An Introduction to Microfinance
Microfinance is the offering of basic financial services to the poor. Microfinance clients typically live in developing countries, and tend to be women, although about one-third are men. Microfinance institutions take many forms, including commercial businesses, non-profit institutions and government agencies.
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Who
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Microfinance clients are poor people who work for themselves or operate small businesses. They often need small loans to build their businesses, or they just need a reliable place to save and borrow money.
Why
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Microfinance clients typically have little money to open a traditional savings account or to use as collateral for a loan. They might not be able to write out an application for a loan. Banks are designed to deal with people who have money.
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How
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Microfinance helps the poor to meet basic needs and protect against risks. Their use of financial services improves their basic economic welfare and enhances the stability and growth of their economic enterprises. The support of women's economic participation empowers them and enhances household well-being.
How many MFIs and Clients?
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As of December 2008, over 99 million people borrowed from over 2,400 MFIs in Asia, Europe, Latin America and the Caribbean, the Middle East and Africa.
Exceptions
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Microcredit has made a difference, but it is not appropriate in some situations, such as nomadic societies, populations with high levels of illnesses such as HIV/AIDS, societies that depend on barter rather than cash, and economies that depend primarily on a single crop.
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References
- Photo Credit piggy bank image by saied shahinkiya from Fotolia.com
