Chapter 1: Changing Landscape of Micro Finance
1. The changing landscape of microﬁnance Suresh Sundaresan INTRODUCTION The ability of households to save, access capital, and manage risk exposures of various kinds, such as life, property, and health through insurance is a prerequisite for their economic and social development. Access to basic ﬁnancial services (such as credit, savings, and insurance) is most likely to develop the entrepreneurial skills and opportunities among those poor who are currently outside the perimeter of such ﬁnancial markets and services. Furthermore, over time, such access will promote better risk management capabilities and promote the economic aspirations of the poor. The World Bank uses two reference benchmark levels of consumption/ income to measure poverty: a consumption level of (US) $1.08 per day and a consumption level of $2.15 per day.1 These levels are measured in 1993 purchasing parity terms. As of 2001, the World Bank estimated 1.1 billion people had consumption levels below $1 a day, and 2.7 billion lived on less than $2 a day. While these ﬁgures are very stark, it is also true that the proportion of people living under $1 a day has fallen from 28 percent in 1990 to 21 percent in 2001. This progress not withstanding, it remains clear that poverty alleviation should be a major priority, especially for countries where a great proportion of people live under $1–2 a day. It is diﬃcult to visualize how countries such as Brazil, China, and India could truly emerge as developing economies until their numerous poor citizens...
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