkable that an educated Filipino mother struggling to provide for her children might be seen as foolish to ignore the “fast” money — fast in the grand scale of things. Recruiters are a method used to demonstrate the many better opportunities that can pull nurses to North America (Brush and Sochalski 2007:37); opportunities especially pertaining to job availability and career advancement. In North America, with the aging of the Baby Boomers acting as a key ingredient, a growing need for healthcare has developed. As Brush and Sochalski further explain, our countries have been unable to produce and hold onto sufficient numbers of healthcare worker to fulfill the needs. Because while North America might be pulling nurses from The Philippines and various other nations in, inadvertently, the phenomenon is bilateral (Brush and Sochalski 2007:38). Not only are North American’s not enrolling in nursing programs at the necessary rate, but those who enroll are taking the opportunities to fulfill the needs of other nations with healthcare shortages. The pull of Filipino nurses to North America is so strong, and the benefits seen as so rewarding, even if an individual does not wish to become a nurse, patterns show they are doing so anyway — at large, for economic reasons (Overland 2005). It has been observed that the educated likes of law students or medical students are even switching into nursing (Overland 2005). Martha Overland is even so bold as to say that the numbers prove that “young, talented Filipinos would rather be nurses abroad than doctors at home” (2005).
History The Philippines has been a world leader in the equipment of nurses for export since the 1950s (Brush and Sochalski 2007:39). What began as work-exchange programs in the 1940s (Perrin, Hagopian, Sales and Huang 2007:220), resulted in the “overturning of Asian immigration restrictions under the 1952 Immigration and Nationality Act”; encouraging skilled laborers to migrate to specific areas of the United States holding shortages in the labor sector (Brush and Sochalski 2007:39). The work exchange programs became a path that young Filipino women were using to get to North America and therefore “elevate” their lives economically as well as personally (Brush and Sochalski 2007:39). During this era, working overseas was typically seen as a method of advancing training and skills in order to bring the knowledge back to The Philippines and improve the standards of health services domestically (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1408). But the times were changing. As many of the students stayed in the United States as migrant workers, and were thus granted permanent residency (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1408) via the changing immigration laws, The Philippines emphasized the onset of an export-oriented economy (Brush and Sochalski 2007:39). The main commodity? Nurses. The Philippines hailed the nurse migrants as “heroes” for the reason that their remittances were seen as a huge contributor to nation building (Brush and Sochalski 2007:39). In fact, throughout the 1990s “remittances from skilled and professional Filipinos made up 5.2% of the country’s gross national product” (Perrin, Hagopian, Sales and Huang 2007:220); that signifies a large proportion of the nation’s people working out of the country. And, on top of that, a large percentage of GNP being obtained through working abroad as opposed to domestically. Within the past two decades nursing shortages have climbed in North America and the migration of Filipino nurses began as a temporary solution to fill the gaps (Brush and Sochalski 2007:42). The shortages have been observed to be cyclical though and the temporary solution by way of migrating nurses from The Philippines has become a permanent fix (Overland 2005). And this is where the division between positive and negative effects begins to cleave.
Good for The Philippines Perhaps the positive implications for The Philippines as a whole are not quite as obvious as the positive implications for each individual nurse who migrates to North America in quest of higher income. As previously discussed within the Push and Pull Factors, migrating to a more developed nation in search of work as a nurse is widely seen as a move that enhances the quality of life for the nurse and his/her family (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1406). Seeing as “one out of every five employed [Filipino] workers is underemployed, underpaid, or employed below his/her full potential,” the opportunity to become employed abroad eases tough conditions and provides work to those seeking jobs (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1407). Dually, whilst of significant economic benefit to the individual involved, the migration of Filipino nurses is of great benefit financially for The Philippines; “These nurses stand to provide substantial remittances to their home countries,” (Brush and Sochalski 2007:44). As touched upon, remittances are an integral part of the Filipino economy. As an example, Marilyn Lorenzo and her team show the recent spike within the last decade to have reached US$ 10.7 billion in the year 2005; of this remittance total, nurses contributed by far the largest portion when all migrant professional workers were taken into account (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1407-1408). The avenue exhibited by The Philippines to gain money via the exportation of nurses as a commodity has become a model by other nations in search of the same thing (Brush and Sochalski 2007:44). The remittances are seen as so very significant to the respective home country that the next significant step could be seen to be the redistribution of said remittances into the domestic health care sector (Brush and Sochalski 2007:42).
Negative implications for The Philippines Despite the significant contributions made remittently by Filipino nurses working abroad, The Philippines faces a serious risk to the nation’s health as a result of the mass migration of nurses occurring (Brush and Sochalski 2007:40). The lack of care being received by Filipino’s at home is just one of many negative implications that the “brain drain” has on The Philippines though. The world wide nursing shortage experienced by many developed countries has resulted in what has been dubbed by Brush and Sochalski as provider maldistribution (Brush and Sochalski 2007:37); developing nations, specifically The Philippines, are unprepared to deal with the extreme loss of their nurses to developed countries. As a result, the quality of nursing services received in The Philippines has diminished; the skilled workforce is being lost far faster than replaced (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1409). Via depletion of the pool of senior nurses (those with the most experience and skill), they add, the quality of care received is lesser. In addition, Lorenzo and crew also highlight that this loss requires continual investment in the training of new skilled nurses (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1413). When the nursing migration phenomenon ensued it brought with it an explosion of unregulated nursing schools in an attempt to satisfy the demand (Overland 2005). Because the regulation of these schools was given to the provinces, and there was “no single entity enforcing minimum standards”, the quality of the education received became unacceptably low (Overland 2005). This had a negative implication economically as the institutions cost a lot of money but was also hampering to the reputation of the quality of nurses that The Philippines was producing (Overland 2005). What is also happening with the schools is that the professors and teachers of nursing are also getting caught in the upswing that is migrating to North America; as the faculty members leave too, the demand seems impossible to meet, claims Martha Overland. But, to satisfy the numbers of students who want to become nurses, the requirement that an educator must hold atleast a master’s degree is being overlooked– yet another sacrifice of quality for quantity (Overland 2005).
Intranationally, the recruitment of nurses from rural areas of The Philippines into the urban centres (to fill the voids left by those who migrated Westerly) has left the health care service for the people in the countryside in a depleted state (Brush and Sochalski 2007:42). Unstable as it were, the people in the rural Philippines were now even more vulnerable in having to “bear the brunt” of the migration cycle (Brush and Sochalski 2007:40). For small towns that had always been serviced by maybe one nurse and not a single doctor, and had little access to transportation into the city, the people are now cut of their health care resource almost completely. Another grueling thing is that, even if there were enough nurses who remained in The Philippines, the cap placed on budgets is far exceeded by the demand for nurses and their services (Brush and Sochalski 2007:41). Between the closure of hospitals, the low quality of care, and the dropping standards of education, the nurse migration to North America has many negative implications for The Philippines.
Analysis Statistics have it that 84.75 percent of employed Filipino nurses work abroad; outside of the borders of The Philippines (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1409). For such a significant percentage of workers, employed in a sector so significant to society, to be working out of the country, one can expect for there to be implications — both positive and negative — involved. In saying this, Morris and Tevaarwerk claim that “truly democratic countries recognize the right of their citizens to seek their fortune wherever they wish” (Morris and Tevaarwerk 2008); in The Philippines case, this rests on the consideration of the fortune that they will in turn benefit from. There are, however, ways that The Philippines could make better effects of the brain drain. One proposed solution is that “healthcare professionals who move to another country would be required to reimburse their country of origin the amount by which their education was subsidized by the state,” (Morris and Tevaarwerk 2008). This would allow for the education and training of more professionals; it could also be potentially beneficial to Canada in that Canadian-trained nurses would have to reimburse Canada if they were to move elsewhere (Morris and Tevaarwerk 2008). This would fall under the category of bilateral negotiations explored by Lorenzo and team; negotiations that benefit both the sending and receiving countries (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1416). Or perhaps another idea: the forging of hospital-to-hospital partnerships between the North and South (Lorenzo, Galvez-Tan, Icamina and Javier 2007:1417).
All in all, said by a Filipino himself, “We will always have a brain drain when someone working abroad can earn what it takes five years to make here,” (Overland 2005). Nurses who migrate to North America in search of better opportunities are not concerned with the negative implications it will have for their homeland. All that concerns these individuals is the “bottom line”: there are families to be taken care of. It does not seem so out of the ordinary that qualified and skilled nurses go to the lengths they do to make more money when it is put into this context. If in need, North Americans would be apt to do the same thing. Thus, although there are many good implications of the mass nurse migration from The Philippines to North America, there are also many underlying negative implications for the country.

An Analysis Of Microfinance And Poverty Economics Essay

“This is not charity. This is business: business with a social objective, which is to help people get out of poverty” – Dr Muhammad Yunus (www.environmentalquoteshomepage.com)
Jonathan Morduch, Chairman of UN Expert Group on Poverty Statistics quoted that “Microfinance stands as one of the most promising and cost-effective tools in the fight against global poverty.” Economic growth of the economically, socially and geographically disadvantaged segments of the population of any country requires access to financial services. The disparity between the rich and the poor continues to grow wider and therefore microfinance institutions were introduced to help the less unfortunate people who did not have enough money for survival. It is usually in the narrow sense called ‘micro’ because the microfinance companies deal with small amounts of loans for e.g. small savings and small loans. These loans are given to unsalaried borrowers, taking very little or no collateral at all. In a broader sense, microfinance refers to a movement where there is an easy access to financial services for the low income clients to build assets, stabilize consumption and protection against future risks.
Microfinance clients are usually people who fall under the poverty line and do not have any access to any financial institution for them to borrow from. The poor people usually save in the informal ways for e.g. They invest their assets in gold, domestic animals, land etc however informal saving has serious limitations. The poor are more likely to lose out on money through mismanagement or fraud. Banks do not entertain the poor people because they do not have collateral or enough money to open a savings account therefore it is not feasible for a poor person to access the banks.
There are several microfinance institutions in the world mainly in the developing countries. The leading countries are Bangladesh, India, Colombia, Mexico, and Morocco. Micro financing has it roots from the 1870’s in Ireland nevertheless today the history of microfinancing hails from the Grameen Bank in Bangladesh. Professor Mohammed Yunus along with his graduate students of Chittagong University designed an experimental credit programme to serve the poor facing banking problems. Through the help of rural banks they were able to disburse and recover loans. Although this project was a huge success the banks refused to take over it considering it to be too risky and expensive. Ultimately through support of benefactors, the Grameen Bank (Grameen meaning ‘rural’ or ‘village’) was founded in 1983 and now provides loans to more than 4 million borrowers. They underlying objectives of the Grameen Bank was to eliminate the exploitation by landlords, perk up the standard of living particularly for women and to reverse the old age vicious cycle of ‘low income meant low savings resulting in low investment. They wanted to inject credit into the cycle thereby increasing the investment size. Microfinance was not considered to “hand out” rather they introduced improved repayment rates. They focused on the ceiling in the interest rate and credit subsidies that retarded the expansion of the financial services. The poor people were shown that the repayment rates were better than the formal financial services were offering to them. The two features which helped Microfinance institutions to attain sustainability and reach large numbers of clients were the “high repayment” and the “cost-recovery interest rates”. Additionally to a bank account, there are other financial services like insurance, credit savings and other payment facilities. “Financial inclusion” represents the easy access of financial services to the poor and low-income groups. One of the crucial functions of the financial system is to allocate the resources effectively for increase in production, increasing opportunities and reducing poverty. (microfinance). Over 40 % of the Indian population has income earning but no savings since they are excluded from the financial system.
It has been almost 25 years since the birth of microfinance since its introduction by the Grameen bank. The UN Year of Microcredit in 2005 showed a turning point for Microfinance as the private sector began to take a more stern attention to what has been well thought-out as the field of NGOs. Even with all this enthusiasm about poverty alleviation and contribution of financial services the Consultative Group to Assist the Poorest (CGAP) ‘estimates that about only 5% reaches the poor clients’ (repository). India is a home growing and innovative sector to microfinance. India is likely to make microfinance its abode as it has a huge population of the world’s poor. One of the largest microfinance institutions is Self Employed Women’s Association (SEWA) in India. It is the largest organization based in Asia to members who are poor, self-employed women workers earning less than US$1 per day. SEWA corresponds to a union of three movements – “the labor movement, cooperative movement and the women’s movement” SEWA builds the capacity of poor illiterate women to manage their own micro-enterprises. The staff is recruited and promoted from its own member groups, thus it has been able to develop managers” who although illiterate, become professionals through practical experience.” “SEWA’s combined approach to poverty alleviation comprises: (a) organizing for collective strength; (b) capital formation through access to financial services; (c) capacity building and (d) social security; to enhance women’s productivity and to ensure that sudden crises are not a drain on their fragile economies.
“In 1972, SEWA was registered as a trade union that began in Gujarat in India”. Though it started in the urban region of Ahmadabad yet their main focus group was the organization of poor yet self- employed women workers especially in the rural part of the region. SEWA has also spread its branches out in the national and international level. These women are the ones who earn their daily income through various small scale businesses or by working in agricultural lands and making handmade materials including hawkers, home-based workers and manual laborers. They do not acquire any regular salary like the people employed in the urban organized sector. They are the “unprotected labour force of our country. Comprising of 93% of the labour force, women constitute about 94% from the unorganized sector.” (www.sewa.org). This microfinance institution is registered under the “Trade Union’s Act of 1926 and is open for membership to all women all over India. In order to start organizing the finances, the organization has introduced a membership fee of Rs 5 annually.
An election is held for the representation of the organization. The union consists of a two tier level representation elected by the members. One representative member governs 100 members under one’s group. The union is governed by a two-tier level of elected representation.
With globalization, liberalization and other economic changes, there are both new opportunities as well as threats to some traditional areas of employment. “SEWA’s first main goal is full employment ensuring work security, income security, and food security. The second is social security and self-reliance”. At SEWA the main objective is meant to attain ‘full employment and self reliance’ through the policy of hard work and growth. By ‘full employment’ means employment whereby workers obtain security in matters of basic amenities such as work and social needs including food, health, shelter etc. There is a need for great effort against many obstacles, limitations and restrictions faced by them or enforced on them by society and the economy, These development activities done by microfinance institutions reinforce women’s bargaining power and offer them new options. SEWA is not only an organization but also a movement that took place to bring up the downtrodden and the poor. In India, this largely self-employed segment forms roughly 90% of the whole economy. A collection of women consequently founded the SEWA bank as a co-operative to empower deprived self-employed women by making available for them financial services and access to credit to lessen their reliance on manipulative money-lenders (www.gdrc.com).
About one billion people globally live in households below the poverty line earning about less than a dollar a day. Policy makers and NGO’s who want to change the poor people’s lives face an uphill battle every day. There have been reports where major organizations like World Development Bank and other associations have extended a helping hand by granting the developing countries with financial aid however due to the bureaucratic behavior and corruption this aid has not reached the low level of the income strata. The grants given by the governments make matters worse by increasing the dependency of the poor and acts as a disincentive to the poor as they choose not to move ahead and develop. The microfinance institutions around the world continue to help the downtrodden by increasing their capacity to invest and improve their living standards. “As James Wolfensohn, the president of the World Bank has been quick to point out that helping 100 million households means that as many as 500-600 million poor people could benefit.” (Jstor) .Poverty alleviation is one of the most sought out strategies that every country encloses in its priority list however since decades this has failed due to loans not being repaid, cost of subsidies increasing tremendously and credit reaching the politically powerful rather than the underserved.
The purpose of Microfinance institutions in India is to extend financial help to its client and to maintain financial sustainability. The microfinance chooses the groups for their financial transactions. These groups may be Self-Help groups. The group takes responsibility for the financial borrowings taken by the members. Even though a few institutions may require capital, the loan repayment method has become quite popular amongst microfinance organizations. Although these high repayment rates may seldom translate into profits. The institutions try and involve the governments as well and keep an eye on the incentives that chase off efficiency in people’s performance. Microfinance depends on pouring of finances from donors however the donors are against the continuous dependence on subsidies. The donors believe that subsidies should only be provided at the start of a project to cover up starting costs. (Murdoch)
Self employed women workers and are quite active in the economic sense and therefore add to the expansion of the economy. They are primarily engaged in production, trade and the service sector as a whole. However, in spite of their uphill struggle and their input to the country’s overall gross domestic product, they have are not provided with any financial services, which could help them upgrade in their own labor and output. (www.sewa.org) These self-employed women cope with two major financial problems: shortage of working capital, and Non-ownership of assets’. The banking sector was not responsive to the needs of these self- employed women and the money lenders were very exploitive in nature. “Thus, sequentially to tackle this problem and liberate themselves from the cruel phase of eternal debt, the SEWA members came together with their own solution, in a meeting in December 1973: “a bank of their own”, where they could be privileged enough to be accepted and not to be made feel inferior by the exploitative money lenders and ‘indeed 4,000 women contributed share capital of Rs.10/- each towards the creation of the Mahila SEWA Co-operative Bank’ (www.sewabank.org). In the year 1974 in May, “the SEWA Bank was registered as a co-operative bank under the dual control of The Reserve Bank of India and The State Government. Since then it has been providing banking services to poor, illiterate self-employed women and has become a viable financial venture”. (www.sewabank.org)
SEWA started its own bank to provide women with access to microloans. ‘Swashrayi Mahila Sewa Sahakari Bank is SEWA members’ largest cooperative, unheard of in India. The bank is in possession of the self-employed women as share holders; policies are devised by their own particular Board of elected women workers. The Bank is managed professionally by qualified managers liable to the Board. In 1974, SEWA Bank was established with 4000 members each contributing shares capital of Rs .10 each. Currently there are 93,000 active depositors. SEWA Bank in the year 1999, celebrated 25 years of granting financial services to the poor, self-employed women. Constantly in debt, our members initially brought up the matter of their need for credit so as to free themselves from the control of money-lenders and traders, to augment their businesses, build up assets in their own name, for children’s education, for the several crises including illness that they might occur and for many other purposes’. (www.sewa.org).
SEWA has been successfully lending money to women for various needs such as running a household or for their children’s education or weddings etc. Since women are achieving the two goals of the SEWA association they are ought to receive the support services such as health care, child care, insurance claim, legal help, communication services and capacity building. These services could be used for self-employment. Also women are ready to pay for these services which made the services financially viable. They don’t have to depend on grants and subsidies for the use of these services. Some supportive services such as child and health care including savings and credit have formed their own co-operatives and have also gained operational self- sufficiency. Access to finance is a major problem for economically deprived women and in particular for poor self-employed women in countries that are developing such as hawkers, street vendors, home-makers, manual laborers and service contributors. As they do not save, disasters and compulsions time and again compel women to scrounge heavily. However, they do not posses the necessary experience and confidence to acquire credit from a financial institution in the recognized sector and the formal sector does not lend to the self employed women easily, therefore, one depends heavily on informal money-lenders, who charge exorbitant interest rates: This is usually the start of a negative skew of increasing indebtedness. SEWA Bank as a cooperative bank with the precise aim to provide credit to self-employed women with the vision to empower them and reduce their dependency on loan sharks. Initially, the SEWA Bank focused on drawing deposits from self-employed women and supplied it as an intermediary to facilitate depositors to procure loans from nationalized banks which are obliged to lend to the poor. In 1976, the SEWA Bank began to offer loans to its depositors from its own funds and steadily withdrew from the credit agreement with the nationalized banks.
The bank employs a woman who saves as a organizer between other women to encourage them to save in the bank as well. The organizer usually visits the women easy accessibility to the depositing of the savings by them. If a loan is required by a woman requires a loan, a member has to accompany her in order for that loan to be sanctioned. The bank scrutinizes the application process, carefully reviewing the applicant’s ability to generate income, standard of living, soundness of working conditions and capability to repay. Majority of the loans are unsecured; the process of approval takes about one week. If collateral is offered then the approval day is shortened and the loan could be granted the same day. “Once the loan has been approved, the borrower is obligated to buy 5 % of the loan amount in bank shares and to open a savings account if she does not have one yet. Women are encouraged to register their savings account and their assets (such as working tools, house or land) in their own name” (www. Gdrc.org).
SEWA bank has also introduced various other schemes such as “Crisis Mitigation Scheme”, House Financing Scheme, Women Farmers Credit Scheme, and ‘Sunrise Scheme’ for developing women businesses. Self-employed women need loans for an ample range of reasons; to obtain assets, raw materials, finished goods for resale, and trade-in old debts, improve their homes, buy transportation means or install amenities in their house, for instance electric and water connections. The bank gives long- term loans, i.e. 3-5 years, of no more than Rs. 50,000 which is an unsecured loan at the rate of 14.5%- 17% and the method used for this lending is the Diminishing Balance Method (This method is also applies a fixed percentage but it applies to the diminishing value of the asset and not to the initial value of the asset) (www .howto.co.uk). Each loan is sanctioned with a pre check of the house visit by a SEWA bank field worker. SEWA Bank has been supplying a wide variety of loan products to meet the productive credit requirement of its clients. SEWA Bank necessitate a woman save regularly for at least one year, before she is eligible to apply for a loan. If there is an absence of traditional collateral, like jewellery or domestic animals a regular savings habit is considered a necessary form of security, in SEWA Bank’s experience of banking with the poor for over 25 years. SEWA Bank lays great emphasis on savings. All the self-employed women required a safe place to save their earnings and building up a credit loan from member savings was a very cost-effective method. SEWA bank introduced ‘India’s first Micro-Pension Scheme’. In April of 2006, SEWA members were approved to bond with a SEBI approved pension plan that presents no assured returns but permits up to 40 % collection to be invested in the Indian stock market. A number of countries were providing general insurance in India. Life insurance was nationalized and the Life Insurance Corporation of India (LIC) became the only authorized insurance life insurer.
“In 1992 SEWA started an integrated insurance programme for its members. It was started with the objective of providing a support to poor women in times of calamities. It is a collaborative effort of SEWA, SEWA Bank and the nationalized insurance companies. Currently, SEWA has its own insurance unit called VimoSEWA which insures women for life, health, assets, widowhood and accidents in Gujarat. Starting with 7,000 members, it has now reached more than 70,000 women in 11 districts of Gujarat state. The total number of insured’s, women and men, is 90,000” (www.sewabank.org)
Why do MFIs target women? Microfinance is a ‘women’s movement’ but there is a logic that MFIs tend to target women for the practical reason that they are willing to attend group meetings and to comply with savings and loan terms. They may also believe that women are more conscientious in using finance for the benefit of the family. Men, by comparison, prefer larger, individual transactions. Lending to women guarantees the microfinance that the money is well spent on education, health, housing, and nutrition, making sure that they maximum money is directed toward the benefit of the family and the community. Financial independence and security gains a woman respect in the society and she is looked up to by other people. Decisions to make own choices could help the family from the clutches of poverty and social exclusion. “The SEWA Bank has ‘broken the vicious circle of indebtedness and dependence on middlemen and traders’, and this has increased the bargaining power of the women. Many of them have upgraded their skills, developed more business and increased their income.” (www. “The World Bank Global Learning Conference in Shanghai in 2004 confirmed the impact of microfinance: “Studies have showed that microcredit programs positively affect a woman’s decision-making role, her marital stability, and her control over resources and mobility. The analysis establishes that a woman’s contributing to her household’s income is a significant factor towards her empowerment” (tars)
The world has failed to understand is that the poor are not victims of a system that failed or passive receivers of domestic and foreign aid. The poor have had the willpower and organization to take action to the problems that affect their lives. As long as affluent nations give out free donations and “help” to poor countries, the people themselves will never be empowered to break free from oppressive conditions of poverty. The poor, if given the opportunity for economic advancement, can and will prove to the world that they are capable and responsible citizens.
There are five major criticisms of microfinance: it is does not reach the chronically poor of the population, it is not financially sustainable for institutions, it is potentially harmful to women (domestic abuse may result from husbands jealous of their wives’ new financial power), it can create a large debt for the poor, and it is not universal in application. Though these criticisms are valid, there is ample evidence to show that the benefits of microfinance outweigh the costs. There are various examples to show that microfinance can lead to an income increase, better opportunities for growth of the family as a whole, better education and employment. Microfinance also leads to empowerment of women especially in developing countries and alleviation of poverty. Microfinance could be the answer to secure success for the Millennium goals.

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