Micro Finance Mock Test

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| By Catherine Halcomb
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Catherine Halcomb
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Micro Finance Mock Test - Quiz

Are you looking for a micro finance mock test? Microfinance, also called microcredit​, is a type of banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. Have a Micro Finance Exam coming up? Don't worry. Take this Micro Finance Pre-Test and prepare well. All the best to you, and do not forget to share this quiz with other people.


Questions and Answers
  • 1. 

    Rotating savings and unions credit associations transform into Accumulating Savings and Credit Associations when one of the following is done among others:

    • A.

      Members can borrow from an accumulated fund outside contributions

    • B.

      Some money is saved in a lock box or in some other more secure manner

    • C.

      At the end of the cycle, members can choose to start a new round or disband

    • D.

      ​​​​​​A pre-determined amount of money brought to weekly meetings is collected and passed to a different member each week on a rotating basis

    Correct Answer
    D. ​​​​​​A pre-determined amount of money brought to weekly meetings is collected and passed to a different member each week on a rotating basis
    Explanation
    Accumulating Savings and Credit Associations are formed when a pre-determined amount of money is brought to weekly meetings and collected. This money is then passed to a different member each week on a rotating basis. This process allows members to accumulate savings over time and also provides them with the opportunity to borrow from an accumulated fund outside of their own contributions. Additionally, the other options mentioned in the question, such as saving money in a secure manner and the ability to start a new round or disband at the end of the cycle, may also be features of Accumulating Savings and Credit Associations, but they are not the defining characteristic.

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  • 2. 

    According to the Stakeholder concept, a microfinance employee would be …… in a typical microfinance sector.

    • A.

      ​​​​​​A primary stakeholder

    • B.

      A​​​​​​ secondary stakeholder

    • C.

      ​​​​​​A solid stakeholder

    • D.

      ​​​​​A client stakeholder

    Correct Answer
    A. ​​​​​​A primary stakeholder
    Explanation
    According to the Stakeholder concept, a microfinance employee would be considered a primary stakeholder in a typical microfinance sector. This means that the employee has a direct and significant interest in the success and outcomes of the microfinance sector. They are closely involved in the operations and decision-making processes of the sector and their actions and contributions have a significant impact on its overall performance.

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  • 3. 

    Which one of these will be categorized as a semi-formal microfinance institution?

    • A.

      Building society

    • B.

      Rotating savings and unions credit association

    • C.

      Rural bank

    • D.

      ​​​​​​Village bank

    Correct Answer
    D. ​​​​​​Village bank
    Explanation
    A village bank will be categorized as a semi-formal microfinance institution. Village banks are community-based organizations that provide financial services to individuals and small businesses in rural areas. They typically offer small loans, savings accounts, and other financial products to help promote economic development in the local community. While they may not have the same level of formality as traditional banks, village banks play a crucial role in providing access to financial services in underserved areas.

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  • 4. 

    Which one of these will be categorized as an informal microfinance institution?

    • A.

      ​​​​​​Building Society

    • B.

      ​​​​​​​Rotating savings and unions credit association

    • C.

      Rural bank

    • D.

      Village bank

    Correct Answer
    B. ​​​​​​​Rotating savings and unions credit association
    Explanation
    A rotating savings and unions credit association can be categorized as an informal microfinance institution because it operates on a rotating basis, where members take turns receiving loans from the pooled savings of the group. This type of institution is typically community-based and provides financial services to individuals who may not have access to formal banking services. Unlike formal institutions like building societies, rural banks, or village banks, rotating savings and unions credit associations are less regulated and often rely on trust and social relationships among members.

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  • 5. 

    The following are all development objectives of MFIs except:

    • A.

      Adverse selection

    • B.

      Employment creation

    • C.

      Empower women or other disadvantaged population groups

    • D.

      ​​​​​​​Poverty reduction

    Correct Answer
    A. Adverse selection
    Explanation
    The given answer is "Adverse selection". Adverse selection refers to the problem of asymmetric information in which one party has more information than the other, leading to a mismatch in the selection of borrowers. However, employment creation, empowerment of disadvantaged groups, and poverty reduction are all common development objectives of Microfinance Institutions (MFIs). These objectives aim to promote economic growth, social inclusion, and poverty alleviation in underserved communities.

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  • 6. 

    ….………………… methodologies help in creating social collateral (peer pressure) that can effectively substitute physical collateral in the MFI sector

    • A.

      Formal

    • B.

      Group

    • C.

      Individual

    • D.

      Informal

    Correct Answer
    B. Group
    Explanation
    Group methodologies in the MFI sector help in creating social collateral (peer pressure) that can effectively substitute physical collateral. This means that when borrowers are part of a group, they have a collective responsibility to repay their loans. If one member of the group defaults, it puts pressure on the others to make sure they repay their loans on time. This peer pressure acts as a form of collateral, reducing the need for physical collateral such as property or assets. By relying on social collateral, MFIs can extend loans to individuals who may not have traditional forms of collateral, increasing access to credit for those in need.

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  • 7. 

    A client would be classified as a(an) ………… and  stakeholder.

    • A.

      External, primary

    • B.

      External, secondary

    • C.

      Internal, primary

    • D.

      Internal, secondary

    Correct Answer
    A. External, primary
    Explanation
    A client would be classified as an external, primary stakeholder because they are not part of the organization but have a direct and significant interest in its activities. Clients are the main recipients of the organization's products or services and their satisfaction is crucial for the success of the organization. As primary stakeholders, clients have a high level of influence and their needs and expectations are prioritized in the decision-making process.

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  • 8. 

    The government would be classified as a(an) ………… and stakeholder.

    • A.

      External, primary

    • B.

      External, secondary

    • C.

      Internal, primary

    • D.

      ​​​​​​​Internal, secondary

    Correct Answer
    B. External, secondary
    Explanation
    The government is considered an external stakeholder because it is not directly involved in the day-to-day operations of the organization. It has an interest in the organization's activities and outcomes but does not have a direct role in decision-making or management. Additionally, the government is considered a secondary stakeholder because its interests may be affected by the organization's actions, but it does not have a direct financial or contractual relationship with the organization.

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  • 9. 

    Which of the following is NOT a benefit of regulation of Microfinance in a country?

    • A.

      ​​​​​​Financial soundness

    • B.

      Protect the client's interest

    • C.

      ​​​​​​Reinforcing public trust

    • D.

      Revising the cost of capital upwards

    Correct Answer
    D. Revising the cost of capital upwards
    Explanation
    Regulating microfinance in a country provides various benefits such as ensuring financial soundness, protecting the client's interest, and reinforcing public trust. However, revising the cost of capital upwards is not a benefit of regulation. This would increase the cost of borrowing for microfinance institutions, potentially making it more difficult for them to provide affordable loans to their clients, especially those who are financially vulnerable.

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  • 10. 

    Which of the microfinance regulation is a major constraint to existing and new entrants in the industry?

    • A.

      Minimum capital requirement

    • B.

      Provision of business plan

    • C.

      Reserve requirement

    • D.

      Restriction to expansion

    Correct Answer
    D. Restriction to expansion
    Explanation
    Restriction to expansion is a major constraint to existing and new entrants in the microfinance industry. This regulation limits the ability of microfinance institutions to expand their operations and reach more clients. It hinders their growth and potential impact on poverty alleviation. By restricting expansion, it becomes difficult for microfinance institutions to scale up their operations and serve a larger number of clients in need of financial services. This constraint can limit the overall development and sustainability of the microfinance sector.

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  • 11. 

    Strategic Decision making based on stakeholder theory results in a process characterized by three main features: These include each of the following except:

    • A.

      Rationality

    • B.

      Intuition

    • C.

      Political behavior

    • D.

      ​​​​​​​Information

    Correct Answer
    D. ​​​​​​​Information
    Explanation
    Strategic decision making based on stakeholder theory involves considering the interests and needs of various stakeholders. Rationality refers to making decisions based on logical reasoning and analysis. Intuition involves relying on gut feelings and instincts in decision making. Political behavior refers to the influence and power dynamics among stakeholders in decision making. However, information is not a feature of the process as it is a necessary component for making informed decisions.

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