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Examining Micro Credit And The Grameen Bank Economics Essay

Grameen Bank (GB) is called the bank of poor people in Bangladesh. It has been established for the welfare of the poor village people of Bangladesh, which becomes a role model of the world of micro credit banking system. At the beginnings of Microcredit, Dr. Muhammed Yunus who is an economist educated in the United States of America, although originally from Bangladesh, introduced the world to the notion of micro-credit in the 1970’s.
Counts (1996) said that Muhammed Yunus talked with the poor village people and discover that general local bank never shows interest to provide loan to poor people and does not lend them and they had to borrow money from extortionate moneylenders with high interest rates. As a result, they ended up more-or-less permanently in debt and any money they made went to pay the interest on these high-interest loans. Yunus became conscious at that moment that the poor problems were in some ways no different from anyone else: low interest credit was a necessity of life.
Definition of Micro Credit Auwal (1996):
An extremely small loan given to impoverished people to help them become self employed. Also known as “micro lending.” This small loans extension (microloans) to those in poverty designed to spur entrepreneurship. These loans especially given to a poor person to enable him or herself to become self employed. Financial services loaned a small amounts of money usually around $50-$150 to poor people as a capital of a small business to start or extend it. The Grameen Bank in Bangladesh has become a model of successful micro loan provider.
Principles of Microcredit: General financing or credit.
It emphasizes building capacity of a micro-entrepreneur.
Employment generation.
Trust building.
Socioeconomic development.
Help the micro entrepreneur on during difficult.
Advantage of Microcredit Soeama (2004):
Source and cost of funding: “
In order for the Microfinance institutions to loan they need funding too and a stable microfinance institution might have a competitive advantage of low cost of funds which enables it to provide finance at low cost.
Infrastructure set up:
Microfinance companies must have a required network and infrastructure to deliver these services. The Grameen Bank of Bangladesh creates and implements this structure in rural village area.
MFI’s are many times criticized as money squeezing machines which charge very high cost. Which is not necessarily true considering their cost of funds and risks moreover they have to be sustainable. So here I think having a good name, image and Top management team helps a lot.”
Disadvantages of Micro Credit: Although microcredits are the keystone in terms of development in poor countries, it can also have its difficult. Indeed, the disadvantages of microcredits are:
Some microcredit institutions are often unpredictable.
Refunding problems.
Budget depends on subsidises from the government or NGOs.
Fig 1: Current Microcredit Network of Grameen Bank
History of Grameen Bank: “The founder of Grameen Bank Muhammad Yunus open up the idea of ‘micro-credit’–minuscule loans to the very poor. The bank currently lends more than $500 million a year with a repayment rate of better than 97 percent. Its Group Savings Funds have assets of $186 million. Grameen Bank operates 1,100 branches in half of Bangladesh’s nearly 80,000 villages. The program has been successfully replicated in dozens of countries, including the Philippines, Malaysia, Vietnam, South Africa, and Bolivia. It has also been applied to inner city and rural poverty in rich nations in North America and Europe.
The origin of Grameen Bank can be traced back to 1976 when Professor Muhammad Yunus, Head of the Rural Economics Program at the University of Chittagong, launched an action research project to examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor. The Grameen Bank Project (Grameen means “rural” or “village” in Bangla language) came into operation with the following objectives:
Extend banking facilities to poor men and women.
Eliminate the exploitation of the poor by money lenders.
Create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh.
Bring the disadvantaged, mostly the women from the poorest households, within the fold of an organizational format which they can understand and manage by themselves.
Reverse the age-old vicious circle of “low income, low saving

Australia Is A Unique And Diverse Country Economics Essay

Australia is a unique and diverse country in culture, population, climate, geography, and history with an area of 7,692,024 square kilometers and the length of the coast line is 25760 km having lowest point as Lake Eyre (15m) and highest point as Mount Kosciuszko (2,229m). Its current population is about 23 million people where the language commonly used to interact is English. It is the sixth largest nation after Russia, Canada, China, the United States of America and Brazil.
Government: Australia is a fully independent parliamentary democracy but formally the Queen of Australia is Queen Elizabeth II of the United Kingdom. The Prime Minister of Australia is Julia Gillard as it does not have a President so all the work is done with help of ministers and parliamentary secretaries. The Council of Australian Governments (COAG) comprises the Prime Minister, State Premiers, Chief Ministers of the territories, and the President of the Australian Local Government Association. It is the only nation to govern an entire continent and outlying islands. Its federation consists of six States and two Territories. On 1 January 1901, Australia’s six states became a nation under a single constitution. The capital of Australia is Canberra where the government is looking out for all the operations including its outlying islands Ashmore and Cartier Islands, Christmas Island, the Cocos (or Keeling) Islands, the Coral Sea Islands, Heard and McDonald Islands, Norfolk Island and the Australian Antarctic Territory (covering 42 per cent of the Antarctic continent
Time Zone: It is divided into three separate time zones i.e. EST, ACST and AWST. Australian Eastern Standard Time (AEST) covers the eastern states of Queensland, New South Wales, Victoria, Tasmania and the Australian Capital Territory. AEST is equal to Coordinated Universal Time plus 10 hours (UTC 10).Australian Central Standard Time (ACST) covers the state of South Australia, the town of Broken Hill in western New South Wales and the Northern Territory. ACST is equal to Coordinated Universal Time plus 9½ hours (UTC 9½).Australian Western Standard Time (AWST) covers Western Australia. AWST is equal to Coordinated Universal Time plus 8 hours (UTC 8).
Currency: Australia’s national currency is the Australian dollar which comes in denominations of $5, $10, $20, $50 and $100 notes. Coins come in 5, 10, 20 and 50 cent and one and two dollar denominations.
National Flag The Australian National Flag was first flown over the Royal Exhibition Building in Melbourne on September 3, 1901and since it is celebrated as ‘Australian National Flag Day’. It symbolizes three primary elements firstly the union jack which is the upper hoist quadrant and is an acknowledgment of Australia’s connection and history with the United Kingdom. Secondly, the southern cross which is in the second and fourth quarter (right hand side), which depicts constellation of fixe stars of the night sky which is visible in the southern hemisphere only. It is a significant navigational feature and intended to represent Australia’s geographical location. Thirdly, the commonwealth star, which is large seven point star is placed centrally in the third quarter of the flag. The seven points denote the six states of Australia and the combined territories of the Commonwealth. The seventh point was an addition eight years after the original in 1909.
Floral Emblem: The national floral emblem is the golden wattle (Acacia pycnantha Benth.). On August 19th, 1988 the Governor-General, the Rt Hon Sir Ninian M Stephen proclaimed the golden wattle as Australia’s national floral emblem and with a recognition from an association Wattle Day league on 23june,1992, 1st day of every September it is celebrated as National Wattle Day and is celebrated by planting wattles and wearing wattle blossoms.
Coat of Arms: For authenticating the documents and other official purposes the Government uses the coat of arms which is a symbol for the federation of the states and depicts the badges of six states enclosed by an ermine border shielded by red kangaroo and the emu and above it are the seven commonwealth star in which the six points represent the six states and seventh represents the territories.
History: About its history the Australia’s Aboriginal people were thought to have arrived by boat from South East Asia 50,000 years ago i.e. the last ice age. When the European’s discovered and settled in over there, there were up to one million Aboriginal people who were already living across the continent as hunters and gatherers scattered in 300 clans and spoke about 250 languages and 700 dialects. Each clan had a spiritual connection with a specific piece of land and for their ritual and totemic gatherings they use to find water and seasonal produce. However, they also travelled widely to trade.
Gold was discovered in New South Wales and central Victoria in 1851 attracting thousands of men and women. They were joined by boat loads of prospectors from China. Despite the violence on the goldfields, the wealth from gold and wool brought immense investment to Melbourne and Sydney.
The First World War had a devastating effect on Australia. There were less than 3 million men in 1914, 400,000 of them volunteered to fight in the war where 60,000 died and 10,000 were wounded. In reaction to the grief, the 1920s was a whirlwind of new cars and cinemas, American jazz and movies and fervor for the British Empire. During the Second World War, Australian forces made a significant contribution to the Allied victory in Europe, Asia and the Pacific.
Rights: Australia is the most urbanized country in the world where each person has rights to express their culture and live freely but at the same time they need to uphold the principle and shared values that support its way of life i.e. equality, peacefulness, equality of law, equality of men and women etc.
Climate: As it is the driest continent after Antarctica, Australia experiences from tropical monsoons to hot, dry weather and snow. Generally the climate is warm and temperate in the major coastal cities.
Basic Etiquettes: For starting a business we need to know the basic etiquettes. Australians call each other by their first names in the workplace between friends but when met someone for the first time they shake their right hand with each other.
Current Economic Conditions: The Australian economy remains among the most robust in the OECD, with solid growth prospects, low unemployment and a significant pipeline of resources investment. However, condition concern about slower than expected global growth and the risk to global stability pose risk to Australia economic outlook.
Real GDP: It grew by 2.1 per cent in financial year 20110-11.GDP grew by 1 per cent in the September quarter to be 2.5 per cent higher than a year earlier. The midyear economic and fiscal outlook for 2011-12 forecast GDP growth to strength to 3.25 per cent in both 2011-12 and 2012-13.
Real GDP Per Capita: It rose by 0.5 per cent in the September quarter to be 0.8 per cent higher than a year ago.
Private investment: It grew by 9.5 per cent in the September 2011 quarter to be 14.3 per cent higher than a year earlier. Investment levels remain relatively high overall, reflecting the year of strong growth during the commodity boom.
Household consumption: It grew by 3.5 percent in financial year 2010-11.
A trade surplus of $6.8billion was recorded in the september2011 quarter -14.3per cent higher than a year ago. For the 2010-11 year as a whole, exports totaled $298 billion while import totaled $$277 billion.
Current account deficit: As a percentage of GDP narrow from 2.1 per cent in the June 2011 quarter to 1.5 percent in the September 2011, quarter. For the 2010-11 year as a whole, the deficit totaled $33.2 billion, significantly below the average of the past ten year.
The current account deficit can be split into income flows and trade. The income deficit has been subject to higher private debt and increase expatriations of fund to foreign owned companies. The trade balance has changed from a deficit to a surplus in recent year.
Consumer price index (CPI): It was unchanged in the December quarter, to be 3.1 percent higher through the year, slightly above the RBA’s target band of 2.6 percent underlying inflation was 0.6 percent in the quarter, to be 2.6 percent higher through the year.
Domestic Economic Conditions: Output in the Australia economy in estimated to have been a little above trend over the second half of 2011, largely reflecting very strong growth in mining investment and the ongoing recovery in mining production from the extreme weather events earlier in the year. National income was also boosted by higher commodity price, with the terms of trade reaching their highest level on record in the September quarter. The outlook for mining investment remains very strong, with further announcements of new projects over months. In contrast, condition are more subdued in some other industries, as the level of the exchange rate tight credit condition for some sectors, the decline in public investment and changes in household spending behavior continue to weigh on activity in the manufacturing, building construction and retail industries. more broadly, measure of consumer and business sentiment are around or a little below long run average levels, in part reflecting concern about development overseas. The unemployment rate has been around 5 percent in the recent month, after increase in mid 2011.
The variation in condition across industries is also seen in regional outcomes. In resource rich, Western Australia and Queensland, demand is being driven by very strong growth in mining investment. Consistent with firm labor market outcome, consumer spending has also been strong in Western Australia. In contrast, in the rest of Australia domestic demand has increased only mostly in recent quarters.
Household Sector: Household wealth is estimated to have grown slightly in the December quarter, but was around 2 percent lower over the year, with a 3 percent fall in average dwelling pricing more than offsetting a small rise in the value of financial asset holding over the year. The ratio of net wealth to household disposable income was just under 5 percent after having been over 6 in late 2007.
In contrast to wealth, incomes have been growing strongly. Real household disposable income increased by 2.1 percent in the September quarter to be 4 percent higher over the year with nominal incomes almost 7 percent higher over the year. household have continued to devote a significant portion of their income to rebuilding asset and paying down debt -the household saving ratio has been around 10 percent over the past three year and well above levels recorded in the 1990s and early 2000s. With income growing a little faster than debt, the household debt- to-income ratio has declined somewhat, although it remain high by historical standard.
Australia capital city dwelling prices declined a little through most of 2011, although there were some tentative signs of stabilization towards the end of the year. Prices were around 3 percent lower over the year and fell by around 1 percent in the end of the year. Price were around 3 percent lower over the year and fell by around 1 percent in the December quarter, Brisbane, Perth and Melbourne were the weakest market, down by around 4 to 6 percent over the year, price in Sydney were broadly unchanged over the year. The values of properties in more expensive suburb have tended to fall by more than those in less expensive suburb over the past year, although they also rose by more in earlier years, while house prices have tended to fall more than apartment prices.
Business Sector: Business investment rose very strongly in the September quarter, mainly reflecting engineering work on large mining projects. Over the to the September quarter, mining investment is estimated to have increase by more than 50 percent. The sharp upswing in mining investment continues to drive very strong growth in capital imports, which rose by 40 per cent over 2011.
Mining production and export also grew strongly over the second half of 2011, owing in part to a recovery in coal production in Queensland after flooding earlier in that year. coal export from Queensland have risen significantly rainfall in Queensland coal- producing regions ,mining companies have not yet reported material disruption to coal production , although the situation is still development. Heavy rainfall in New South Wales over recent month has caused some loss of production.
Iron ore export have risen rapidly since mid 2011, by around 15 percent, underpinned by capacity expansion and efficiency improvement by some of the major producers. In contrast, conditions remain subdued in some other area of the economy. The ABS capital expenditure survey point little growth in non mining sector investment over the remainder of 2011/12. The high level of the Australian dollar continues to restrain activity in trade exposed industry such as manufacturing, tourism and education. Service export have fallen by around 15 percent since their peak in 2008 and have continues to trend lower.
Government Spending Public demand contracted over 2011 as spending associated with the earlier fiscal stimulus was completed. In the November mid- year economic and fiscal outlook, the Australian government budget position was forecasted to move from a deficit of 2.5 percent of GDP in 2011/12 to a small surplus in 2012/13. The consolidated budget position for the states is expected to be deficit of 1.1 percent of GDP in 2011/12, with a narrowing of the deficit forecast over coming years. The forecast combined state and federal deficit for 2011/12 was revised upwards, reflecting weaker than expected growth and falls in asset prices weighing on tax receipt and new government payment to households and business announced as part of the government’s clean energy future package.
External Sector: Australia trade surplus reached a 40 year as a ratio to GDP in the September quarter, reflecting large increases in bulk commodity contract price. More recently, decline in iron ore and coal price has resulted in a smaller trade surplus as well as a fall in the terms of trade from their record level, solid growth in export volume has been out stripped by more rapid growth in import volumes, reflecting the appreciation of Australian dollar and the sharp upswing in mining investment. In line with these developments, the current account deficit, which had narrowed significantly over the past few years, is likely to have widened towards the end of 2011.
While Australia aggregate trade balance remains close to record high, this masks diverging trend in goods and services trade. While the balance on good trade has shifted to surplus recently, in part reflecting the very level of commodity prices. A sizeable deficit in services trade has emerged. The letter trend has been driven largely by the increase in Australia exchange rate over recent years, coupled with strong growth in Australians, leading to a strong increase in tourism related services imports. In contrast, services export has fallen over recent year.
Labor Market: The unemployment rate has remained around 5 percent in recent month, although employment growth has been soft and the participation rate is estimated to have fallen in December. Growth in total employment remains patchy, with mixed employment outcome across industry and little net employment growth over 2011. Some of the weakness in employment likely reflects the effect of earlier pre-emptive hiring that supported above trend employment growth in 2010. Recent business liaison has indicated that some firms have become more caution about hiring new worker in the absence of clear indicated of a pickup in demand. Growth in total hour worked has been stronger than employment growth over the year, suggesting firms have been meeting additional labor needs via increase in average hours rather than hiring additional worker.
Business Environment and Opportunities: Business environment: Australia has the most transparent and efficient regulatory environments in the world with proactive reforms, providing businesses with the right conditions for growth and investment. Australia is the third fastest place in the world to start a new business. There are no foreign exchange controls in Australia and the currency is fully internationalized. As there is transparency in the region it is considered to be the third best and its regulatory framework has been rated as one of the top six economies for encouraging business (Source: IMD World Competitiveness Yearbook 2009). The reforms introduced recently focuses greatly on labor market, trade liberalization, industry deregulation, reductions in tariff barriers and the development of a better tax system which results in strong productivity which tends to be highly responsive in economic conditions. Australian corporate boards are sixth in the world for the supervision of the management of companies and seventh for implementation of ethical practices in companies (source: Ibid). Australia has a strategic location for the Asia- Pacific countries. It already has strong links with China and India and also its geographical location is a significant asset. Its geographical location is such that it allows the benefits from “follow the sun operations” i.e. help desks and financial markets.
Australia’s workforce is highly skilled which has lead to increase in productivity and decrease in the cost of labor which is one of the major expenditure need to be incurred in a business. Also, its labor force is most competitive workforces with Asia Pacific regions which in return have made Australia the number third in the world for attracting and retaining talents between 57 economies in a study. As it is a home for 200 countries it has become a hub of multilingual and multicultural sensitivities. As per Australian Bureau of Statistics 25 % of the labor workforce speak English and about 400 other languages are spoken at home in the country. This has helped European and Asian Pacific countries to develop and expand their businesses in Australia.
Australian Economy showed stability and resilience during the financial crisis. The financial services sector is best centered Asia Pacific region as it is sophisticated and ideally positioned and this was evidenced during the financial crisis. Its Economy was ranked one of the most resilient in Asia Pacific region in 2009.
Even Australia’s banks are among the strongest banks in the world and have been ranked at four by the Standard and Poor among the world’s nine major which are rated AA or above. This strong credit rating helped the banks to raise funds from different parts of the world during the financial crisis; as a result no bank required capital injections from the government.
This relative stability and system of regulation governing the financial markets can be viewed as model of responsibility and prudential regulation around the world.
MOUs and Agreements: There are many tie ups between Australia and India which helps both the countries to promote trade, education, travel and living etc. Some of these are Indo – Australian Chamber of Commerce (IACC), which was set up in 1989 to function as a catalyst between India and Australia for evolving effective business partnerships in a broad spectrum. IACC has its hands with the country’s trade and industry, and Chambers of Commerce to help Indian business in establishing a base in Australia. The Chamber membership spreads over a various products and industries across different regions in the country. The Chamber’s activity revolves around four key areas:
• Provide a database on all Australian and Indian industries and advise members on the emerging trends in bilateral trade.
• Act as a bridge between companies of both the countries with a view to recognize specific opportunities for trade and technology transfers.
• Create awareness among members and others regarding bilateral business opportunities through various mediums like seminars, workshops and trade missions.
• The Chamber works in depth with other bodies like Chambers of Commerce, trade bodies, universities and various other research institutes in Australia to encourage and promote a wide range of interaction between India and Australia.
India Australia trade relations started in 1801 when the first Australian ship came to India laden with coal as a part of the East India Company but still full potential has not been achieved and there is a considerable scope for development. The major items which Australia exports to India are gold, vegetables; copper and its ores, wool sliver an platinum, telecommunication equipments and electronic equipments. The major items which Australia imports from India are precious and semi precious stones, Floor coverings, Textile, Agricultural products, Leather and leather goods. Joint Ministerial Commission and Joint Business Council have been making efforts to promote trade between the two countries. Major Indian investments include a gold mine and two copper mines followed by acquisition of Pacific Paints by Asian paints, Windsor hotel managed by Oberoi group etc. Australian companies in India include TNT express, ANZ (IT), Fosters (brewery) etc. Both the countries have come long way but there is a still scope of improvement which will be beneficial for both the countries.
Also to encourage trade potential between two countries in 1986 both the country Prime Ministers Mr. Rajiv Gandhi of India and Mr. Hawke of Australia formed an Australia India Business Council (AIBC) whose main function is only to promote bilateral trade in between the two countries. This is the first step for the government as well as business representatives who are planning to start a business. Members of this Council can be private and public sector organizations from government agencies, small, medium, large organizations and as well as students and individual professionals.
Australia and New Zealand Business Association in India (ANZBAI) is a joint association to add value beyond the strength of individual countries. Its main aim is to increase trade and investments between these countries. Business Opportunities For Indian investors as the trades between the two countries are in buoyant stage there is a big opportunity for the commodities like food processing, mineral resources, energy, iron ore, health care and education. As Australia intends to invest A$80 billion into the resources sector in next 12 months it will increase the opportunities for the Indian market such as Power, IT and Infrastructure. Even manufacturing industry has presented some opportunities for example Mahindra Aerospace has made investment in Gipps Aero for making small aircrafts.
As there were some issues existing between the two countries India and Australia which was considered very serious issue and taking this in mind Australia has again started refocusing on the education sector to attract more students and offer collaborations and linkages across Universities and offering dual badge degrees and P.H.Ds. The Australia-India Strategic Research Fund has taken up Grand Challenge projects in four areas like health, water, energy and environment.
In the financial sector the top three Australia banks out of the top four are present in India whereas Insurance companies are waiting. For example SBI has a tie up with AIG logistics firm Lindfox has a tie up with the Tata’s.
SWOT Analysis:
Strengths: As Australia is a strong economy and had been able to overcome the financial crisis with a better per capita GDP with the leading countries.
Strong emphasis given on reforms, low inflation and blooming sectors there is a great opportunity for the business organizations to invest and grow their businesses.
As Australians consider all their employees equal which is better and will lead to motivation in employees resulting in better work .This will also provide a stable working environment.
The transportation both inside and outside the country is good it will lead to easy transport of raw materials and finished goods from one place to another.
Good skilled workforce and R