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Summary

Income inequality is very high across the world, and the top 20% of the world’s population control nearly 70% of the world’s wealth.1 The Gini coefficient refers to income distribution across a country; the higher the Gini coefficient for a country the higher the income inequality, and the lower a country’s Gini score the more equitably wealth is distributed in the country.2 Latin America is the region with the highest Gini score, indicating high levels of inequality.3 While Sub-Saharan Africa is also highly unequal, the region has reduced its Gini score by several points since the 1990s.4 The International Labor Organization estimates that nearly 202 million people are currently unemployed worldwide.5 In 2012 6% of the world’s total workforce was without a job.6 About 35% of the world’s unemployed have been out of work for six months or longer, and 13% of the world’s population under the age of 24 is currently without work.7 The 2008 economic recession significantly increased the global unemployment rate, and in 2007 around 178 million people were unemployed, as opposed to over 200 million in 2014.8 Only 10% of the global population has access to traditional banking or means of attaining loans, savings accounts, credit, or other financial services.9 Poverty, service fees, and travel distance all inhibit over 2.5 million adults around the world from accessing banks or financial institutions.10 Microfinance is becoming an increasingly popular model in developing countries as a means of boosting local economies and the global market. Microfinance institutions enable low-income individuals, who would otherwise be unable to utilize a traditional bank, to attain loans for their businesses. The loans are then repaid to the individual lenders, rather than a bank.11 These financial services can lead to increased income, improved health, and improved education for many families.12 An estimated 500 million individuals have benefited from microfinance worldwide.13 However, the success of microfinance initiatives rests heavily on regulatory policies including interest-rate caps and pricing transparency to protect borrows from exploitation and exorbitantly high interest rates.14 1 http://www.unicef.org/socialpolicy/files/Global_Inequality.pdf 2 Ibid 3 Ibid 4 Ibid 5 http://www.theguardian.com/business/2013/jan/22/ilo-unemployment-numbers-rise-2013 6 Ibid 7 Ibid 8 https://www.gfmag.com/global-data/economic-data/worlds-unemployment-ratescom 9 http://www.forbes.com/sites/dell/2012/07/24/microfinance-as-a-tool-to-alleviate-poverty/ 10 http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20433592~menuPK:34480~pagePK:64257043~piPK:437376~theSitePK:4607,00.html 11 http://www.forbes.com/sites/dell/2012/07/24/microfinance-as-a-tool-to-alleviate-poverty/ 12 http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20433592~menuPK:34480~pagePK:64257043~piPK:437376~theSitePK:4607,00.html 13 http://www.forbes.com/sites/dell/2012/07/24/microfinance-as-a-tool-to-alleviate-poverty/ 14 http://www.theguardian.com/global-development-professionals-network/2014/oct/08/developing-countries-informal-economies-microfinance-financial-inclusion

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