Unequal Pay Among the Sexes

Unequal Pay Among the Sexes Group Smith, Bauer, Tetteh, Vice   Unequal pay is not a new subject but since it still happens, we felt that we should shed some light on this subject and give our fresh opinions. Before we go any farther let me explain some of the background of Equal pay. The Equal Pay Act of 1963 Applies to virtually all employers, large and small, and prohibits sex-based wage discrimination between men and women working in the same place of business who are performing substantially the same work. (Snow). This Act was created because of the significant wage gap among genders back in 1963, yet we still struggle with it today. when the Equal Pay act was passed the average wages of women were less than sixty percent of men.( Kubasek). Now that, that has been explained in detail the following will be explained Since unequal pay is still relevant and well define why it is unfair and what steps people can take if they believe it is happening to them. Lastly, we will talk about the consequences of unequal pay to the companies who allow thi s to happen. There are several reasons given by experts as to why there is still a gap between men and women wages. According to Hartmann, Gault, Lovell, Sinzdak, and Caiazza the number one feature in womens earning less than men is that of hours worked, or on the part of women, hours not worked.(Kennedy). For this reason, You can imagine that women may have to get leave form work to take care of a sick child or a family member. Sad to say but, of the thousands of single parents in the workforce today, more than half of them are women (Kennedy). This is some of the reason that results in less hours worked by women as to men. Many excuses have been made that the difference is attributed to productivity but according to professor Francine Blau this information cannot be proven. The existence of large pay differentials between male and female workers that cannot be attributed to individual differences in productivity-related characteristics (Blau). Another reason why many believe the gender wage gap still exist is lack of experience and skills at the work place. Many jobs are dominated by male workers are worth more money than those dominated by female workers (Kennedy). For example; An employer who owns an electric company and has a male electrician and a female secretary is not likely to pay the secretary the same as the electrician. The secretarys job is not of less importance to the system of the organization, but her day-to-day work does not contain the knowledge, skills, abilities, and other characteristics that keep her alive on the job as to where by the electricians job is more dangerous, requires more knowledge and training (Kennedy). Since these two positions cannot be considered the same, there should be a wage gap expected. The Equal Pay Act of1963 requires equal pay for men and women doing substantially equal work, as opposed to comparable worth, that is equal pay for men and women doing equal work for an employer. (Kennedy) The third reason why we still see a gap between men and women wages is simply discrimination. Wall (2000). indicated women are making only 76.5% of mens wages, a gender wage gap of 23.5 cents for every dollar earned by the median man and when it comes to hourly standpoint, the pay wage gap decreases to 16.2 cents. (Kennedy, Nagata, Mushenski, Johnson, 2008). when it comes to the discrimination standpoint, expert has given many reason why the wage gap is not to be considered a discrimination against women. We all have rights to protect whether you are a man or women. Thank goodness that there is a law that fights for unequal pay so if you feel there is a discrimination on your pay there is ways to fight it. According to The American Association of University Women, if unequal pay is occurring, you have the right to file a charge of discrimination with the EEOC, Equal Employment Opportunity Commission. If you want to file a charge, its best to do it as soon as possible because you must file a charge within 180 days of the discriminatory action to preserve your legal rights. There are different options when filing. You can either file a lawsuit, although youd have to hire an attorney for that. The other option is to just go to the EEOCs website and file the charge. If a complaint is filed, courts or the EEOC will examine a broad range of pay practices to analyze compliance, including the employers overtime pay practices, bonus structures, stock options, profit sharing, life insurance, vacation pay, car allowances, hotel accommodations, reimbursement for travel expenses, and other fringe benefits. Importantly, if there is an inequality in wages between men and women, employers may not reduce the wages of either sex to make their pay equal (Snow). There are a lot of factors to consider when it comes to unequal pay, much more than what meets the eye. Speaking up as soon as possible is clearly the best option. No one should have to settle for unequal pay. The Equal Pay Act of 1963 was designed to protect men and women from pay discrimination from their employer; most cases involve women and even more so women of color and other nationalities. If these women decide to peruse they could take it to court, if they have proof of the pay discrimination is taking place if a women are preforming equal in the terms of skill, effort, responsibility and working conditions. The gap is so big between women and men almost 0.24 cents with the right evidence that gap could be closed more than it already has. Equal Pay Act are intended to bring much more than shame to an employer. Suits may be initiated and enforced by the EEOC, a group or class of employees in a class action, or individual plaintiffs. The statutory damages can be crippling to employers. Like the FLSA, the Act provides for recovery of two or three years (if violation is willful) of back wages, liquidated or double damages of an amount equal to the back wages, as well as reimbursement of attorney fees and costs. (Snow) Under the Equal Pay act of 1963 it outlines what happens of a company is found guilty the plaintiff may recover damages under the Equal Pay Act and gender discrimination (Snow, pg.4). A company could face severe damages to pay to the plaintiff and all who is involved in the case or others who works there. Importantly, individuals, such as owners, officers, or supervisors, may be held personally or individually liable under the Equal Pay Act if they had the capacity to exercise control over the plaintiff employee (Snow). Ways that a company can justify differences in pay could be merits seniority, productivity and commission based sales. The ways listed can justify pay differences and they work if the company follows the rules of The Equal Pay Act of 1963. A successful plaintiff may recover damages under both the Equal Pay Act and Title VII for gender discrimination the court will calculate damages to give each plaintiff the maximum award to which he or she is entitled under either s tatute (Snow) unequal pay can be crippling for a company so it is important to follow the laws when it comes to gender and equal pay. Unequal pay is unfair and employees should know what they can do to report unequal pay. Importantly, individuals, such as owners, officers, or supervisors, may be held personally or individually liable under the Equal Pay Act if they had the capacity to exercise control over the plaintiff employee (Snow). Without a doubt this is a serious topic, it interferes with employees lives and means of making a living. The Equal Pay Act is there to help people and preserve their dignity. The consequences can be grave and destroy employee morale A successful plaintiff may recover damages under both the Equal Pay Act and Title VII for gender discrimination. (Snow). Unequal pay in wrong and employers and employees should be vividly aware of the consequences Works Cited Blau, Francine D. Gender, Inequality, and Wages. Oxford Press Oxford Univ, 2016. Print Kennedy, A., Nageta, E., Mushenski, B. P., JohnsonD. L. (2008). Wage Discrimination Based on Gender and Race. Delta Kappa Gamma Bulletin, 75(2), 13-19. Know Your Rights at Work: The Equal Pay Act. AAUW: Empowering Women Since 1881. AAUW, n.d. Web. 09 Mar. 2017. Kubasek, Nancy, M. Neil Browne, Daniel J. Herron, Lucien J. Dhooge, Linda L. Barkacs, and Carrie Williamson. Chapter 24/ Emplyement and Discrimination Law. Dynamic Business Law: Summarized Cases. 3rd ed. New York: McGraw- Hill/Irwin, 2013. N. pag. Print. Snow, Christopher B. and Jane K. Snow. The Equal Pay Act of 1963. Utah Bar Journal, vol. 29, no. 6, Nov/Dec2016

The Importance Of The Cultural Training Education Essay

In recent old ages at that place has been a drastic alteration in the form of the work force where there has been a batch of engagement of the multicultural people in assorted administrations. So every administration had started concentrating to better their indispensable accomplishments through assorted developing programme ( Sabo, 2000 ) . During this procedure they recruit, train and promote from planetary labor pool ( Herr, 1990 ) . Furthermore there has been enormous addition in the figure of the minority registration in the administration at different degrees. So every administration is more focussed to acquire prepared to larn and work with different people with different cultural background throughout the universe internationally. In order to understand and to get by up with different people employees are provided with needed developing programmes every bit good as schemes. And in these preparation programmes much focal point is given over the struggles in the cross-cultural relationships ( Sue and Sue, 1990 ) . Difference in these learning manners can move as a hinderance to the preparation programmes. Apart from these there are certain internal factors like self-pride and attitude which will move as barriers during the preparation work country ( Field and Aebersold, 1990 ) . Furthermore internal personal relation accomplishments are the most general accomplishment which is provided in every preparation programme ( Greenan and Winters, 1991 ) . And these accomplishments are inter-related to each other and their impacts over the preparation programmes are huge.Cross cultural direction:There has been important addition in the cross cultural interactions among people and administrations because administrations are seeking to thrive and develop globally in order to go earn more net income. ( Alder, 1983, 1991 ; blunt and Richards, 1993 ) stated that the importance of International Human Resource Management has been increasing in footings of academic and pr actical facets. ( Black and Mendenhall, 1990 ) argued that cross cultural preparation is an effectual manner for easing effectual transverse cultural interactions. In old yearss, transnational companies used to concentrate on merely one dimension while choice of an employee for foreign assignment and that is proficient competency without sing the effects of interpersonal accomplishments and relationship accomplishments ( Mendenhall et al. , 1987, Miller, 1973, Tung, 1981 ) . Cross cultural direction trades with choice of campaigners for international undertaking,Cultural preparation Models:During these developing the trainers use few words like preparation and orientation which are really frequent in their educational form. Orientation means acquiring acquainted with the environing environment or state of affairs ( Batchelder, 1978 ) . orientation is characterised as who, what, when and where attack sing their readying period but in preparation every person learns practically about the environment, learns the needed accomplishments and attacks depending upon the state of affairs. Finally they become so possible and capable plenty that start executing good in those new environments efficaciously. There are assorted theoretical accounts which are used by the trainee to develop the pupils. These are some of them. Orientation Training Education ( Bennett, J. M. ( 1986 ) â€Å" Modes of cross-cultural preparation: gestating cross-cultural preparation as instruction † . International Journal of International Relation, Vol. 10: 117-134 Table. : Models used in the cultural preparation Orientation Training Education Goals Cognitive Behavioural Affectional behavioural Cognitive affectional behavioural Content Cultural particular ( who, what, when and where ) Cultural particular ( who, what, when, where, and how ) Cultural specific cultural general ( who, what, when, where, how and why ) Procedure Intellectual Experiential Experimental rational Beginning: Bennett, J. M. ( 1986 ) , pp.121Assorted cross-cultural preparation theories:( Fiedler et al. , 1971 ; Mitchell et al. , 1972 ) stated that there are four different types of teaching- acquisition theories are most effectual for transverse cultural preparation and these are: Cognitive Pragmatism Behaviorism Humanitarianism Cognitive learner theory: This is besides called as the ‘Class room ‘ , ‘University ‘ Model ( Harrison & A ; Hopkins, 1966 ) . Here it is believed that the cognitive apprehension is indispensable for effectual public presentation because here the participants learn the things with their involvement towards the acquisition. Fiedler et Al. ( 1971 ) ; Mitchell et Al. ( 1972 ) ; Landis et Al. ( 1976 ) ; Randolph et Al. ( 1977 ) ; Worchel and Mitchell ( 1972 ) ; and Weldon et Al. ( 1975 ) designed and developed this theory to measure the cognition of campaigners sing cultural difference and their impact on their public presentation while executing work in a different state. This theory involves readying of short incidents that describe the interactions between sojourners ( person visiting or populating temporarily in given state ) and host national ( native of given state ) . So, the campaigners are divided into groups and each group has to analyze series of multicultural incidents jointly. For each incident, campaigners used to acquire assorted multidimensional inquiries and they have to take one option based on their cognition and penchants ( Parhizgar, 1998 ) . Pragmatistic: It is a cross-cultural experiential preparation plan. It includes five types of procedures and these are: Attention: campaigners are required to hold deep and close concentration on some peculiar events. They have to detect some cardinal things merely and disregard others. However, some cultural values do non necessitate close attending because these values are rather similar to candidate ‘s ain civilization values. Choice: the trainees have to choose some peculiar sort of cultural values, beliefs and behavior forms to be learnt and analyzed. Withdrawal: it includes determination of cultural values, beliefs and behavior forms that are rather different from trainees ain civilization in order to larn efficaciously other civilization in simplest manner. Emphasize: the trainees has to give more attending towards certain parts of selected cultural values in order to deeply understand the basic operation of that civilization. It besides helps in analyzing the affectional power of images which varies harmonizing to person ‘s ain perceptual values. Assortment and contrast: if trainees find that the new cultural environment is utmost and seeable in the same manner as their ain civilization, so trainees do non able to larn significantly. So, to larn efficaciously, trainees have to see or hear the new civilization from different manner otherwise similarity causes them to lose involvement ( Parhizgar, 1998 ) . Behavioristic: ( Bandura, 1969 ; Sims, Jr. , & A ; Gioia, 1986 ) stated societal acquisition theory which argued that to understand the behavior of a individual we need to analyze individual ‘s societal and rational environment. It consists of taking trainees to field trip to a different state to detect and analyze the cultural forms straight. This theory comprises of eight constituents viz. : Observation: in the simplest manner, trainees can watch and enter events on the footing of their observation. ( Moorhead & A ; Griffin, 1990 ) described assorted signifiers of observation that trainees are free to utilize and of import 1s among them are – structured observation, participated observation and concealed observation. Structured observation involves look after of peculiar type of events by the trainees to larn on peculiar country. In participated observation, trainees have to really take part in the events and record the meaningful effects in their dairy. Inspection and experimental recording of the events without the pre and station cognition of perceivers play an of import function in concealed observation. Attention: this procedure helps in finding the choice of events that is required to pull out of import information from those interactions. The factors that may alter or upset the trainee ‘s attending are – place, involvement and analogy of the theoretical account and the perennial handiness of the manners ( Black & A ; Mendenhall, 1990 ) . Percept: ( Zalkin & A ; Costello, 1962 ) stated that a individual has to gone through series of procedures to understand information about modelled cultural behavior. It besides helps in increasing the consciousness of individual sing its cognition of modelled cultural behavior. Apperception: the procedure of implanting or integrating new constructs into 1 ‘s ain civilization – wonts, desires, involvements and values is known as apperception. The manmade instruments like cultural traits are responsible for bring forthing peculiar types of psychological responses in human existences. The perceiver has to demo desire and involvement in order to understand the order or nature of ideas of other civilizations. Retention: ( Black & A ; Mendenhall, 1990 ) stated that the procedure by which we can integrate modelled or desired behaviors as memory is called keeping. Invention: it is a procedure which helps us in the account of new things or constructs in footings of general and specific features, common values and rules. It besides plays an of import function in disputing the bing cognition every bit good as to detect the new constructs. Adaptation: in the simplest signifier, version agencies is to do accommodations efficaciously to cognize the cultural environment, factors behind the environment alteration, and how people able to new constructs by agencies of socialization. Behavioral alteration: it means the reading and use of new erudite cultural behavior and values that is to be embedded in the individual ‘s ain civilization. It is the procedure of transition of behavior of a individual to understand the other civilization in deeper manner. Humanist: Modem humanistic cultural preparation theory is concerned with two chief types of learning larning phenomena. One consists of cultural doctrine: moralss, morality, literature, verse forms, faith and other distinguished Fieldss of enquiry such as metaphysics ( cosmology, ontology, and causality ) , epistemology and axiology. The 2nd consists of related human ritual activities, manners of corporate cultural perceptual experiences and experiences in creativeness, productiveness, or executing humanistic disciplines and those involved in perceiving, appreciating, utilizing, basking, measuring, managing, instruction, and prophesying values covering with it. This theory presents a challenge to the trainee ‘s doctrine and free ways of understanding. It is founded on the theory that larning occurs chiefly through contemplation on personal experience. The work of a collaborative group of trainers-multicultural trainers-is non to set anything in the head or repertory of the trainees, but to pull out positions from the trainees ‘ ain sensational and rational penetrations and experiences. It is a deductive and dialectic teaching-learning attack. On the footing of trainee ‘s experiences, trainers explain stirred statements, so trainees make new connexions in a composite formation. Both learning and learning procedures are inductive in footings of logical thinking, averment, visual image, contemplation and generalisation of the facts. A humanistic attack is manipulated neither by trainers nor by trainees. It is the natural flow of nearing and sing with extremely motivated techniques ( Parhizgar, 1998 ) . Integrationist attack: Research suggested that to heighten the success of individual who is traveling to work in a different state in footings of public presentation and personal satisfaction, individual has to travel through socialization. Berry ( 1997 ) proposed a theoretical theoretical account to achieve socialization easy and efficaciously is by agencies of integrationist attack. This attack is rather different to separation, assimilation and marginalization. The administration has to promote their employees who have been selected for an international undertaking to take or follow above said attack in order to understand new civilization by agencies of socialization. In this attack, campaigners are asked to retain or memorize their ain civilization every bit good as to larn new constructs and values related to the new civilization ( Abbott et al. , 2006 ) . Cultural theory: Downs ( 1970 ) explained four types of preparation theoretical accounts for transverse cultural issues: Intellectual Model: this theoretical account comprises of talks and reading stuffs about a civilization that is different from individual ‘s ain civilization and it is based on that the exchange of information sing new civilization is helpful in life in different civilization. Area Simulation Model: this theoretical account is by and large referred to as civilization specific preparation plan. These preparation plans are based on belief that an person has to acquire particular preparation sing the civilization he/she is traveling to come in. These plans chiefly involve analysis of future behavior of an person for peculiar state of affairs in the new civilization. Self Awareness Model: this theoretical account is based on premise that to understand a new civilization, it is critical for an person to first understand the individual from the different civilization. To understand individual, means understanding likes, disfavors, behavior, societal values and norms of that peculiar individual. Culture Awareness Model: ( Harris and Moran, 1991 ) stated that to work efficaciously and strongly in another civilization, an person has to larn the basic or general behavior rules that is accepted by the society with regard within that type of civilization.Developing Cross-cultural Management Skills: Experiential Learning in anBy and large, there are two major types of preparation plans that are used by administration in order to give preparation to their possible employees to larn some new techniques and schemes and applies the already learnt techniques for smooth and proper operation in a different state. The first type is civilization general and other type is civilization particular. Both types of preparation plans have distinguishable characteristics and features. ( fiedler et al. , 1971 ) designed and illustrated the oldest, civilization specific attack which involves forced pick replies of people from one civilization who are being received preparation in regard of other civ ilization. The purpose of civilization specific preparation plan is to give general information sing new civilization to employees so that before really traveling to a different state, they enable to make some readying to cover with transverse cultural issues. This type of developing attack is preferred when an person is frequently traveling to one peculiar state. On the other manus, as administration starts working hard to go a planetary participant to gain more money, so the focal point of the administrations begin switching towards civilization general preparation plan ( David, 1997 ) .Parameters of cultural differences:In the yesteryear, batch of research workers and anthropologists have been tried to specify civilization and the distinguish characteristic that constitutes civilization. The survey by Hofstede ( 1981, in Hofstede. 2001 ) explained the difference between civilizations on assorted parametric quantities viz. – Bolshevism vs. individuality, high power distance vs. low power distance, high uncertainness turning away vs. Low uncertainness turning away, maleness vs. feminism and long vs. short term ends. The elaborate description of above said parametric quantities is given below: Individualism vs. Bolshevism: It is the grade to which a homo is bound under social norms and values while doing any determination. In an individualistic civilization, people have been encouraged or supported to do their ain determinations to populate their life without confer withing their determinations with others. On the other manus, people in collectivized civilization have been encouraged to do determinations in groups and ever back up squad work. High power distance vs. Low power distance: it is the grade to which the power of doing determinations has been allocated in the society. By and large, people with high power distance ever give importance to hierarchy in doing critical determinations while people with low power distance give authorization to every person to take portion in determination devising without following hierarchal order. Masculinity vs. Feminism: it is the extent to which a society allows the person to take portion in working civilization on the footing of gender. In a masculine civilization, work forces considered to be working harder than adult females while in a feministic civilization, adult females are besides given equal chance as compared to work forces to populate their life. High uncertainness turning away vs. Low uncertainness turning away: it is the grade to which an person is encouraged to work in a challenging or unpredictable environment. In high uncertainness turning away, people prefer to work under rigorous regulations and officially structured ways of making work. While in low uncertainness turning away, people prefer to work freely and like to invent new ways of making things and disputing the past ways. Long vs. Short term ends: it is the grade to which a civilization given importance to timeframe to larn something new. Peoples with long term ends, characterised by forbearance, emotional stableness and anxiousness and they prefer working in such a manner that they will be able to present a better hereafter. On the other manus, people with short term ends ever focus their attending to do their present better than yesteryear without sing the impacts of their determinations on hereafter.Advantages of transverse cultural preparation:To increase the cognition and experience of employees to heighten their apprehension to seeing the universe from wider position. To maximise the cultural sensitiveness. To larn how to avoid misinterpretations based on cultural differences. To larn how to pass on verbally and nonverbally with co-workers in other civilizations. To increase the flexibleness of the employees to set in different civilization. Hence cross-cultural preparation can be seen as a tool for bettering the corporate civilization and patterns by invariably larning through initiation of foreign subjects in the organisations. Further the cross-cultural preparation will assist to cut down the psychological emphasis and cultural daze which frequently lead to failure of exiles.

The Common App Essay Topics 2016 Pitfall

The Common App Essay Topics 2016 Pitfall Thru-way corporation's questions are ensured multiple at any selection of the. If it is possible to paint a very clear picture for your reader by giving details, you're a great deal more likely to file a marker in their memories. This new prompt provides the chance for you to discuss something which completely enthralls you. There isn't a prompt to steer you, and that means you must ask yourself the questions that will get at the center of the story you would like to tell. A Secret Weapon for Common App Essay Topics 2016 Vanessa's essay succeeds on several fronts. In general, she has written a fine essay, but it is not without a few short-comings. Bridget's essay is extremely strong, but there continue to be a couple little things that could be made better. Basically, the author takes a huge risk with the topic of the essay, but with good logic and superior writing, defends the case well. You need to deal with each portion as a way to craft a good essay that presents yourself in the greatest possible light. Prewriting To begin, you have to first collect and organize prospective suggestions for your essay's focus. You should definitely use contractions, which enhance the stream of your essay. At the present time, I desperately should develop an idea for my CommonApp essay. Having just said that there's no such thing as a perfect answer, in addition, it is important to know that a few answers become used a good deal, and that could make it more challenging to compose an essay on such topic that will get noticed. Finally, this answer is fantastic since it draws on parts of a different essay. Regardless of what topic you select, allow some time for extra editing. 1 approach to begin coming up with interesting suggestions for your Common App essay is to have a look at the instructions. Your reply shouldn't be a book report. Two new essay options are added, and a number of the previous questions are revised. It may be a bodily or an intellectual one. In general, there's no single correct topic. Don't neglect to explain why the challenge is significant to you! Clearly articulate the issue. Life After Common App Essay Topics 2016 The focus on a specific event is crucial. You may even be in a position to read examples from previous students to receive your creative juices flowing. College-specific supplements and essay prompts are a crucial bit of a student's application only because they help colleges gauge a student's demonstrated and informed interest, and permit the student a chance to demonstrate how he or she is going to add to the campus community and expand upon her or his specialty. This guide can help you begin! The personal insight questions are an essential part of your freshman or. The procedure for your experience is essential. For others, it takes much more time to earn a choice. Then think about whether it's the case that you'd make the exact same decision again and why.

Microfinance Perspectives For A Socially Motivated Investor - Free Essay Example

Sample details Pages: 14 Words: 4077 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Essay any type Did you like this example? This chapter is designed to enlighten essential notions of microfinance and provide an overview on microfinance institutions. 2.1 Notions of microfinance à ¢Ã¢â€š ¬Ã…“The poor stay poor, not because they are lazy but because they have no access to capital.à ¢Ã¢â€š ¬? Milton Friedman, 1976 Nobel Prize in Economic Sciences One of the critical aspects that impacts adversely growth in the developing world is that a major part of its population is excluded from financial services (Yusuf, 2009). The vulnerability, those people face, could be reduced when means that smooth consumption and overcome crises are provided. Like any individual they need a full range of financial services, rarely accessible through the mainstream financial sector.  [1] Don’t waste time! Our writers will create an original "Microfinance Perspectives For A Socially Motivated Investor" essay for you Create order 2.1.1 Microfinance: a concept to alleviate poverty Microfinance means financial services for low-income people, mainly to set up and grow businesses. There are many definitions of microfinance, and the concepts show a discrepancy. According to the Consultative Group to Assist the Poor (CGAP)  [3]  In order to frame the scope of microfinance, CGAP (2004) developed a list of key principles for à ¢Ã¢â€š ¬Ã…“effective, accessible and equitable microfinance servicesà ¢Ã¢â€š ¬?. The Key Principles for Microfinance (refer to Appendix I) were endorsed by G8 leaders in 2004. Based on Stuart Rutherford research, CGAP (2006, p.22) distinguishes three functions describing the expediency of microfinance. First, microfinance provides low-income people with the ability to deal with life-cycle events, e.g. marriage, death and education. Second, microfinance reduces vulnerability by increasing the aptitude to deal with emergencies, e.g. personal crises and natural disasters. Third, microfinance provides opportunities to invest in à ¢Ã¢â €š ¬Ã…“an existing or new business, or to buy land or other productive assetsà ¢Ã¢â€š ¬? (Rutherford, 2000, p.8). In addition, microfinance in Latin America is slightly narrower, though linked to the third aforementioned function. Berger al. (2006, p.4) define microfinance in Latin America as à ¢Ã¢â€š ¬Ã…“financial services primarily for microenterprises: their owner/operators and their workers. [à ¢Ã¢â€š ¬Ã‚ ¦] Microenterprise has a broad definition; it includes independent economic activities ranging from individual vendors selling oranges on the street to small workshops with employeesà ¢Ã¢â€š ¬Ã¢â‚¬ and anything in between.à ¢Ã¢â€š ¬? It seems to be a general statement, supported by all actors involved in microfinance, to focus on those excluded from the formal financial sector. The very essence of microfinance is to give the individual the tools to develop him- or herself. Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime. Lao Tzu Targeted microfinance clients are identified by certain characteristics: gender, ethnicity, caste, religion, geographic location (e.g. rural or urban) and poverty level (Ledgerwood, 1998). In referring to microfinance clients by poverty level, Cohen Sebstad (2000) separate them in four groups. Most current microfinance clients seem to fall around or just below the poverty line. Vulnerable non-poor clients are in households above the poverty line but are susceptible to slipping into poverty. Moderate poor clients are in the top 50 percentile of households below the poverty line. Extreme poor clients are in households in the bottom 10 to 50 percentile of households below the poverty line. Destitute clients are in households in the bottom 10 percent of households below the poverty line. Figure 2.1: Defining Microfinance Clients Source: CGAP (2006) based on Cohen Sebstad researches Cohen Sebstad (2000) find out that microfinance clients come from extreme poor, moderate poor, and vulnerable non-poor households. People coming from destitute households seem not to be reached by microfinance. Amongst few exceptions, the largest number of microfinance clients appears to be moderate poor people (Figure 2.1). Latin American microfinance makes no exception; it focuses on entrepreneurs with insufficient access to financial services and the unbanked in general, including both the poor and clients above the poverty line. Latin American microfinance aims to provide services to a broad base of clients (Berger al. 2006), rather than focusing on the poverty issue. Therefore microfinance doesnà ¢Ã¢â€š ¬Ã¢â€ž ¢t coincide with charity. Microfinance might be a long-term sustainable approach to alleviate poverty as contrasting with a single donation. Reformulating Friedmanà ¢Ã¢â€š ¬Ã¢â€ž ¢s quote, people in developing countries do not lack entrepreneurship, they lack access to capital, and economic growth might be limited wit hout capital formation (Honohan, 2004). On the first sight, it might contradict traditional development work. However the whole idea is to help low-income people to independency from aid. Traditionally microfinance aims to reach female population (e.g. Grameen Bank). Women are often discriminated in developing countries; they hardly have access to capital. Formal-sector commercial banks tend to favor men; consequently women seek solutions through the informal sector (ArmendÃÆ' ¡riz Morduch, 2005, chap. 7). The issues surrounding microfinance and gender equity are often sources of discord among academics and practitioners. On the one hand, empirical results seem to confirm that microfinance contributes to increasing womenà ¢Ã¢â€š ¬Ã¢â€ž ¢s empowerment (e.g. Pitt al. 2003). On the other hand, Nowak (2005) notices in Bangladesh that this empowerment might exclude men from the labor market. Women tend to be more conservative in their investment strategies (ArmendÃÆ' ¡riz Morduch, 2005, p. 183), they are better at repaying their loans and more willing to co-operate with their loan groups  [1]  . However women often act merely as intermediaries for their family, such that the men spend the contracted loan, while women are burdened with the inherent risk. Thus women are kept out of waged work and pushed into the informal economy (Cons and Paprocki, 2008). 2.1.2 Microcredit: a tool to alleviate poverty Microcredit is one of the major components of microfinance. For a matter of illustration, Latin America is a relevant example highest microcredit penetration rates in the world, where Peru, Paraguay and Chile have penetration rates between 25% and 35%.  [4]  , but can be more consequent depending on the country. Conversely, microcredit is hard to be defined rigorously with respect to the size of the loan, e.g. $300, $500 or $1,000. Berger al. (2006, p.4) argue to avoid a strict microcredit threshold definition because of different levels of development, incomes, and prices existing across countries. Table 2.1 provides figures in regards to average loan sizes by region as of December 2009. Table 2.1: Average loan balance per borrower by region AFR EAP ECA LAC MNA SAR All Regions Avg. Loan Balance per Borrower (in $)  [1] 626 684 4008 1341 746 912 1588 Avg. Loan Balance per Borrower (in % of GNI per Capita)  [2] 138 48 155 47 44 115 97 Source: based on MIX (2010) Secure jobs and reliable sources of income elude the poor. To get by one can create and run its own microenterprise. The latter may be small, but the cumulative impact is colossal. Depending on the country, microenterprises employ an estimated 30% to 80% of the working population (United Nations, 1997). Even if a recent study (Roodman Morduch, 2009) raises grave doubts about the poverty impact of microcredit (or more generally microfinance), its objective remains to enable people to work their way out of poverty.  [3] As a weapon for fighting poverty in the developing world, microcredit is as vital as education, health care, human rights and stable government (Smith Thurman, 2007). To emphasize its importance in fighting poverty, the United Nations declared 2005 the International Year of Microcredit  [4]  . This associates with the Millennium Development Goals, where one of the purposes by 2015 is to de crease by 50% the proportion of people living currently in extreme poverty. Microcredit is important to get a deeper understanding for the transition process to sustainability for the microfinance area since this, in the long-run, might be an excellent approach for à ¢Ã¢â€š ¬Ã…“any practitioner of development and for those eager to change the way financial institutions, international agencies and private actors service poor populations throughout the worldà ¢Ã¢â€š ¬? (UNCDF, 2005). The essence and driving force of microfinance is to create an environment for development and independency for low-income people and, in a wider perspective, for nations. 2.2 Microfinance institutions: the micro level Schumpeter (1911) argued that the advanced services provided by financial intermediaries like mobilization of savings, allocation of capital, management of risk, facilitating transactions and monitoring firms- are essential for economic growth and development. Hence appropriate financial intermediaries might play a central role in the developing world by providing financial services that à ¢Ã¢â€š ¬Ã…“stimulate economic growth by increasing the rate of capital accumulation and by improving the efficiency with which economies use that capitalà ¢Ã¢â€š ¬? (King Levine 1993, p. 735). 2.2.1 Definition and overview A microfinance institution (MFI) is an organization that provides financial services to low-income clients who are not served by mainstream financial service providers (Mersland StrÃÆ' ¸m, 2009). MFIs play a significant role in facilitating financial inclusion  [2]  . Characterizing the microfinance industry, reliable and inclusive data is complex to come by, regarding market penetration particularly. According to Daley-Harris (2009) 3552 MFIs worldwide reported reaching approximately 155 million microfinance clients as of December 31, 2007, where 83.4% are women. Besides, the Microfinance Information eXchange (MIX)  [4]  for comprehensive figures on market coverage. Combining the three sources, 2420 MFIs reported reaching 99.4 million microfinance clients in 117 countries. Most MFIs in this sample are concentrated in South Asia and Sub-Saharan Africa, while most borrowers are concentrated in South Asia, and East Asia and Pacific region (MIX, 2008). Figure 2.2: Regional distribution of microfinance clients Figure 2.3: Regional distribution of MFIs Source: own research, based on MIX (2008) As the MIX (2008) disclaimer advises, these numbers should not be considered exact representations of the global figures. Not all MFIs and microfinance clients are covered in the sample. The figures correspond to a sample of MFIs that self-reported. MFIs that voluntarily provide their information tend to be more efficient and well-managed than the majority of MFIs; subsequently the aforementioned numbers are not perfectly accurate. This discrepancy might be explained by a significant number of informal operators characterizing microfinance. 2.2.2 Microfinance institutions in the landscape of financial service providers The organizational structure and management in combination with the degree of oversight of supervision by the government determines the institutional formality of MFIs (CGAP, 2006). Figure 2.4: The spectrum of financial services providers Source: CGAP (2006, p.36) Low-income people largely obtain financial services through informal arrangements. Arrangements may well be made amongst friends and family, or with saving collectors, shop keepers, and moneylenders. Often despised for exploiting low-income people, moneylenders in fact à ¢Ã¢â€š ¬Ã…“offer a valued financial service in many communitiesà ¢Ã¢â€š ¬? (CGAP 2006, p. 37). Cooperative financial institutions are member-based organizations, owned and controlled by their members. Financial cooperatives are generally not regulated by a state banking supervisory agency, but they may be supervised by a national or regional cooperative council. Financial cooperatives are chiefly non-profit institutions. Non-governmenta l organizations (NGOs) have been the true pioneers of microfinance. According to CGAP (2006), at least 9000 NGOs are providing financial services. NGOs may face constraints in the range of financial services that they are authorized to provide; e.g. NGOs may not be allowed to offer deposits-taking services. Most of Latin American MFI pioneers began as NGOs, working in urban markets. They have focused on microcredit as the primary service offered, only recently beginning to develop their product range (Berger al. 2006, p. 41). The existence of microfinance is owed to the lack of ability or inclination of formal financial institutions to serve the unbanked. On the other hand, these institutions have the means to make the financial system truly inclusive. CGAP (2006, p. 49) considers state-owned banks as à ¢Ã¢â€š ¬Ã…“immense sleeping giants [that] could play a big role in scaling up financial services for the poorà ¢Ã¢â€š ¬?. Amongst private commercial banks four types of in stitutions can be distinguished: Rural banks have emerged in specific countries. They target clients in non-urban areas generally involved in agricultural activities. Non-bank financial institutions (NBFIs) include both for-profit and non-profit organizations. A separate license for NBFIs may exist in return for being allowed to assume additional roles, including, for some, taking deposits (Cull, DemirguÃÆ' §-Kunt Morduch, 2008). NBFIs encompass mortgage lenders, consumer credit companies, insurance companies, and certain types of specialized MFIs. Specialized microfinance banks entail transformed NGOs, NBFIs, and banks that from their establishment were entirely dedicated to microfinance. Commercial banks are fully licensed financial institutions regulated by a state banking supervisory agency (CGAP, 2006). Commercial bank MFIs are likely to be pro-profit and rely to a larger extent on commercial funds (both debt and equity funding) and deposits. This category consi sts of both microfinance banks with microfinance as their main activity as well as of number of commercial banks who established specialized departments within the bank to focus on poorer clients. 2.2.3 Specific features and lending methodologies of microfinance institutions The contrasts between MFIs and the mainstream financial institutions are important to be mentioned at this stage. Honohan (2005, chap. 3) provides three major dimensions along which microfinance appears to be dissimilar to the mainstream: scale, subsidy and style of operation. Scale can be perceived as a transitional phenomenon and the sustainability of an MFI is partly a function of scale. Rather than having a large number of MFIs, achieving scale of individual institutions, à ¢Ã¢â€š ¬Ã…“seems to be the key to ensuring that the sector has reached a large proportion of the populationà ¢Ã¢â€š ¬? (Honohan 2005, p. 12). Moreover, one has to emphasize the importance of achieving scale when region-wide economic shocks occur. The latter can plunge apparently households into poverty. Hence small-scale, informal and geographically confined financial arrangements are à ¢Ã¢â€š ¬Ã…“unable to dissipate the risk through poolingà ¢Ã¢â€š ¬? and (geographical) diversification Honohan (2 005, p. 13). Style of operation differs between microfinance and the mainstream. It is important to realize the diversity within microfinance itself. The lending methodology is a major feature of an MFI. Cull, DemirgÃÆ' ¼ÃƒÆ' §-Kunt Morduch (2007, 2009) distinguish between three lending methodologies for providing microcredit; the individual methodology and two group-lending-based arrangements. The individual lending method applies to MFIs that use standard bilateral contracts between a lender and a single borrower. Solidarity group lending applies to institutions that use contracts between a lender and a solidarity group of borrowers. Loans are made to individuals, but the group is confronted to a joint liability for repaying the loan. The village bank methodology applies to institutions that offer large groups the opportunity to engage in participatory lending by forming a single branch. Being of the major innovation of the microfinance movement, the practice of group lending (Figure 2.5) in particular has received great emphasis from academics seeking to comprehend how microfinance deals with information, enforcement and administrative costs (Honohan 2005, p. 15). For instance, ArmendÃÆ' ¡riz Morduch (2005, chap. 4) argue that group-lending-based contracts provide, in principle, efficient outcomes through the promotion of social capital, and that without collateral. Moreover, group lending mitigates problems created by adverse selection (Morduch, 1999) and à ¢Ã¢â€š ¬Ã…“ensures low default rates and replaces standard collateralà ¢Ã¢â€š ¬? (Dieckmann, 2007, p. 4). Figure 2.5: Process of group-lending-based contracts Source: Dieckmann (2007) Other features differentiate MFIs from mainstream institutions in regards to the style of operation: the progressive increase in the amount borrowed from an individual or group members as each successive loan is repaid, the use of non-traditional collaterals (e.g. T.V.) and the high frequency o f required repayment installments (Honohan, 2005, p. 16). Subsidy may benefit a large portion of MFIs, whether in the form of technical support, a donation of capital not expected to be compensated, or a flow of funds provided at below market rates. Overall, MFIs remain heavily grant and subsidy dependent (Honohan, 2005). The subsidy feature through donation is developed in the next section considering the source of funding of MFIs. 2.3 Microfinance funding environment At the present time, microfinance is not anymore considered as an isolated marginal sector that needs to be served only by niche market MFIs. Microfinance is becoming an integrated segment of the broader financial system. The example of the Mexican MFI Compartamos depicts well this evolution when, in April 2007, Compartamos sold 30% of its shares in an initial public offering (IPO)  [1]  that was oversubscribed 13 times and netted approximately US$467 million for the original investors (Daley-Harris, 2009). The success of the Compartamos IPO might no doubt facilitate future funding of MFIs, and improve microfinance image, particularly in regards to cross-border investors (CGAP, 2007). 2.3.1 Sources of funding for microfinance institutions: an overview The availability of capital is key factor of growth for an MFI (Krauss al., 2007, p.3). In order to supply microfinance borrowers with its services, an MFI needs capital on the liability side of its balance sheet. The funding process works basically like a mainstream financial institution. An MFI is financed either with equity, debt capital, or a mix of both capital structures. The equilibrium between debt and equity financing is key to the development and growth of an MFI (Maisch al. 2006). Appendix II provides the pros and cons of each capital structure. From the perspective of a microfinance investor, an MFI with a high growth potential over the next 3-5 years and with a strong gross margin to maintain its cash flow represents a serious equity investment candidate. MFIs that do not match the aforementioned criteria may still be potential equity investment candidates, although à ¢Ã¢â€š ¬Ã…“with an investment structured to have lower riskà ¢Ã¢â€š ¬?. (Maisch al. 2006, p. 80). Latin American MFIs have to a large extent a diversified source of funding. Based on a sample of 42 MFIs from Latin America and Caribbean region as of June 2008, MicroRate (2009, p. 30) finds that domestic sources -including deposits, local commercial loans and others domestic debt capital sources- make up 59% of funding of MFIs. Equity, coming from both domestic and international sources, accounts for another 30%. International sources of funding through debt account for the remaining part (11%). Globally, Cull al. (2008) find that microfinance banks (the more formalized institutions) rely predominantly on commercial funding and deposits. NGOs (app. 40% of the sample) rely mainly on donations and non-commercial borrowing. Credit unions (member-based financial institution) rely predominantly on deposits provided by their own members. Table 2.2: Shares of total funding by institutional type (2005-2007) Donations Non-commercial borrowing Equity Commercia l borrowing Deposits Bank 2% 1% 13% 13% 71% Credit Union 11% 3% 16% 6% 64% NBFI 23% 11% 18% 28% 21% NGO 39% 16% 8% 26% 10% Total 26% 11% 13% 23% 27% Source: own representation based on Cull al. (2008) 2.3.2 Degree of commercialization and issues The funding situation of an MFI is associated with its degree of commercialization. Commercialization refers to a transition from a state of heavily donor-dependency of subsidized operations into one in which MFIs are financially self-sufficient and sustainable, and are part of the formal financial system (Ledgerwood al. 2006). A classification of MFIs (Figure 2.5) according to their degree of commercialization depicts the growing disparity that reigns amongst MFIs. Meehan (2004, p. 7) states, à ¢Ã¢â€š ¬Ã…“a growing divide is emerging between larger more commercially oriented specialized MFIs, many of whom are, or intend to become, regulated financial intermediaries, and smaller, NGO-managed MFIsà ¢Ã¢â€š ¬?. Figure 2.5: Types of MFIs according to their degree of commercialization Source: Dieckmann (2007) based on Meehan (2004) Tier 1 MFIs are developing into formal financial institutions, and are increasingly attracting the attention of private and institutional inves tors. Typically, tier 1 MFIs are profitable, have a more experienced management team, and are regulated institutions. On the contrary, tier 2 MFIs are smaller and less mature MFIs. According to Dieckmann (2007), these institutions are predominantly NGOs that are in the process of transforming into regulated MFIs. Tier 2 MFIs may receive funding from public or institutional investors, but less than Tier 1 MFIs. Tier 3 MFIs are predominantly NGOs as well. These institutions are close to becoming profitable MFIs, but are characterized by a lack of sufficient funding. Lastly, tier 4 MFIs are start-ups or informal financial institutions for whom microfinance is not their primary focus Dieckmann (2007). Consequently, MFIs have an incentive to upgrade their institutional and regulatory status (e.g. from tier 2 to tier 1) in order to access more capital. This need for commercialization of MFIs, other than the increase in their depth of outreach  [1]  , is prompted by an endeavor for growth. Looking from a socially-motivated international investor viewpoint, some remarks have to be mentioned at this point. First, an issue that can arise from this search of financial expansion through commercialization is a phenomenon called mission drift. It captures the process whereby an MFI departs from its social mission, and increasingly focuses on its financial performance. Mission drift occurs as an MFI might find profitable to reach out to wealthier clients while crowding out poorer clients. The risk of mission drift is more likely when an MFI à ¢Ã¢â€š ¬Ã…“transforms into a formal institution or when shareholders are changingà ¢Ã¢â€š ¬? (Lapenu Pierret, 2005, p. 67). As such, the commercialization of an MFI is expected to harm its social performance, consequently deteriorate the dual return that foreign institutional investors expect to achieve from the financial and social performance of the MFI invested in (Mersland StrÃÆ' ¸m, 2009). From a policy standpoin t, ArmendÃÆ' ¡riz Szafarz (2009) emphasize that à ¢Ã¢â€š ¬Ã…“donors and socially responsible investors can be easily mislead by MFIs which are serving unbanked wealthier populationsà ¢Ã¢â€š ¬?. Second, MFI growth can be sustainable and reflect financial strength, but uncontrolled growth can be hazardous for an MFI. It can lead to increased delinquency and, in the long-term, problems that can even result in an MFI bankruptcy (Lapenu Pierret, 2005). This issue of uncontrolled growth is reflected in recent delinquency crises in Nicaragua, Morocco, Bosnia and Herzegovina, and Pakistan (CGAP, 2010b). This later point is extensively enhanced in Section 5.3. In addition, Fitch Ratings (2008, p. 17) notes a challenge faced particularly by tier 1 and 2 MFIs. As an MFI transforms and commercializes, and as microfinance borrowers are becoming integrated into the mainstream financial system, a risk can occur that à ¢Ã¢â€š ¬Ã…“the resulting convergence between microfinance and mainstream banking effectively strips microfinance of the very characteristics that help to insulate it to some extent from wider economic trendsà ¢Ã¢â€š ¬?. International funding of microfinance This chapter provides a topology of international key actors funding microfinance. Furthermore, it aims to depict how flows of cross-border funding reach MFIs. The microfinance area lacks at the present time of a clear and exhaustive categorization of funders, channels of funding, financial instruments etc. This is due to the relative immaturity and constant evolution of microfinance, and an actual search of consensus among CGAP, leading asset managers and industry experts. Therefore, the present chapter is structured to situate microfinance investment vehicles in a clarified microfinance landscape. 3.1 Primary cross-border funders The landscape of primary cross-border funders  [1]  in microfinance is categorized by two groups: donors and investors. Table 3.1 provides a comprehensive classification. Table 3.1: Landscape of primary cross-border funders Source: adapted from cgap.org and CGAP (2009a) Developing and transition economies receive international funding for microfinance. Traditionally, MFIs have been funded mainly from international financial institutions (IFIs) and donors. Donors may get involved in MFIs through a wide range of instruments; policy support, technical assistance, grants, loans  [3]  , equity investments in MFIs that can sell shares, and guarantees. For donors, direct funding of MFIs might be the most effective channel (CGAP, 2006, p. 95). However, many donors, particularly multilateral development banks, work only with governments, typically providing them with soft loans. The latter might be suitable for funding traditional aid activities (e.g. building roads, hospit als, and schools), but less appropriate for supporting MFIs development (CGAP, 2006). Furthermore, there is recognition that neither IFIs nor donors (e.g. NGOs) have been successful in delivering sustainable services to significant numbers of MFIs. A shift in direct cross-border funding is occurring; institutional and (for-profit) individual investors are progressively filling this role of sustainable investor (Berger al. 2006). Besides, microfinance is increasingly recognized as an (emerging) asset class among global private investors. Microfinance investments offer a double-line return à ¢Ã¢â€š ¬Ã¢â‚¬Å" a financial and a social one. In addition, investing in microfinance may provide portfolio diversification value for international investors (Krauss Walter, 2008). Currently, domestic sources of funding, including deposits, account for 85% of microfinance funding, while foreign sources account for 15% (CGAP, 2010). In 2008, microfinance funders (i.e. donors and investor s) disbursed US$3 billion and increased their commitments by 24%, reaching US$14.8 billion committed as of December 2008 (CGAP, 2009a). Investors account approximately for two-third of the commitment, while donors complete the rest of the aforementioned amount. Despite the financial crisis funding projections for 2009, reported by a majority of funders, have not been affected (CGAP, 2009a)  [2]  in 2005 to 29% in 2008. Figure 3.1: Microfinance investment growth by investor type Source: own research, adapted from CGAP (2009b) and cgap.org Institutional investment is mainly composed by 13 commercial banks (aggregate assets of US$ 797m), 6 pension funds (aggregate assets of US$ 681m) and 5 private equity firms focusing on investments in India (CGAP, 2009b). Commercial banks have been around the longest, essentially the European ones. Pension funds like Tiaa Cref have been important investors. Private Equity Investors have been higher profile in recent years, many of them s olely focused on financial gains especially with pre-IPO candidates, principally in India. The SKS deal in 2007 was a key spur to their interest. Niche players like Legatum and Sequoia are now being followed by heavyweights as Blackstone, general Atlantic, TPG and Carlyle. Many now proclaim that these investors are interested in mf as a sector, or asset class. I have my doubts, many have only invested in 1 or 2 token deals. I suspect their interest is in the Indian market, as a huge and rapidly growing, untapped markets. Endowments: Tufts with Omidyar funding has led the way, but perhaps there could be others even though most endowments are focused on maximizing return. We know of only one Sovereign Wealth Funds, Temasek, invested in mf, but more may follow.