Microfinance is the process of lending small amounts of money to low-income or unemployed people who would otherwise not have access to banking services. It enables many of these people to operate small businesses. Recent challenges for microfinance are discussed in the Economist article, "For Microfinance Lenders, Covid-19 Is an Existential Threat."

Instructions

Read the article and then answer the following questions. (The article can be accessed by doing an online search that includes the title of the article and the magazine.)

a. Under normal circumstances, what is the default rate on small loans at Dvara Trust? What percent of borrowers were unable to pay their loans during the pandemic? Why were many borrowers unable to pay their loans even if they had money?

b. According to the World Bank, what percentage of the total number of global businesses do "MSMEs" represent? What percentage of employment does this represent? How many customers do microfinance institutions (MFIs) serve?

c. People who lack access to banking services are referred to as unbanked. What was the global change in the number of unbanked people between 2011 and 2017 ?

d. What is one step that could significantly reduce the default rate of loans (and thus sustain the businesses as well as lenders) during a pandemic?