Last Updated 07 May 2020

Developing Country

Category Bank, Poverty
Essay type Research
Words 1157 (4 pages)
Views 385

With a closer view of the economy of a developing country, microcredit and other related type of financing activities most of the times exists to this type of countries. Microcredit is defined as the annex of microloans or the very small loans that is being provided most of the financial institution in the market.

Moreover, the developers of microcredit aim to cater for the financial needs of those people who does not have any collateral with them or those people who are being considered as poor as well as the group of “poor” entrepreneurs who do not have the capacity to borrow to the bank due to their financial incapability or due to their incapacity to pay considering the time given by the banks after they evaluated the financial status of the borrower.

Furthermore, microcredit also covers those people who lack employment and confirmable credit history which made them not to meet the requirements of the banks and other financial institutions since one of the protocol of the banks and financial institution is to check the credit reputation of the borrowers before they grant they loan of the applicants. Actually, microcredit is a part of microfinance, in a general sense, which covers for all the activities that provides financial services to poor people.

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Microfinance is currently being used by the government of most developing countries to help poor people alleviate their financial status in the society and exposed them to various market opportunities such as the establishment of small-scaled businesses. Microfinance only deals with small amount of loan transaction usually equal to less than 100 USD and aside from microcredit microfinance also includes microsavings and microinsurance.

With the provision of microcredit to the economy of most of the developing countries, it was said according to market studies that those people who availed microcredit did improve in terms of financial capabilities and start to produce wealth and profits out of the money that they borrowed from the said financial program. Because of the success alleviation of microcredit to its borrowers, traditional banking industry started to realize the importance and possible gains from catering into those once considered as “non-bankable” individuals.

Currently, these banks in the financial market started to accept the said “non-bankable” individuals and considered them as “pre-bankable” persons. With this, microcredit started to receive recognition from various sector of the economy especially the financial industry due to their perception that microcredit would be a great help towards the attainment of economic growth. Since poor can now increase their spending through the help of microcredit, consumer spending component of GDP improves which serves to be a major indicator economic development of one country.

By the time domestic consumption increased, GDP would also increase. Moreover, foreign direct investments started to show interest to those countries implementing microcredit or microfinance since purchasing power of the domestic market increases due to the booming of small-scaled businesses and consumer spending of the economy. In order to commemorate the development of microcredit, the United Nation declared 2005 as the International Year of Microcredit.

The only downside of microcredit is the high uncertainty of being paid back by the borrowers considering that they do not have jobs and financially incapable. Moreover, there have been issues regarding the accounting practices as well as collection methods that are being implemented by microcredit providers such as Grameen Bank. Moreover, there are some countries that charges high interest rates to borrowers ranging to 2. 5 to 4 percent a month or 31 to 50 percent a year.

Corruption Among the eight questions cited in the article the question regarding the common characteristics of those countries suffering from corruption. It was raised in the article that one thing in common to countries with severe corruption is low income distribution and most of them are developing or transition countries (Svensson, 2005). This only suggests that level of poverty is correlated to the level of corruption on the said country.

With the above stated relationship of corruption and the economic status of the countries being considered, it is clear that if only those countries could prevent the said dilemma regarding the government authorities, then, they could divert that money being corrupted to giving financial aid to the poor people. In the first place, the reason behind why every poor family gets lower and lower income everyday boils down to the irresponsible government officials that corrupts what supposedly belongs to the society especially to the poor individuals/families.

It is the responsibility of the government to serve their citizens and give back the taxes that are being paid by the latter in terms of providing security, health, education, electricity etc and other responsibilities stated in their constitution. Those corrupted government funds might open more job opportunities to jobless people or could provide the poor with other anti-poverty projects if only reached the right government agency at the right time.

But it just so happened that along the transfer of government funds from the government going to the public, government officials cannot keep their hands off to those funds, that is the reason why at the end of the day poor individuals’ results with nothing on their hands and on their plates. The point here would be, the private sectors and other industry would no longer have to resort to developing microfinance to help the poor individuals if the government officials do their jobs in the first place.

The above statement do not mean that all of the government officials are irresponsible, only the majority. Just imagine, the market should not be needing microfinance or any other financial programs for the poor people since these people are actually reach and has a the skills only that the government is not providing the avenue towards the attainment of these condition. Multinational Corporations Also known as transitional corporation, multinational corporations are corporations or business venture that are engaged into managing establishments or services to at least two countries.

Another characteristics of a multinational corporation would be, it surpasses the budget of some countries since it covers to a vast coverage of operation and caters to at least two market areas. One great example to this type of business would be the Microsoft Company which operates to almost hundreds of countries around the globe providing computer software and hardware to the market not to mention their new product lines such us game console like Xbox. With this, multinational corporations contribute much in the income being generated by the host country from the taxes that they pay to the government from their operation.

Moreover, they also provide an avenue for the host countries to move towards the state of globalization and improvement in terms of technological advancements that are not present to the host countries. In some countries, around 35% of the total revenue of the multinational corporation goes to the government as a form of tax payment and it amounts to billions of dollars. With this, various countries allots economic zones for multinational corporations be attracted to invest into their country.

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Developing Country. (2018, Jul 17). Retrieved from https://phdessay.com/developing-country/

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