WEEK six

Hey guys, we are now in week six as you can see we are moving forward,follow me and enjoy. This is my financial literacy course (CDV) well my cdv class in six week is the best among weeks i attend in the previous weeks, i have learn many thing about micro financial. Mr Asongo Abraham from micro financial office came and give the class more details about the micro financial. MICRO FINANCIAL: is a general term to describe financial service to low-income individuals or to those who do not have access to typical banking services. Micro financial is also the idea that low- income individuals are capable of lifting themselves out of poverty if given access to financial services.Financial literacy  as a micro financial it help  people to make the best way of felicity, it give individuals first  hard knowledge on how to manage their own resources , mostly is to teach them how to save not how to borrow .Micro financial  is divide into two sector, informal sector and formal sector. INFORMAL SECTOR: is define as contracts or agreement conducted with out reference or recourse to the legal system to exchange cash in the present for promises of cash in the future.The informal sector provides saving and credit facilities for small farmer in rural areas, and for lower- income households and small- scale enterprises .The procedures of informal schemes are they emanate from local cultures and customs, they are easily understood by the population.The informal sector mobiles rural savings and small saving from  low- income urban households. informal groups operate at times and on days which convenient for their members.Informal sector associations accept any amount of regular savings, even the most  modest sums which a saver  can a ford to set aside . The financial techniques on which such informal groups are based 1 end  themselves to the management of a large number of small accounts.Access to credit is simple , non-bureaucratic, and little based on written documents. Literacy is not a requisite.Within the informal sector, information is widely diffused. The regular meetings of informal savings and credit associations serve as a forum for dissemination of information.The interest paid on deposits in the informal sector compares favorably with that paid in the formal sector, thus providing an incentive of rural and small urban households to save. There are no investment opportunities for saving which have been mobilized but which have not bee lent. Repayment rates  are high. Because they emanate from local environment , informal groups are aware of  the problems that members may be confronted with, repayment difficulties in a pragmatic manner .Debt rescheduling is possible.Savings and credit mechanism in the informal sector are not geared towards accumulating funds before the peak when loan requests are highest. FORMAL SECTOR: A group of people usually employees ,that includes recognized income sources for paying income taxes based on all 40-hours, regular wages jobs contrast to information sector.The formal sector consists the business, enterprises and economic activities that are monitored, protected and taxed bye the government, whereas the formal sector is comprised of the worker and enterprises that  are not under government regulation.All those type of employment which offer regular wages and hours, which carry with them employment rights and on which income tax is paid. Loan application procedures are complex and require  reading and writing skills so that a file on the borrower may be established.Processing of loan requests is complex , resulting in long delays before final approval or rejection. Even when approval is obtained ,loans delivery is slow.Collateral requirements correspond to the situation of relatively well-off deposits or saving accounts in commercial bank, property  which  can be mortgaged.In formal sector transaction cost are high , also repayment rate are low. Furthermore, formal sector institutions do not have close contact with the environment in which they operate. Sometimes social repercussions, while at other time they do not sue for reimbursement, leading borrowers to believe that formal loans are free.The formal sector keeps written records on the activities of clients, although the information recorded is sometimes irrelevant.

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