Poverty and Microloans

Hyeona ImKevin DingKatie RussellPoverty and Microloans

Do You Know? At least of humanity lives on less than $10 a day.

A) 20%B) 60%C) 80%D) 40%

C

Do You Know? people worldwide do not have enough food to eat.

A) 170 millionB) 320 millionC) 610 millionD) 870 million

D

Do You Know? is the number one cause of death in the world.

A) HungerB) HIVC) AIDSD) Malaria

AHunger kills more people than HIV/AIDS and malaria combined.Poverty in Canada2009 statistics:1 in 10 Canadians are considered poor.The poverty rate increased from 9.4% to 9.6% from 2008 to 2009. In Ontario, the richest 20% enjoyed 44.3% of total after tax incomes, compared to poorest 20% which had 4.7% of the after tax income.Cost of poverty to Canada is around $72-$86 billion; 6% of GDP.

Poverty in Canada ContdIn Hamilton, there is a 21-year difference in life expectancy between people living in high and low income neighbourhoods.In 2010, 59% of Canadians lived paycheque to paycheque.The average annual income of Canadas best-paid CEO ($6.6 mill) is 155 times higher than the averageworkers income (42,988).By the end of 2009, 3.8% of Canadian households controlled 67% of the total household wealth.

Poverty Line in CanadaLow income cut-offs (poverty line) in 2009:1 person: $18,4212 persons: $22,4203 persons: $27,9184 persons: $34,829Poverty Measures in CanadaAbsolute poverty is defined as lacking the basic fundamentals to survive, such as food, shelter and clothing.Two types of absolute measure: basic needs poverty measure and market basket measures.Relative poverty is defined as lacking the conditions to enjoy life as compared to others in the same country. One type of relative measure: low-income cut off Canada has several methods to measure poverty.

Basic Needs Poverty MeasureDeveloped in 1992 and is based on a variety of data sources e.g. Statistics Canada.Information is collected and put into a list of the cost of household necessities. Based on family size, the list helps determine how many households have sufficient income to afford these needs. Note: most measures are taken into consideration theafter-tax income as a household well-being indicator. In 2004, the basic needs poverty rate was 4.9%, equaling 1.6 million Canadians. Market Basket MeasureCreated by the Government of Canadas Departmentof Human Resources and Skills Development in 2003.Analyzes a broader range of essential goods and services compared to the basic needs measure. Takes into account community size and location. Also determines a disposable income required to meet these basic needs to live.

Low-Income Cut OffThe most accepted measure of poverty, which is usually quoted in the media and has been used since the 1960s.A measurement used to identify income levels, which a household is classified as being in a relatively limited income situation. In 2008, 9.4% of Canadians were apart of a family whose income was below the after-tax LICO.

Social Welfare ProgramsGovernment programs that are created to assist citizens outside of what the market provides.The emergence of a welfare state in Canada occurred after the Great Depression. Microloans is a concept that is used to combat poverty.Becoming a very popular poverty alleviation tool in developing countries.

MicroloansSmallloansto impoverished borrowers.Support entrepreneurship and alleviate poverty.Empower women and uplift entire communities byextension.A division ofmicrofinance.Known as a structural strategy because it focuses on the long-term changes needed to combat poverty.

Muhammad Yunus 0Born 28 June 1940Bangladeshi banker, economist and Nobel Peace Prize recipientDeveloped the concepts of microcredit and microfinanceIn 2006, received the Nobel Peace PrizeHis objective was to help poor people escape from poverty

"Banker to the Poor

Grameen BankAfter Yunus witnessed the devastating effect of thefamine in 1974 in Bangladesh, he had a desire to help anyway he could. He created microfinance in Bangladesh and lent out$27 US dollars to 42 women in a village. From there, he created Grameen Bank and itsupplied $6.38 billion dollars by 2007 to impoverished people. Some criticisms: microcredit can bring communities into debt that they cant escape. Microfinance OrganizationsA microfinance institution is a company that provides microfinance services; range from small non-profit organizations to large commercial banks. Microfinance organizations such as FINCA organization have been created in Canada. In 1980, John Hatch, the founder of FINCA, created a small loan program targeted towards low-income farmers in Bolivia; known as village banking.In El Salvador, the weekly income of FINCA clients increased on average by 145%.Another advocate for microfinance programs is the organization Plan Canada. Companies teach the borrowers how to save their money, repay their loan etc.(Youth Economic Empowerment video)

Microloans in Canada 0MOSAIC (http://www.mosaicbc.com) is a multilingual non-profit organizationIts micro-loans range from $500 to $5,000.

The Micro-Loans Program offers three types of loans to help individuals with different needs:

Back to Work Loans:

With These Hands Loans:

Peer Lending (Circle Lending):

Be My Own Boss Loans:

Divide class into two groups: disadvantages and advantages of microloans. Duration: five minutes

Microloans- Disadvantages Microcredit doesnt end poverty

Microcredit rarely transforms livessome people do better, some do worse, but very few climb to middle classpopular in public due to story-telling promotion - popular, but not representativeaccording to luck/pluck, people get different outcomes

American economists Dean Karlan and Jonathan Zinman say: microloan has no effect on poverty for family 1/2 years after they receive loan

Microloans- DisadvantagesWhat microloans miss

in 2010, suicidal occur among over-indebted borrowers microloans often used to smooth consumption, tiding a borrower over in times of crisiswhat poor countries need the most is small-to-medium-sized enterprisesMissing middle phenomenon

Microloans- AdvantagesImprove peoples living standards. (health and welfare)Mitigate the awful toll of HIV/AIDSHelp nations to recover from warsHelps create a sense of communityBetters the future generation (families have more money to support children to go to school etc.)Tool to empower womenJob CreationA little can go a long way

Connections to the CourseChapter 9:GDP growth (microloans indirectly boost countrys GDP)Full employment (microloans help to reduce a countrys unemployment rate)Chapter 13:Welfare StateDistribution of wealthChapter 15:Income DistributionAbsolute and relative povertyLow-income cut-off (poverty line)Before-tax income and after-tax incomeStructural StrategiesChapter 17:Comparative and absolute advantage (people start small businesses using microloans)

ConclusionOverall, microloans are a great tool to helpeliminate poverty in developing countries. The advantages of microloans outweigh the disadvantages.

"Today I'm a very respected woman in the community. I have come out of the crowd of women who are looked down upon. Due to the loan that I received... you have made me to be a champion out of nobody.-Rose Athieno, Produce Reseller, Uganda