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Chapter 10: Q3. (page 385)

What do you predict is the effect of Grameen Bank’s lending on a community?

Short Answer

Expert verified

The income of the community members will increase.

Step by step solution

01

Impact of Grameen Bank’s lending on a community

Generally, these communities find it difficult to get financial support from traditional financing institutions of financial risk associated with them (because there have low savings or they fail to provide any collateral). If a person from the community wants to expand his small business, he will fail to get any financial support from these institutions.

Grameen Bank lends money to these members of the small income community. The members can use the borrowed money to initiate small businesses or expand existing businesses. Hence, the income of the members will increase.

Thus, the lending by Grameen Bank will increase the income of the community members.

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Most popular questions from this chapter

Suppose that expected inflation rises from 3% to 6%.

  1. How will the real interest rate be affected by this change?
  2. How will the nominal interest rate be affected by this change?
  3. What will happen to the equilibrium quantity of loanable funds?

Rank the following assets in terms of (i) level of transaction costs, (ii) level of risk, (iii) level of liquidity.

a. A bank deposit with a guaranteed interest rate

b. A share of a highly diversified mutual fund, which can be quickly sold

c. A share of the family business, which can be sold only if you find a buyer and all other family members agree to the sale

What market inefficiency is being exploited by Grameen Bank? What is the source of this inefficiency?

What tasks of a financial system does microlending perform?

Use a diagram of the loanable funds market to illustrate the effect of the following events on the equilibrium interest rate and investment spending. a. An economy is opened to international movements of capital, and a net capital inflow occurs.

b. Retired people generally save less than working people at any interest rate. The proportion of retired people in the population goes up.
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