Microfinance could be defined as the supply of basic financial services (such as microloans and saving schemes) to the less favoured sectors of the society.
People living in poverty, especially those who are self-employed in small scale economic activities (micro-entrepreneurs), need simple financial instruments to run their businesses, build their assets, and shield themselves against major risks.
However, they very rarely can access the formal financial sector, and they are forced to address their needs through informal relationships, e.g. by borrowing credit from money-lenders at usurious costs.
Over the last twenty-five years, Microfinance Institutions (MFIs) have led the way in developing workable credit methodologies and reaching out to large numbers of poor people.
Throughout the 1980s and 1990s, these programs improved upon the original methodologies and changed conventional wisdom about financing the poor. Successful MFIs have shown that the poor repay their loans and are willing and able to pay commercial interest rates. This allowed many institutions to reach financial sustainability and to expand - quite a rare characteristic among development initiatives.
|
|
|
 |
|
