Microcredit still trailing with some loopholes
Microcredit is the hottest stuff in World economics after the Nobel Peace Prize conquered by Md.Yunus who is the pioneer of Microcredit. UN has imposed a special boost to it but still I feel its not a full proofed idea to implement Microcredit. Whats wrong with it? Let us discuss…
The problem lies not with microcredit but rather with microenterprises. The United Nations’ declaration that microentrepreneurs use loans to grow thriving businesses leading to flourishing economies is hype. A client of microcredit is an entrepreneur in the literal sense: she raises the capital, manages the business and is the residual claimant of the earnings.
But the vast majority of microcredit clients are caught in subsistence activities with no prospect of competitive advantage.
Moreover self-employed poor usually have no specialised skills and often practise multiple occupations. Many of these businesses operate at too small a scale. The median business operated by the poor has no paid staff; most of these businesses have very few assets as well. With low skills, little capital and no scale economies, these businesses operate in arenas with low entry barriers and too much competition; they have low productivity and lead to meager earnings that cannot lift their owners out of poverty.
