Open Access Honors Program Thesis
Muhammad Yunus and the Grameen Bank of Bangladesh were awarded the 2006 Nobel Peace Prize "for their efforts to create economic and social development from below" [Sengupta and Aubuchon 2008, 9]. The so-called "microfinance revolution" has come a long way since the establishment of the Grameen Bank in 1983. At present, it is estimated that there are between 1,000 and 2,500 microfinance institutions (MFIs) serving 67.6 million clients [Sengupta and Aubuchon 2008, 10].
MFIs provide financial services, such as loans, savings, and insurance, to the poor. The hope is that the services MFis provide will allow the poor to escape from poverty. Self employment activities started by loans from MFis can provide the poor with a way to make a living. MFIs have typically relied on subsidies to fund their operations. In this paper, I examine the problems associated with subsidies and how these problems can be solved. The ultimate question is: What role should subsidies play for MFIs? I conclude that subsidies are useful in certain cases, such as when an MFI is established. Subsidies can also attract other sources of capital. Private investment, an alternative source of funds, is important as well.
Year of Submission
Department of Economics
University Honors Designation
A thesis submitted in partial fulfillment of the requirements for the designation University Honors
1 PDF file (16 pages)
©2008 Emily Anne Cormaney
Cormaney, Emily Anne, "What Role Should Subsidies Play for Microfinance Institutions" (2008). Honors Program Theses. 741.