The culture plays a very important role in the development of the society. The collapse of the banking industry in the US says one thing extending of credit to sub-prime category led to the system crumbling. On the contrary, the south asian countries are doing fantastically in the credit management by lending money to the sub-sub-prime category by way of microcredit. the recovery rate of microcredit is 98% . Moreover, the system is so simple as the borrowers are from economically under priveleged class. This process doesn't require any paperwork as it is done purely based on trust. No collateral is required no lawyer is required as no document is required to be signed. Muhammed Yunus, father of micro finance , started this venture in the late 1980's . The conventional banking system is out of reach for the large chunk of the population as a result the poverty plagued the population. The main aim of the micro finance is to make extending credit to everyone. It should be regrded as a matter of Human right.Grameen Bank, a product of Muhammed Yunus, started for this category of people. Bangladesh was the first country to give mobile phones to beggar s to market the product .
In south asian countreies,taking credit is considered as an extra burden failure to repay the debts will attract isolation from the society. In order to avoid such a situation people in this part of the world repay the debts promptly. In the western countries living in credit is the way of life. Filing insolvency is regarded as a fashion . At the time of financial collapse, the developed nations should look into this microfinance product seriously. In India, many nationalised Banks have taken this concept in their portfolios. The system works like this any five member form a self help group approach a bank for a financial assistance the bank lend the money to the group with the initial amount of Rs15,000/-. The group leader will be responsible for the repayment of loan. Timely repayment will augument the credit limit of the group. The Reserve Bank of India has issued a notification any non-repayment of loan should not be regarded as NPA. This system is gaining momentum in the rural areas.
In south asian countreies,taking credit is considered as an extra burden failure to repay the debts will attract isolation from the society. In order to avoid such a situation people in this part of the world repay the debts promptly. In the western countries living in credit is the way of life. Filing insolvency is regarded as a fashion . At the time of financial collapse, the developed nations should look into this microfinance product seriously. In India, many nationalised Banks have taken this concept in their portfolios. The system works like this any five member form a self help group approach a bank for a financial assistance the bank lend the money to the group with the initial amount of Rs15,000/-. The group leader will be responsible for the repayment of loan. Timely repayment will augument the credit limit of the group. The Reserve Bank of India has issued a notification any non-repayment of loan should not be regarded as NPA. This system is gaining momentum in the rural areas.
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