Deck 21: Microfinance

Question 1

Which of the following exemplifies benefits of microcredit programs which would be considered a spillover effect?

A) A small village's telecommunication services improves as a result of a micro-entrepreneur selling time on a cell phone
B) A microloan allows a farmer to purchase better equipment which raises his income
C) A household uses a microcredit program to save a sick family member
D) A household uses a micro loan to pay off a higher interest loan

Answer 1

A

Question 2

Many MFIs aren't able to maintain a high enough degree of profitability to be self sustaining.These MFI's require differing amounts of subsidies and can come in the form of all of the following except:

A) Investors willing to take less than competitive returns
B) Grants to cover non-financial services
C) Obtaining funds in commercial capital markets
D) Ongoing donations to fund the supervising of loans

Answer 2

C

Question 3

Microfinance programs were first created by Nobel prize winning economist Muhamed Yunus in what decade?

A) 1950's
B) 1960's
C) 1970's
D) 1990's

Answer 3

C

Question 4

What does it mean for a microfinance institution (MFI)to be financially sustainable?

A) It has earned a large enough grant to operate without interest and fees from loans
B) Its revenue from interest and fees exceeds its operating costs
C) Donors have guaranteed the funds will remain available
D) It has earned the funds through commercialization

Question 5

Why is microcredit considered by many to be effective and self targeted tool for reducing poverty?

A) Low income earners are liquidity constrained
B) High income earners are not likely to be liquidity constrained
C) High income earners are unlikely to find the high interest rates attractive
D) All of the above are correct.

Question 6

As interest rates increase the cost of borrowing_____,profit for microenterpirses_____ and participation in microfinance programs__________?

A) increases; increases; increases
B) increases; decreases; decreases
C) decreases; decreases; increases
D) increases; stays the same; decreases

Question 7

While the goal of almost all microcredit programs is to raise well-being,which of the following could hurt a family as a result of taking a microloan?

A) Having to work more hours to repay the loan
B) A sound investment could not work out because of poor demand
C) Illness may or poor investments may cause the family to reduce consumption further to repay the loan plus interest
D) All of the above

Question 8

As minimum loan sizes _____,or as loan repayment schedules become ____stringent participation in microfinance programs__________?

A) increase; more; increases
B) increase; less; decreases
C) decrease; less; increases
D) decrease; more; decreases

Question 9

The penalty for failing to repay a microfinance loan can be?

A) Jail time
B) Seizure of personal property
C) Denial of access to future microfinance loans
D) There is no penalty for failing to repay a microfinance loan

Question 10

All of the following are reasons why a person may choose not to take advantage of microcredit except?

A) Households living in rural areas
B) Potential borrower as few skills
C) Loans are too small
D) Future loans can be for larger amounts

Question 11

A microenterprise is ______.

A) A small family run business
B) Has relatively easy access to capital to finance investments
C) A car rental company offering smaller sized vehicles
D) A small business with at least three employees

Question 12

Microfinance loans can be as small as_____ on interest free loans for beggars and have been reported to be as high as_____ in Mexico?

A) $100; $20,000
B) $100; $5,000
C) $1.00; $1000
D) $3.00; $7,000

Question 13

While the goal of almost all microcredit programs is to raise well-being,which of the following could hurt a family as a result of taking a microloan?

A) Having to work more hours to repay the loan
B) Increased consumption of durable goods
C) Increase food consumption
D) If the loan is taken by a women it may increase her voice in the family

Question 14

What is the primary benefit of using microfinance for business investment?

A) Status
B) Higher current income
C) To find opportunities to start new businesses
D) Future business profits

Question 15

An unintended consequence of a new microcredit program is that it makes it more difficult for other lenders to determine if potential borrowers are already deeply indebted and?

A) Allows borrowers to default without losing access to future credit
B) Allows low income families a way to climb out of poverty
C) Allows households to plan for a major event such as paying a dowry without having to sell of assets
D) If the loan is given to women can increase their status in the family or the community

Question 16

Which of the following terms describe programs which offer credit and other financial services to clients that are poorer than are typically serviced by commercial banks?

A) Charity Programs
B) NCLB Programs
C) Microfinance programs
D) Savings and loan associations

Question 17

Why is it difficult to empirically measure the impact of a microfinance program?

A) Microfinance programs are too young to measure the impacts
B) There are too few examples of microfinance in practice to create any significance
C) The time it takes to for investments to payoff are different in each case
D) Incomes are measured in different currencies

Question 18

The higher the ratio of revenue to operating costs for an MFI the ______ sustainable they are considered and the excess of revenue over operating costs is referred to as_______?

A) More; Profit
B) More; Inflation
C) Less; Loss
D) Less; Bankruptcy

Question 19

Most microfinance programs are loans consisting of?

A) A single loan
B) A larger loan than is typically given out in a commercial bank
C) A series of loans that are increasing in size
D) An indefinite series of loans that remains the same size over time

Question 20

Contemporary microfinance programs are incredibly diverse which of the following are the same for all MFIs?

A) Eligibility
B) Types and sizes of loans
C) Recruitment practices
D) Goal is to improve lives of poor people

Question 21

Why might a government intervene in a fully sustainable MFI?

A) Being profitable doesn't guarantee the credit services are being supplied in a socially optimum way
B) To save scarce resources for other purposes
C) To add competition to existing commercial banks
D) To avoid bankruptcy

Question 22

New lending technologies reduce lending costs when they _______default rates without ________ supervision costs,or __________ supervision costs without raising the default rates.

A) Reduce; raising; increase
B) Increase; lowering; reduce
C) Reduce; lowering; increase
D) Reduce; raising; reduce

Question 23

It has been argued that MFI's goal should be to achieve commercialization,discuss the benefits and costs of pursuing a microcredit program that is fully sustainable.

Question 24

In order for an MFI to be profitable the interest rate charged for poorer borrowers tends to be ________,so most of the loans are going to the _______ of potential borrowers.

A) Lower; poorest
B) Lower; wealthiest
C) Higher; wealthiest
D) Higher; poorest

Question 25

What are some ways that MFI's can increase sustainability without sacrificing outreach or impact?

Question 26

All of the following lending practices have been undertaken by MFIs to lower costs of microlending except

A) Offering borrowers a series of loans that grow larger with each repayment
B) Offering 0% interest rates on loans
C) Group liability lending
D) Requiring borrowers to begin repaying the loans soon after taking them out

Question 27

Which of the following ideas is likely to improve the outreach of an MFI's micro credit program?

A) Changing from group liability to individual liability
B) Increase the time until the first payment is due
C) Switch from weekly to biweekly meetings
D) All of the above would improve outreach

Question 28

Why might a government intervene in MFIs program when it has achieved financial sustainability and does not divert any resources away from other development projects?

Question 29

Several MFIs take advantage of an innovative lending technology known as group liability lending.What is the advantage of group liability lending

A) Its shifts the burden of screening and supervising from group members to loan officers
B) It reduces the risk involved in borrowing from an MFI
C) It lowers lending costs by shifting some the burden of screening and supervising from loan officers to group members
D) It provides borrowers with dynamic incentives for repayment