Sociology

The need for economic development in such countries has therefore led to the need for micro loans. This are small valued loans that are provide for small business and investment holdings basically aimed at steering up the economic development process in these nations. The basic rationale behind micro credit in developing countries is usually from the realization that the developmental process has generally been slow due to the low capital creation process. Engaging themselves in such micro credits therefore, they have been able to explore various developmental projects that have consequently led to the creation of employment for their people and more important been able to harness the local productive resources.

It is true that many third world countries have been politically independent for a couple of years. Despite of being independent for several years, most of the third world countries have been prevailing in the extremities of poverty. Third world countries have been vulnerable to poverty related issues and unemployment. There has been rapid population in the third world countries. Other social problems within third world countries include poverty, high crime rates, high unemployment rates amongst other social problems. This has led to intervention of various financial institutions to provide aid in order to alleviate poverty in third world countries (Timmer, 2001). Financial institutions offer microcredit and microloans to aid in poverty alleviation in third world countries.  This helps fight poverty. Despite of helping fight poverty there is pros and cons of microcredit.

Fundamentally, micro credit enables the creation of income generating activities. Through microcredit, the poor countries are able to invest in activities bound to bring incomes. Investments such as businesses provide opportunities which help in eliminating poverty. Microcredit enables financial services to the poor. The access to financial services and credit facilities has a positives impact to people in the third world countries. The positive impacts can be tested by considering the social and economic impacts. These positive impacts include poverty alleviation, good housing conditions, better nutrition, reduced birth rate. It also enables easy access to education and also decreased child mortality due to improve health (Timmer, 2001). Microcredit enables active participation of women in nation building activities. The participation of women in both political and social activities enables poverty alleviation. Most of the development projects within third world countries have been fully if not partially supported by donors.

Despite of having advantages, there are also disadvantages of microcredit. There has been various scandals attached to microcredit offered by microfinance institutions. These institutions offer microcredit to help alleviate poverty by investing in certain development. The financial services offered to support development projects towards a certain community may be channeled to other unplanned projects. This leads to mismanagement of funds which prompts poverty. The deemed beneficiaries of microcredit are sidelined during evaluation of development projects. Microcredit programs are facilitated by other people who are not the targeted beneficiaries. The recipients of microcredit end up not benefiting. This has been a major problem in most third world countries.

Microcredit is repaid with some interest. Microcredit offered to third world countries increases the national debt since it is repayable. Microcredit is paid back with some interest. Mismanagement of microcredit leads to entire consequences. This leads to negative impacts of social and economic activities. This has been the trend in most third world countries. Donors use national debt as bait in controlling the progress of third world countries (Timmer, 2001). This has been a contributing factor to poverty experienced in third world countries.

In conclusion, microcredit is a potential tool for alleviating poverty in third world countries. There are pros and cons of microcredit. Development projects can be implemented through microcredit. Mismanagement of microcredit leads to poverty.