Microfinance means providing poor people with small loans at a low interest rate. These people are usually unable to obtain loans from commercial banks. It is intended to encourage development and originated in Bangladesh. A World Bank study in 2014 showed that microfinance raises consumer expenditure, the value of household assets, the size of the labour force and spending on children’s education.
(a)[2]
Define the ‘rate of interest’.
(b)[4]
Explain two reasons why the poor may find it difficult to obtain loans from commercial banks.
(c)[6]
Analyse how higher spending on education could raise inflation in the short run but lower it in the long run.
(d)[8]
Discuss whether a rise in consumer expenditure would be beneficial for an economy.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A fee / cost of borrowing money.” …