Microfinance In Poverty

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Poverty has become a main problem in development issues. It is so pervaded so the United Nations put eradication of poverty as the first and foremost objective to be achieved in the Milenium Development Goals (MDGs) in 2000. Although the number of poverty in Indonesia has been declined from 2010 to 2014, the income disparities between the richest and the poorest has been widened as indicated by the Gini Coefficient which increased from 0.38 in 2010 to 0.41 in 2014 . The increased of Gini ratio in the last few years implies that Indonesia has become more unequal in terms of income distribution. Chatib Basri, the former of Indonesian Finance Minister, stated that the increased of Gini coefficient is due to the fact that Indonesia middle class-up…show more content…
Fernando (2004) claimed that instead of eliminating poverty, microfinance is in fact perpetuating it. As Robinson (2001) divided group of poverty people into three (poorest of the poor, economically active poor and middle-income poor), Fernando (2004) argued that the requirement set by microfinance cannot be fulfilled by the poorest of the poor groups in the society and thus, they remain neglected and invisible by the microfinance. Bateman (2010) and Duvendack et.al (2011) support his criticism. Bateman criticizes commercialization of microfinance as a local neo-liberalism while Duvendack et.al concluded by a comprehensive analysis on the microfinance impact with various impact assessment tools, that there is no convincing evidence that microfinance improved well-being of poor people. Microfinance doesn’t cure poverty (Kanani 2007) and the best estimate of the average impact of microcredit on the poverty of clients is zero (Roodman 2012). Out of 100,000 Microfinance Institutions currently estimated to be operating in the world, only 3-5 percent will become financially self-sustaining (Allen 2007 in Bateman 2010). In Indonesia, out of 3000s of Islamic Microfinance Institutions operated in the 1990s, only one-fifth who sustained in the early 2000s (Seibel & Agung…show more content…
The approach integrates microfinance institution with indigenous and other existing local institutions. It attempts to approach poverty alleviation as one of development objectives in a more comprehensive way. Poverty is a multidimensional societal problem, which is not only a finance-related matter, but also related to health, education, and other development sectors, including socio-cultural dimensions. Thus, only by involving people’s participation at the community and by integrating those interrelated factors in approaching poverty, development objectives can effectively achieved and sustained. It promotes bottom-up development initiatives as it was also proposed by Toledo (2001) as a sustainable community development

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