Editing Microcredit (section)

==Improvement==
[[File:Inside banco palmas woman.JPG|thumb|Many microfinance institutions also offer savings facilities, such as Banco Palma in Brazil, shown here.]]
Many scholars and practitioners suggest an integrated package of services ("a credit-plus" approach) rather than just providing credits. When access to credit is combined with savings facilities, non-productive loan facilities, insurance, [[enterprise development]] (production-oriented and management training, marketing support) and welfare-related services (literacy and health services, gender and social awareness training), the adverse effects discussed above can be diminished.<ref>{{cite journal|last=Holvoet|first=Nathalie|title=The Impact of Microfinance on Decision-Making Agency: Evidence from South India}}</ref> Some argue that more experienced entrepreneurs who are getting loans should be qualified for bigger loans to ensure the success of the program.<ref name="GuptaGoetz">{{cite journal|last=Goetz|author2=Gupta|journal=World Development|year=1996|volume=24|title=Who takes the credit? Gender, Power, Control over loan use in Rural credit program in Bangladesh|url=http://www.citt.ufl.edu/portfolio/genders/Readings/ReadingsW10/Whotakesthecredit.pdf|issue=1|doi=10.1016/0305-750x(95)00124-u|pages=45–63}}{{dead link|date=September 2017 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>

One of the principal challenges of microcredit is providing small loans at an affordable cost.  The global average interest and fee rate is estimated at 37%, with rates reaching as high as 70% in some markets.<ref>{{cite news|last=McFarquhar|first=Neil|title=Banks Making Big Profits From Tiny Loans|url=https://www.nytimes.com/2010/04/14/world/14microfinance.html?pagewanted=all&_r=0|newspaper=New York Times|date=April 13, 2010|access-date=February 25, 2017|archive-date=June 12, 2017|archive-url=https://web.archive.org/web/20170612080203/http://www.nytimes.com/2010/04/14/world/14microfinance.html?pagewanted=all&_r=0|url-status=live}}</ref> The reason for the high interest rates is not primarily cost of capital.  Indeed, the local microfinance organizations that receive zero-interest loan capital from the online microlending platform [[Kiva (organization)|Kiva]] charge average interest and fee rates of 35.21%.<ref name="HighRates">{{cite web|url=http://www.kiva.org/about/app.php?page=help&action=InterestRateComparison#AverageInterestRateBorrowerPaysToKivaFieldPartner|title=Kiva Help - Interest Rate Comparison|publisher=Kiva.org|access-date=October 10, 2009|url-status=dead|archive-url=https://web.archive.org/web/20090803220548/http://www.kiva.org/about/app.php?page=help&action=InterestRateComparison#AverageInterestRateBorrowerPaysToKivaFieldPartner|archive-date=August 3, 2009}}</ref>  Rather, the principal reason for the high cost of microcredit loans is the high transaction cost of traditional microfinance operations relative to loan size.<ref>{{cite web|url=http://www.kiva.org/about/microfinance#interestRatesAreHigh|title=How Kiva works - Kiva|access-date=July 23, 2012|archive-date=July 26, 2012|archive-url=https://web.archive.org/web/20120726074045/http://www.kiva.org/about/microfinance#interestRatesAreHigh|url-status=live}}</ref>  Microcredit practitioners have long argued that such high interest rates are simply unavoidable.  The result is that the traditional approach to microcredit has made only limited progress in resolving the problem it purports to address: that the world's poorest people pay the world's highest cost for small business growth capital.  The high costs of traditional microcredit loans limit their effectiveness as a poverty-fighting tool. Borrowers who do not manage to earn a rate of return at least equal to the interest rate may actually end up poorer as a result of accepting the loans. According to a recent survey of microfinance borrowers in Ghana published by the Center for Financial Inclusion, more than one-third of borrowers surveyed reported struggling to repay their loans.<ref>{{Cite web |url=http://centerforfinancialinclusionblog.files.wordpress.com/2011/11/111108_cfi_over-indebtedness-in-ghana_jessica-schicks_en_final.pdf |title=Archived copy |access-date=July 23, 2012 |archive-date=December 18, 2011 |archive-url=https://web.archive.org/web/20111218023933/http://centerforfinancialinclusionblog.files.wordpress.com/2011/11/111108_cfi_over-indebtedness-in-ghana_jessica-schicks_en_final.pdf |url-status=dead }}</ref> In recent years, microcredit providers have shifted their focus from the objective of increasing the volume of lending capital available, to address the challenge of providing microfinance loans more affordably.  Analyst David Roodman contends that in mature markets, the average interest and fee rates charged by microfinance institutions tend to fall over time.<ref>Roodman, David. "Due Diligence: An Impertinent Inquiry Into Microfinance." Center for Global Development, 2011.</ref>

Professor [[Dean Karlan]] from [[Yale University]] advocates also giving the poor access to savings accounts.<ref name=Karlan>BBC:[http://www.bbc.co.uk/programmes/p003s71s Business Weekly] {{Webarchive|url=https://web.archive.org/web/20100326185812/http://www.bbc.co.uk/programmes/p003s71s |date=March 26, 2010 }}, 2 August 2009</ref>