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Concept of Micro Finance

Individuals without many resources still need the kinds of financial services that those with plenty of resources have. Following the philosophy that insurance and loans should be available to all, microfinance is a concept that allows those with less to have more.

  1. Identification

    • Microfinance is a banking system that assists individuals who are unemployed or have low income by providing various services to become self-sufficient.

    History

    • According to Forbes Investopedia, microcredit operations have been around since the mid-1700s. Microfinance institutions are usually located in developing countries.

    Function

    • Microfinance institutions aid individuals with borrowing money, saving and budgeting money, as well as insurance.

    Significance

    • The Nobel Peace Prize winners from 2006, Muhammad Yunus and Grameen Bank, demonstrated that low-income individuals can bring themselves out of poverty if they have access to very small loans, or microloans. Furthermore, low-income individuals have very high repayment rates when loans are property constructed.

    Microfinance Investing

    • Investors can get in on microfinance. Morgan Stanley issued a microfinanced bond, which was rated an "AA" rating by Standard & Poor's. An "AA" indicates a very high quality credit.

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