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Microfinance And Developement Question Paper
Microfinance And Developement
Course:Bachelor Of Commerce
Institution: Strathmore University question papers
Exam Year:2011
1
STRATHMORE UNIVERSITY
SCHOOL OF MANAGEMENT AND COMMERCE
Bachelor of Commerce
END OF SEMESTER EXAMINATION
BCN 4202: MICROFINANCE AND DEVELOPEMENT
DATE: 22ND MARCH 2011 TIME:2 Hrs
INSTRUCTIONS: Answer Question ONE and any other TWO Questions
QUESTION ONE:
(a) What kind of factors might affect attitudes towards charging sustainable interest rates by
Microfinance Institutions in the Kenyan market environment? How can an MFI/or Deposit
Taking Microfinance (DTM) overcome negative attitudes towards such rates? Construct an
argument to discuss with someone who holds such attitude in Kenya today.
(10 Marks)
(b) Explain three measures of access or use of formal financial services.
(5 Marks)
(c) “The delivery of appropriate financial services to low-income people requires a good
understanding of their needs and desires”. Discuss the truth of this statement, and explain
how Microfinance providers can comply with this key principle of microfinance? What
specific issues should an MFI address to fit the needs and preferences of clients to product
offerings? (15 marks)
TOTAL 30 MARKS
QUESTION TWO:
a) Explain the meaning of the term ‘financial sector development’ and its impact on economic
growth in a modern economy. (10 Marks)
2
Identify and discuss the typical characteristics of ‘sustainable’ microfinance as demonstrated
in the above case. Do you think Wanjiku has a livelihood, and where would you place her in
the poverty pyramid? (Hint: Apply your knowledge of the principles of microfinance and
how microfinance works best for development). (10 Marks)
TOTAL 20 MARKS
CASE STUDY (ROSCAs)
Wanjiku is a small vendor who sells vegetables from a shelf set in the window of her hut. She is a member of a merry-go-round that has seven members, including herself. This is what they do: Everyday, day-in day-out, each of them saves 20 shillings. So each day, a total of 300 shillings is saved. Each day, one of the seven women takes a full 300 shillings. By Kenyan standards of wage levels this is equivalent or even more than the daily earnings of a man who works in industry area. After each of the fifteen women has taken their ‘prize” in turn – which takes 15 days of the course – the cycle starts again. Wanjiku was “a serial number 1” in the cycle. So at the start of the first cycle, and then every seven days, she gets 300 shillings in return for putting in 20 shillings each and every day. Wanjiku has been in this Merry-goround with the same fellow members for two and half years.
Wanjiku takes her merry-go-round very seriously. The total value of her kiosk is a little over 300 shillings. So when she has to dig into her working capital to pay for the extra costs for her two children, she has to do so in the knowledge that provided she is faithful to her merry-goround, she’ll get a Kshs. 300 lump sum within the next week and can recapitalize her shop.
QUESTION THREE:
(a) ) What does the term ‘mission drift’ mean? Do you think microfinance is facing a mission drift today? (6 Marks)
(b) “Vulnerability is said to be a state where the poor lack adequate economic and social capacity and where they can easily slip in and out of poverty”. Define and explain the meaning of the term poverty. Explain the role of formal and informal providers of microfinance services in reducing vulnerability of the poor? Identify which target group of the clients in the poverty pyramid (or vulnerability continuum) is served by each class of providers in your answer.
(14 Marks)
TOTAL 20 MARKS
QUESTION FOUR:
(a) Majority of ‘bankable’ people in Kenya do not yet have access to financial services. What does the term ‘bankable ‘mean and do you agree with this statement attributed to the Central Bank of Kenya? (5 marks)
(b) Microfinance institutions as financial intermediaries have proven that they are able to provide banking services reliably to poor customers, and this is a necessary prerequisite to economic development. Discuss. (5 marks)
(c) Explain the meaning of the term ‘inclusive finance’ as used in microfinance (6 marks)
(d) Microfinance innovations are recognized by the UN as having the ability to promote the
achievement of millennium development goals (MDGs). Do you think Microfinance as
implemented in Kenya contributes to MDGs? (4 marks)
TOTAL 20 MARKS
QUESTION FIVE:
(a) Identify and discuss the main characteristics that distinguish a leading MFI. (10 marks)
(b) “Lack of capital is the main constraint why microfinance institutions do not grow into big organizations in the East African region”. Discuss the truth of this statement. Do you
think microfinance sector is adequately funded? (10 marks)
TOTAL 20 MARKS
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