AHMEDABAD, India- Microfinance has become a popular way to combat global poverty. Organizations such as the Grameen Foundation and Kiva have had success and are fairly widely known. Another microfinance organization that is making a difference on the ground is Arman Financial Services Limited. Incorporated in 1992, this organization focuses on providing microfinance and loans to the semi-urban and rural poor in Gujarat, a coastal region in northwest India. The name “Arman” is apt because it means desire or wish in Hindi. The organization has been successful, as its website reported in 2010 to have 21 operational branches, with new expansions every month.
In a nutshell, microfinancing involves bringing financial services to the very poor and marginalized who have long been without access to them. These services often take the form of small loans that go toward helping destitute entrepreneurs and artisans get on their feet. According to the International Monetary Fund, microfinance has upended traditional banking practice, which has been to avoid such people because of the risks they pose and their often remote living situations.
Specifically, Arman Financial focuses on providing poor women with financial services. According to their website, microfinance resources go to individuals and also to groups of similarly needy entrepreneurs, groups which can range in size from eight people to 30 people. Much of the organization’s assistance is provided in order to allow for purchasing transportation or buying resources and stock for businesses. Repayments are required on a weekly basis, and the interest rate is typically 24 percent.
This rate is clearly very high, but normal banking rates have the potential to be much worse.
According to UNICEF, 33 percent of India’s total population lies below the $1.25 per day poverty line. Moreover, according to its government website and 2011 census data, Gujarat itself is home to over 60 million people, about five percent of India’s total population. Arman Financial is based in Gujarat’s largest city, Ahmedabad, whose population is 7.2 million. Though Gujarat is an economic leader in India, there is certainly a wide base for Arman’s services.
Furthermore, Arman’s website lists two success stories as examples of the work it does on the ground. One of the stories is about a woman who was left in charge of a shop and three children after her husband became bed-ridden. Arman loaned her money to purchase stock for her small store. As a result, her income and quality of life rose. Subsequently, Arman lent her more money for her son’s business. These two loans amounted to 10,000 and 15,000 Indian Rupees, which roughly equals $160 and $240 respectively.
All in all, Arman Financial appears to be doing important work in India. Though there are certainly questions about its effectiveness, microfinance has exploded in popularity recently and provides opportunities to the poor and marginalized that were out of their reach before. Microfinance gives underserved populations a channel for obtaining much-needed financial resources and therefore gives them the chance to obtain a livelihood for themselves and their families.
– Sarah Wieberdink
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