The topic of microfinance and banking services for low-income individuals has appeared several times in IELTS Writing Task 2 exams, particularly in 2019-2022. Based on analysis of past papers and current global economic trends, this topic has high probability of appearing in future tests, especially given its relevance to developing economies.
Analysis of Real Test Question
Some people think that banks should not offer microcredit services to people with low incomes because it increases poverty and debt. To what extent do you agree or disagree with this statement?
This question requires candidates to:
- Take a clear position on microcredit services
- Evaluate the impact on low-income individuals
- Consider both benefits and drawbacks
- Support arguments with relevant examples
Microcredit services helping small business owners in developing countries
Model Essay 1 (Band 8.5)
I strongly disagree with the statement that banks should stop providing microcredit services to low-income individuals. Rather than increasing poverty, well-designed microcredit programs can serve as powerful tools for economic empowerment and poverty alleviation.
Microcredit services play a crucial role in breaking the cycle of poverty by providing low-income individuals access to formal financial services. When properly implemented, these small loans enable entrepreneurs to start or expand small businesses, invest in education, or manage emergency expenses. For example, in Bangladesh, the Grameen Bank’s microcredit program has helped millions of rural women establish small enterprises, significantly improving their household income and living standards.
Furthermore, regulated microcredit services through banks protect vulnerable populations from predatory moneylenders who often charge exorbitant interest rates. Bank-offered microloans typically come with reasonable interest rates, structured repayment plans, and financial literacy support. This formal banking relationship can also help low-income individuals build credit history and eventually access broader financial services.
However, it is essential to acknowledge that microcredit programs must be carefully designed and regulated. Banks should implement thorough assessment procedures, provide financial education, and maintain reasonable interest rates. Additionally, they should offer flexible repayment terms that align with borrowers’ income patterns to prevent over-indebtedness.
In conclusion, while concerns about debt are valid, the solution lies in improving microcredit systems rather than eliminating them. When properly managed, microcredit services remain vital tools for financial inclusion and poverty reduction.
Model Essay 2 (Band 6.5)
I disagree that banks should stop giving small loans to poor people. These loans can help people make better lives if they are used correctly.
First, small loans help poor people start businesses. When someone gets a small loan, they can buy things to sell or start a simple business. For example, in my country, many women use small loans to open small shops or sell vegetables in the market. This helps them earn money for their families.
Second, bank loans are safer than borrowing from unofficial lenders. Many poor people have to borrow money from local moneylenders who charge very high interest. Bank loans have lower interest rates and are more fair. Also, banks give proper documents and explain everything clearly.
However, there are some problems with small loans. Sometimes people cannot pay back the money and get more debt. Banks should check carefully before giving loans and teach people how to use money wisely. They should also give more time to pay back if someone has problems.
In conclusion, I think banks should continue giving small loans to poor people, but they need to be more careful about how they do it. These loans can help poor people if they are managed well.
Score Analysis
Band 8.5 Essay Analysis:
- Clear position maintained throughout
- Sophisticated vocabulary: “exorbitant”, “predatory”, “vulnerable”
- Complex sentence structures with appropriate linking
- Well-developed arguments with specific examples
- Coherent paragraphing with clear progression
Band 6.5 Essay Analysis:
- Basic but clear position
- Simple vocabulary with some repetition
- Mostly simple sentences with basic linking
- Arguments supported with simple examples
- Basic paragraph organization
Key Vocabulary
- microcredit (n) /ˌmaɪkrəʊˈkredɪt/ – small loans made to low-income individuals
- predatory (adj) /ˈpredətri/ – unfairly taking advantage of others
- exorbitant (adj) /ɪɡˈzɔːbɪtənt/ – unreasonably high
- indebtedness (n) /ɪnˈdetɪdnəs/ – the condition of owing money
- empowerment (n) /ɪmˈpaʊəmənt/ – giving power or authority to someone
For practice, try writing your own essay about whether microfinance institutions should charge interest rates similar to commercial banks. Share your essays in the comments for feedback and discussion.
