Research Articles Base: Economic Growth Examples

Effectiveness of petty trader’s loan in economic growth

Effectiveness of petty trader’s loan in economic growth Petty trading has long been a means of subsistence in developing nations.  These micro-enterprises offer potential for employment creation, poverty alleviation and contribute to a healthier economy.  Development of this sector is hindered by its limited access to formal credit largely due to the slow pace of rural financial market development.  Emergence of financial and other aid to micro-enterprises has been provided by institutions such as the World Bank, the Asian Development Bank, and International Fund for Agricultural Development, Inter-American Development Bank and the United States Agency for International Development.  (Selvanvinayagam) In Africa, these small-scale merchants represent the fastest growing segment of the labor market due to the recent economic stagnation and restructuring on the continent.  Part of the restructuring is being done under the watchful eyes of the International Monetary Fund (IMF) and the World Bank, whose programs have slashed the public sector employment, urban subsidies (including subsidies on food), and the exchange value of local currencies.  All of this has made it difficult for many Africans to subsist without holding multiple occupations, including involvement in all types of trade. As Mamdani points out in the case of Uganda, the economic reforms and restructuring of the past decade have turned waged workers and others into “part-time hawkers.”   (Little, P.  2) In Liberia, women who own small businesses have a hard time getting loans to expand.  Banks in the country will not give them loans, until they (women) show land or house ownership for collateral. The situation is considered by experts as dire because, women who are small scale traders in Liberia, as well as most African countries have no houses or land of their own.  Without loans most women stick to their petty trade; and stay trapped in that economic and social class.  Economist Bedel has warned that their stagnation has a long term effect on the economic growth of the country. “The government should provide the conditions for women to gain more access to credit facilities so they could easily compete with foreign merchants, who now dominate commerce in Liberia,” Bedell said.  (North, Desmond)  If the trend continues, it will hamper the socio-economic development significantly. In a press release by Capital Ethiopia news, The Metropolitan Micro and Medium Scale Enterprise Development Agency said it has granted an over 102 million Birr loan to people engaged in petty businesses over the last five months.  Agency Deputy Director Getchew Tadesse said that the agency has provided the loan to people engaged in construction, metal and wood works, food preparation, among others.  More than 11,387 people have benefited from the loan, according to the deputy director.  The number of people benefiting from the agency’s loan service is increasing from time to time, he said.  (Capital) The problem with access to credit for these petty traders is that the majority of the borrowers have limited education.  The process of applying for loans is daunting as they need to provide business and financial plans and on top of that need to understand loan conditions and sign on loan documents.    This sector has become an essential element in the development strategy of many developing nations.  According to Selvavinaygam, the heterogeneity of the socio-economic status of the rural people and the diverse nature and scale of their economic activities would imply that the demand for financial services by the micro-entrepreneurs may not be met by a unique financial institution or a uniform approach. The institutional mix, the product variety and the operational approaches must be compatible with the characteristics of different socio-economic categories if their demands for financial services are to be met satisfactorily. However, owing to high costs and risks associated with the early stages of rural financial market development, private financial institutions are unlikely to voluntarily play a major role in this process. Rural financial market development cannot therefore be left entirely to market forces, although the ultimate objective is to develop a market-driven financial system. The government also has an important role to play in the process. A well-formulated rural financial market development strategy is required to ensure that rural financial market development activities of different groups, particularly the potential small borrowers, government agencies, private sector, NGOs and the donors are carried out within a coherent framework with clearly defined objectives.  (Selvaninyagam, K)   References: Capital.  Agency’s 102 million birr loan to petty traders.  Vol 13, no. 646.  6 May, 2011.  Retrieved on 6 May, 2011 from http://www.capitalethiopia.com/index.php?view=article&id=12113%3Aagencys-102-mln-birr-loan-to-petty-traders&option=com_content&Itemid=3 Little, Peter D.  Selling to Eat:  Petty Trade and Traders in Peri-Urban Areas of Sub-Saharan Africa.October 1999.  Retrieved 6 May, 2011 from http://pdf.usaid.gov/pdf_docs/Pnacl390.pdf North, Desmond.  Liberia: Petty traders crucial to African economy  Afrik-News. 18 APRIL 2009.  Retrieved 6 May, 2011 from http://www.afrik-news.com/article15586.html Selvaninyagam, K.  Improving Rural Financial Markets.  FAO Corporate Document Repository. June 1995.  Retrieved 6 May, 2011 from http://www.fao.org/docrep/007/ae363e/ae363e00.htm Credit:ivythesis.typepad.com

Effectiveness of petty trader’s loan in economic growth

Effectiveness of petty trader’s loan in economic growth Petty trading has long been a means of subsistence in developing nations. Thes...

THE ROLE OF COOPERATIVES IN JOB CREATION

THE ROLE OF COOPERATIVES IN JOB CREATION         Cooperative or “coop” literally is organizations or group of individuals who have bind themselves to use their talent, money and knowledge for their mutual benefits. The vision of cooperative is in working together to reach the common goal which is to be a progressive individual by depending among them. Members of cooperatives may allow themselves voluntarily to serve and become a significant worker that will definitely contribute to the success of the organization. Cooperative is promoting cooperation among members to grow individually and as a group.       Cooperative is being established mostly according to the needs of the people in their community thus the strength of its function relies heavily on the patronage of its members.  When a cooperative grows the members benefited from the community because it helps its member by sharing profit and helped them in job creation. Practically relevant to economic growth as needed, look around your areas and see if you can find the following types of cooperative. ·         Consumer Cooperative – These are small businesses engage in consumer goods and other products. They can also be Supermarket or Groceries Store, Sports house, Food house etc. Basically a consumer cooperative can start by voluntarily or forced contribution of members to establish such business and they themselves operate the store. Definitely more than the members if the business grows then the community grow and more so, it will give job creation because most businesses in retail store would need a rooster of employees including stock refiller, promo merchandiser, cashier, etc. This job creation unify the members even more since they themselves or their family can be prioritize upon hiring.  The members benefit since they are also included in profit sharing. ·         Credit Cooperative – This kind of cooperative is more than like a bank. You can be a member by simply investing your money in their organization. They implied a different perspective than bank. Their mission is to provide fund for its members but basically the idea is to help them cope up with financial constrain. Basically the program of this cooperative is something like this one, they will take your savings as an investment and after six months you can borrow money for about fifty (50) percent of your savings, then after one year you can borrow a one hundred (100) percent of your service and after another year you can again borrow about two hundred (200) percent of your saving. This is just a basic estimate but depending on the capacity of the organization it may vary. This kind of cooperative can grow tremendously because of its benefit. Imagine the business and job creation it may serve upon the start. A simple credit cooperative can start at home or a small office hiring a few staff. They also need other forms of security measures like CCTV camera in the office since this cooperatives involve lots of cash. ·         Multi-Purpose cooperative – Is a combination of two or more cooperatives; including Marketing Cooperative, Agrarian Reform Cooperative, Education Cooperative, Workers Cooperative etc. they are engage primarily on the contribution of products and services, rules and regulation and internal control formulation upon start –up.       They embodied a large scale of members since they cater to many different types of services. As you can see like any other types of cooperative, this one needs a larger rooster of employees to help the demand of the growing needs of customers as well as members. A multi-purpose cooperative should provide multiple products and services to work in harmony with its members towards self sufficiency and sustainability.  They should highly promote the socio economic development and the mission of cooperative which is cooperation.    ·         Other forms of cooperative includes – Producers cooperative, Service cooperative, Advocacy cooperative, Cooperative banks, Financial cooperative, Fisherman’s cooperative, Electric cooperative, Health cooperative, Transport cooperative, Workers cooperative and many others.       It is clearly shown here that cooperative is a guide to economic progress, this kind of institution should be taken seriously by the government and its members. Cooperatives do not just provide employment opportunities but it can also empower the quality of life of its members by teaching them discipline, loyalty and most of all cooperation. If by chance you would like to know more about its principles and how you can be involve as a member you may seek your local Municipality to ask for registered type of cooperatives that is located within your areas. You may also like to look in the Internet to know more about its objectives and other details.      Credit:ivythesis.typepad.com

THE ROLE OF COOPERATIVES IN JOB CREATION

THE ROLE OF COOPERATIVES IN JOB CREATION Cooperative or “coop” literally is organizations or group of individuals who have bind t...