Statistics: Microcredit, Brief Literature, Structuring and Analysis in a Hierarchical Form (Coursework Sample)

Statistics: Microcredit
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Statistics: Microcredit
Microcredit involves providing loans of small amounts to individuals that would not be able to secure credit because of their low financial status. It is at times provided to support a running business to enable the business to grow. Entrepreneurs involved in microcredit are referred to as micro-entrepreneurs based on their business scope, and the amount required to fund them is very modest. Another purpose of microcredit is to encourage self-employment as the world economy faces the risk of high unemployment increase. This paper explores 15 small businesses from different parts of the world. An analysis of these businesses using AHPSort classifies the businesses into three classes to determine their capability to receive or not to receive credit.
Brief Literature on Microcredit
Snow and Buss (2005) observes microcredit as a concept that has achieved broad acceptance by international development agencies, as well as major donors. Microcredit is viewed as a way to correct market and governmental failure in various regions of the world. Microcredit’s purpose is to enable low income earners and the unemployed to reach the formal economy depending on reforms in the macro-economy (Snow & Buss, 2005). According to Yang and Stanley (2013), the modern ideology of microfinance (microcredit) began in the 1970’s when the Grameen Bank was founded by Muhammad Yunus. Since its introduction, there have been criticisms on whether microfinance has actually succeeded in achieving goals it is intended to achieve. The main objective of microfinance is to provide credit to the poor or low income earners to enable them overcome poverty (Yang & Stanley, 2013).
Brau and Woller (2004) claim that core elements of microfinance have not yet reached the entrepreneurial or mainstream finance literature. In their article, Brau and Woller (2004) introduce the academic community to microfinance and microfinance institutions. The article claims that in most parts of the world, poor people have been excluded from formal financial systems. As a result, the less fortunate have developed a number of informal, community based financial arrangements to meet financial needs (Brau & Woller, 2004). In order to solve this problem, a number of formal sector organizations have emerged. Microfinance has existed in the shadows until recently, during the last four decades, when serious efforts have been made globally to formalize financial provision to the poor. The emergence of the microfinance industry has observed remarkable achievement as ideas of the poor have been supported. It has offered the potential to provide cost-effective financial services to the poor (Brau & Woller, 2004).
Problem Structuring and Analysis in a Hierarchical Form
A total of fifteen entrepreneurs from around the globe have applied for microcredit and an analysis of each was conducted to determine whether or not they qualify for credit. To solve the problem, AHPSort was used to classify the entrepreneurs in three classes as follows: a) entrepreneurs that will definitely be funded; b) entrepreneurs that will be funded when there is still enough money; and c) entrepreneurs that will definitely not be funded. Computation was done using Expert Choice and the results analyzed to classify each entrepreneur.
* Entrepreneurs that will Definitely be Funded
A number of factors are put into consideration to determine whether an applicant qualifies for microcredit. These factors include: repayment period, risk diversity, family dependency, and the loan purpose. Using computations of each entrepreneur, the following are entrepreneurs that will definitely be funded. Sinag Hay, Pha Chhean, and Bunna Tim are the first entrepreneurs to definitely qualify for loans. The risk diversity, family dependency and loan purpose are way above average and there is high guarantee of the loan being repaid in time and in full. Rith So, Tigwirizane Women Group and Dinh Cong also qualify for definite credit; however, their purposes for loans vary considerably. The purpose for these loans is not convincing, but since the business performance and loan repayment is guaranteed, they highly qualify compared to other entrepreneurs as observed in the second group.
* Entrepreneurs that will be Funded when there is still Enough Money
After the first group of entrepreneurs has been provided with credit, the second group should be put into consideration. This group involves entrepreneurs with running businesses that have a slightly low probability of repaying credit within the given period and in full. Entrepreneurs that qualify for this second group are: Maria Christina C. Alejandro, Parveen Bibi, Makara, Hernan Verga, and Tithandizike Group. For these businesses, there is an element of significant family dependency and low loan purpose that could affect credit repayment. Their family dependency on the business and loan purpose is below average. This means that they depend on their business to provide for their families; hence, returns are not much as compared to the first group. However, there is still a higher possibility of repayment though not guaranteed. These businesses are promising in loan repayment and have a going concern that is convincing for their credit qualification.
* Entrepreneurs that will not be Funded
The third group of entrepreneurs consists of individuals that do not qualify to receive credit. This is because there is an extremely low probability that they w...