Law and Finance in Emerging Markets Essay Example | Topics and Well Written Essays - 4000 words

Law and Finance in Emerging Markets - Essay Example In this endeavour the back ground and characteristics of microfinance, the strengths and weaknesses of microfinance, impact of microfinance on poverty, and the various microfinance institutions and their governance have been discussed. Lastly, drawbacks in the working conditions of microfinance had been scrutinised. In addition, several innovations with regard to the alleviation of poverty, by promoting access to finance to the poor, developed by various countries, have been examined. Finally, conclusions were arrived at. The microfinance innovation has not been restricted to the developing countries. Europe has witnessed such innovations during the 19th century. For instance, the credit union notion was developed by Raiffeissen and his supporters. This initiative emerged from an earnest intention to break the stranglehold of the moneylenders over the rural populace and to better their lot. Such unions have burgeoned, since the 1870s, in the Rhine Province and other regions of the Ge rman States. This cooperative movement was adopted by the countries of Europe and North America, and finally spread to the developing nations. Poverty alleviation and enhancement of economic growth are objectives that can be realised by improving access to financial services. ... These innovations include; contract designs, product innovations, and regulatory policy. Recent developments in behavioural economics and randomised evaluation techniques have provided greater insight into improving financial access to poor and low income households.2 It is crucial to provide access to financial services, as the number of adult individuals without such access is of the order of 2.7 billion. The betterment of access to financial services enables families to create assets, countenance risks and defray regular expenses in a planned manner. Microfinance that addresses the genuine needs of the poor has the capacity to enhance family income.3 In addition, it improves the health and education of the children in the family, which in turn leads to less absenteeism from school. Access to finance for small market vendors has been discussed in the sequel. The provision of saving facilities to small market vendors enables them to maintain higher inventories of stock and thereby g enerate higher income. It is to be realised that microenterprises constitute the largest employer in many countries with low income. However, these entities frequently do not have access to credit and savings facilities, which has a detrimental effect on their growth.4 As such, this lack of access to financial services prevents microenterprises from investing in fixed capital, improving their turn over and employing the required number of staff. In addition, firms require savings, insurance and payment services. These services enable them to address risks in a better fashion and provide them with the required confidence to participate in new investments.5 As such, lack of access to finance markets causes many unwarranted difficulties to small firms. In general, the