Type: Economics
Pages: 6 | Words: 1695
Reading Time: 8 Minutes

Third world poverty refers to poverty in countries that are more commonly called “˜underdeveloped’ or developing in terms of their living standards or economic standards or economic progress. Most of the world’s the third world countries are countries in Asia and Africa. Poverty can be defined in absolute terms as a person living on less than two dollars a day or being not able to easily access food, water, healthcare, shelter and education. This research proposal will contain the various approaches towards the investigation of the impact of micro-lending on poverty levels in the third world countries and will contain necessary recommendations.

This document will contain the particular design of Grounded Theory that will be used in investigating the effects of micro-lending on the third world poverty levels. The research will be conducted aided by sources from all over the world since poverty levels affect the entire human race with the third world countries being the mostly affected having the highest numbers of people living below the poverty line. Our research is going to embrace the sequential steps of Grounded Theory based research that are: coming up with a set of recurring facts and findings, arranging these facts into clusters based on their similarity, formulating a hypothesis based on the findings and coming up with explanations behind these facts and support why such findings were achieved.

Findings obtained will be used to identify a pattern or tune in which the research subjects occur. The results obtained from the findings will help in coming up with a report and a valid conclusion that will help highlight the facts obtained in a tangible and measurable way.

Thorough analysis of the results obtained will be used to come up with a conclusion of the investigation conducted and this will result from discussions that will be conducted. The conclusion will be as a result of a comprehensive analysis of poverty in the third world countries.

Third world countries are considered to be among the poorest nations in the continent. Most of these countries are the developing nations of Africa, Asia and Latin America. Their economies are weak as compared to other great nations. These nations can hardly afford to feed their own population as they rely heavily on donor aid to support their nations’ budget. Such countries are plagued by huge domestic debts and poor infrastructure coupled by low GDP’s and in most cases are entrapped in the cycle of poverty. Rural areas in such countries account for three in every four people living on less than US $ 1 a day.

Microlending. The major goal in almost all of the third world countries is primarily poverty eradication. This can be achieved using various mechanisms and microlending is by far the most used means to eradicate poverty. Microlending is the extension of small loans to the very poor especially in the third world countries to help them venture into businesses and be able to generate some revenue. The people being given the microloans are normally not able to meet the minimum qualifications of accessing the traditional bank loans since they have no stable employment and also they do not have a good verifiable credit history. They are in most cases not considered to be eligible for a loan since most financial institutions consider them to be possible loan defaulters in future. Micro lending has been seen as a very effective way to jumpstart a country’s economy by empowering the poor and also enabling them to make use of their available resources be it labour or land.

The problem is that the perceived effectiveness of microlending on alleviating global poverty has been mixed and differs among experts. Third world countries are the “˜less privileged’ countries in the world and this is mainly associated to their slow economic growth rates and minimal per capita incomes. Micro lending is considered as a possible solution to improving the economy of the third world countries since it provides funding to the poor people in the community and awakens a sleeping giant of potential. This not only helps in improving the economy of the country but also it provides a means of employment to the people thus sustaining their lives.

The research will be mainly focussed on how microloans affect the poverty levels in the third world countries. The sub questions in this research will include:

  • How do microloans empower women in the third world countries
  • How the microloans help the poverty level in the community
  • What impact does micro-lending have on poverty levels in third world countries
  • Can micro-lending alone eliminate poverty in third world countries

The research will include studies conducted in all parts of the world concerning third world countries.

The purpose of this qualitative study is to examine the impact that microfinancing programs have on poverty level of women in third world countries. This will also show how the microlending in the third world affects the communities and the significance they have on improving the poverty levels of the affected countries. Most of the third world countries lack resources to basic human necessities to provide to their citizens. The study of micro lending will assist in helping the third world countries improve their economy and consequently raising the living standards of their people. Such a research can also be used by international funding agencies and non-governmental organizations in analyzing their impacts and finding better ways of carrying on in their fight against poverty. With women being the highest number in the world’s population emphasis will be laid on their access to the micro loans and the development activities that they engage in once they are given the micro loans.

The research is directed on finding solutions to poor economic growth in the third world countries. This research will be primarily focused on microlending as a possible solution to the eradication of poverty. Effects of micro-lending in the third world countries will also be investigated giving some insights on methods of implementing micro lending policies.

According to World Bank Development Indicators (2008), at least eighty percent live on less than US $ 10 a day. This is equivalent to almost 79.7% of the world’s population thus making most of the human race to be considered as being poor. Water problems affect almost half of humanity with third world countries being the mostly affected. In developing countries 1.1 people have inadequate access to water, and 2.6 billion lack basic sanitation. Almost two in three people lacking access to clean water survive on less than US $ 2 a day, with one in every three living on less than $ 1 a day. The number of children in the world is estimated to be around 2.2 billion with 1 billion children living in poverty mostly who are from the third world countries. The human basic necessities are not readily available in the third world countries and this is associated to the high poverty levels in those countries. For the 1.9 billion children from the developing world there are 640 million without adequate shelter which accounts for one in every three children. 400 million children have no access to safe water which accounts for one child in every five. Access to health services is also difficult with 270 million children having no access to the health services which accounts for one child in every seven.

Most of the people living in the third world countries have no access to loan facilities mostly because they are unemployed and have no securities which can be used to obtain loans from financial institutions. This makes them to be unable to venture into business activities and in the long run their country’s economy does not grow since there are very few sources of income making the country to highly rely on external aid to support its budget. It should be noted that the poorest 40 percent of the world’s population accounts for 5 percent of global income. The richest 20 percent accounts for three-quarters of world income. This clearly shows that most of the world’s population lives in poverty.

Micro-lending also known as microfinance refers to the act of giving out small loans to people who are in need. These micro loans are of around US $ 20 and are used to help people to start out businesses. The people receiving these micro loans are usually from poor areas and developing countries. Micro-lending normally targets poor borrowers who can not find formal financial resources through the regular banking loans. In the third world countries, women are the vast majority and micro-lending targets them since they are the ones who contribute most to the society. By empowering women it becomes easy to improve the living standards of the community and thus most of the target group for the microfinance is women. Many economic theories equate economic growth and productivity to entrepreneurship which is encouraged by micro-lending. Most of the people living in poverty have a mentality of helplessness which is tried to be got ridden of by providing microfinance to them thereby changing their perception towards life.

Microfinance can lead to a mentality shift of the poor borrowers as a result of them taking their development into their own hands which can lead to an entrepreneurial class to arise in the medium to long term which in turn can result to growth and prosperity. Micro-lending also encourages entrepreneurship in various fields which have been otherwise neglected by the formal banking system such as fishery, pastoral activities and agriculture which only allow the poor people to only improve their livelihoods. This can also contribute in making a country to be food self-sufficient helping in lowering the cost of imports in a country and the money being spent in the development of the country’s infrastructure leading to economic growth. Micro-lending tries to empower the people in the poor countries other than trying to improve the overall country’s economy from the government projects which are in most cases not successful since most of the third world countries governments are corrupt leading to underdevelopment due to mismanagement of funds and resources. This greatly contributes to increasing the poverty levels in the affected country. This research will help in determining the effects of micro-lending in the third-world countries.

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