Business Ideas in Romania

New opportunities with microfinance in Romania

• Posted by Laurentiu on October 24th, 2006 filed in Financial services

Opportunity: new consumers entering the market with micro-finance.

With this year’s awarding of the Nobel Peace Prize to Bengali economist and banker Dr. Muhammad Yunus, all eyes have turned to microfinancing and what it can do in the developing world. Already very popular in South-East Asia and Latin America, the schemes of microfinancing available in Romania are beginning to show signs of life but more exposure is needed in the areas where it is needed most. The traits of Romania and other emerging economies are similar – a rural population still living off subsistence agriculture, the majority of them have very little collateral to be eligible for bank credits, have little or no track record of employment or credit, and access to development funds from international institutions, including the EU, is very bureaucratic and hard to attain.
In Romania, services such as microcredit and microsavings can be very helpful for rural workers to start or continue their small business, because it helps them overpass the hurdle of a relatively high initial investment. And as the system has proven world-wide, it is profitable both for the borrower and for the lender. Dozens of institutions have proven that financial services for poor people can cover their full costs, through adequate interest spreads, relentless focus on efficiency and aggressive enforcement of repayment. A large and growing proportion of today’s microfinance services worldwide are being provided by institutions that are profitable, even after adjusting for subsidies that they may have received from the respective governments.
It is also advisable for any such institution to preserve the “joint liability” concept and the tradition of lending primarily to women, as they have shown to be very reliable in investing the money properly and returning the loan.

The only doubt that arises is: can microfinancing services overcome working abroad as the main source of investment money for rural Romania?

I will post some more specific opportunities over the next week regarding the types of products and services desired by those newly empowered with microfinance.