Microfinance’s

What is microfinance?

Microfinance is a type of banking service that is provided to people without job or low-income individuals or groups who, otherwise, would have no other opportunity of gaining financial services. Ultimately, the goal of microfinance is to give low income people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance. (Include the source used to get this quote).

Micro financing is not a new concept. Small microcredit operations have existed since the 70s. Although most modern microfinance institutions operate in developing countries, the rate of payment default for loans is surprisingly low - more than 90% of loans are repaid. 

Microfinance brings the power of credit to the grassroots by the way of loans to the poor, without requirement of collateral or previous credit record. Experience shows that microfinance can help the poor to increase income, build viable businesses, and reduce their vulnerability to external shocks. It can also be a powerful instrument for self-empowerment by enabling the poor, especially women, to become economic agents of change.

Poverty is multi-dimensional, and by providing access to financial services, microfinance plays an important role in the fight against the many aspects of poverty. Access to credit allows poor people to take advantage of economic opportunities - for their homes, their domestic environments and their communities.

For instance, income generation from a business helps not only the business activity expand but also contributes to household income and its attendant benefits on food security, children's education, etc. Moreover, for women who, in many contexts, are secluded from public space, transacting with formal institutions can also build confidence and empowerment.