Rural Poverty and Microcredit in Third World Economies Essay

Rural Poverty and Microcredit in Third World Economies - Essay Example The traditional obsession with macro policies implemented at the state level has at most been disastrous. This, coupled with the inefficient delivery of aid to the poor nations, has only increased corruption, high and persistent inflation and unemployment, political repression and burdensome external and public sector debts (Woller and Wordworth 269) . This paper is divided into two parts. Part one looks at the latest strategy, microcredit, floated as a possible solution to ending rural poverty in Third World countries. Microcredit embodies the specific recognition that the lack of access to credit can be a limiting factor for significant numbers of the economically active poor. The second part seeks out a way through which the West can deliver aid effectively, efficiently and accountable to help combat rural poverty. The origins of microcredit Since the end of World War II few countries have moved from underdeveloped to developed status with the exception of the Asian tiger economi es. Though the reasons for this remain numerous and complex, Woller and Wordworth (268) attribute a large portion of the blame to widespread macro development policy failure. In the past it was believed that the best way to tackle poverty is through top-down, state-led development policies modeled on the experience of the Western industrial nations. These policies favored large-scale industrialization and concentration of economic power on elite groups. To make matters worse the international aid community reinforced the ills of these policies by pouring billions of dollars into numerous, and often dubious, large-scale state development projects (Woller and Wordsworth 268). Worse still, from the late 1960s, a rural alternative to the state-led modernization drive called the Green Revolution was initiated. The Green Revolution essentially forced Western agricultural practices on indigenous Third World peasant farmers, with many small family plots being expropriated by central gover nments and leased out to huge multinationals in the Europe and America. The end result of all these policies was uneven industrialization, high and persistent inflation and unemployment, endemic corruption, political repression and burdensome external and public sector debts (Woller and Wordsworth 269). In recent years economic growth has picked up creating a new sense of optimism for the Third World. However, even in a best-case scenario, it would be foolish to expect poverty eradication in these countries in the next few years. Woller and Wordsworth (270) are convinced that in the absence of policies that provide economic opportunities for the poor, macro development policies will continue to bypass the poor. What the Less Developed Countries (LDCs) need are small, concrete efforts that emanate from the grass-roots. The microcredit movement is part of this new paradigm that has emerged from the underground economy of the poor. The microcredit rationale Microcredit is defined as programs that extend small loans to poor people for self-employment projects that generate income (Woller and Wordsworth 267). With limited employment opportunities, in both rural and urban areas, millions of poor people in LDCs must earn their living through self-employment in the informal economy. This involves engaging in activities such as hawking, bicycle and/or rickshaw transportation, collecting scrap and running small shops. However, even these self-employment opportunities require capital for starting up, running or expansion.

Ethics in financial institutions Literature review

Ethics in financial institutions - Literature review Example Releasing such information to third parties exposes the customers to potential threats of information. Financial institutions should not only focus on improving their welfare but also that of the clients. To achieve this, it is vital that customers are involved in major decision making of any financial institution. For instance, before a bank can introduce any products in the market, it will be vital to seek the customers’ indulgence. This owes to the fact that such products are aimed at adding value to customers. On the other hand, it is the responsibility of the financial institution to protect the plight of the customers. This is in terms of any losses that may occur. For instance, technological advancement in the financial sector has opened an avenue for malpractices and fraudulent activities. Currently, there are many financial institutions, which have been hacked into making it difficult to operate. This has happened while these financial institutions straggle to maintai n good relationship with the customers. There are various forms of unethical practices, which a financial institution can be accused of taking part in. the major ones include corruption, failing to disseminate proper information to customers and extorting customers in terms of prices. Embezzlement of funds is a major issue, which many financial institutions grapple with. This is especially in countries, which lack transparency and accountability within the financial institutions. However, financial institutions should not be entirely responsible for all losses, which the customers incur. This is mostly focusing on the fact that such customers may, through their ignorance share their confidential information with third parties. This is especially those using ATM cards. Such individuals may share information, which can cause them get into major problems. The following discussion focuses on the literature review on ethics in financial institutions. Literature review According to Goodpa ster (84), financial institutions are out to service customers and therefore must abide to the moral ethical principles. One of the main things that the customers are looking for is a financial institution, which they can trust to give them the services needed. Trust is built on the quality of services offered to customers as well as the communication between the two. The financial institutions should be willing to disclose all the information that the customers need. Customers need all the financial information, which an institution deems important. In addition to that, the financial institutions should inform the customers on any changes, which have taken place. Keeping constant communication with the customers is one of the main ways through which trust is built between the customers and financial institutions. Secondly, Goodpaster (65), states that there is need to have customer confidentiality. The information of the customer should not be disclosed to third parties. If this ha ppens, the customer may lose their money. For that fact, there is need to ensure that the customer’s money is protected against any loss. The financial institutions however have been witnessing many challenges due to increased fraudulent activities. Hackers have been able to get access to even the most guarded institutions in the world. Recently, some financial institutions in the United States have been hacked by fraudsters causing havoc within