Inequality and Microfinance Opportunities

Having realized that poverty can’t be eliminated through donations only, we need to develop a structure that provides equal opportunities for everybody and thus brighten their future at all stages of life. One such structure, developed by economists from the World Bank, Brazil and Argentina is Human Opportunity Index (HOI,) provides a method of classifying and rectifying the reasons that bring inequalities in opportunity, particularly for children. The study primarily focuses on children because:

“As a whole, societies with greater inequality of basic opportunities among children are more likely to show inequalities later in the life cycle, despite individuals who beat the odds through their effort, talent and luck.”

The same study also tries to measure inopportunity and makes this significant discovery:

“Between one fourth and one half of income inequality observed among Latin America and the Caribbean adults is due to personal circumstances endured during childhood that fell outside of their control or responsibility, such as race, gender, birthplace, parent’s educational level and their father’s occupation.”

The HOI help recognizing the circumstances over which the child has no control, like its location, race, availability of clean water and electricity and education of parents, but all these can affect the economic future of a child. It also offers statistical data as proof on many prevailing factors which can shape children’s access to opportunities and direct them to a more useful lifer on getting government support, community development programs and even microfinance. These tools are instrumental in providing access to potable water and electricity, perking up literacy rates, and enhancing parents’ incomes. All these go to create a helpful way of offering them a level playing field and open the doors of opportunity.

How do microfinance opportunities contribute to a child’s economic outlook?

Micro financing is a way of offering financial services including loans, saving plus insurance to poor entrepreneurs so that they can improve their small businesses. It has been realized by ACCION International that on availing these financial services poor entrepreneurs can improve their productivity and make more money and thus make savings that can be utilized for the overall benefit of the family thereby enabling them to pay for vaccinations, school fees, improve condition of home and offer clean water and healthy food for their families. ACCION points out that access to financial services to working poor benefit their children.

Here is real story of Juan Pirir, a farmer cum furniture maker from Guatemala. During his childhood Juan needed to work in the fields and thus couldn’t go to school and get educated. With the help of microfinance services, he is now the father of six children.

As per HOI, Guatemala is the lowest-ranking country in offering   opportunities for education of children. The study reveals that uneducated parents living in rural areas and working as agricultural laborers have many children, who have almost zero likelihood of doing well in later life.

Thankfully, Juan could seek loan from Génesis Empresarial, allowing him to replace his manual tools with electric ones. As a result, his production of furniture went up by three times and profit tripled. At present his workshop has all the tools and he employs three local boys from his neighborhood as part time helpers. Availability of fund through microfinance gave him an opportunity to improve his business, enabling him to have a new roof over his family house and send all his six children to school!

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