What is Microfinance?
Microfinance is the supply of financial services for poor and low-income people, typically, but not limited to, those living in the developing world. Individuals with little income or collateral are seldom able to borrow money from banks and other formal financial institutions. Basic financial services such as credit and savings give people an opportunity to borrow and invest. Microfinance usually involves small amounts of money, such as small loans, sometimes as little as seventy dollars.
Access to financial services provides the less fortunate with the ability to invest in their own small businesses that generate income and often creates more jobs. A small business can help to secure a family’s food supply, pay for medical needs, and a child’s education, among other essential necessities. The basis of Microfinance is to provide the poor with resources that will help them help themselves. Access to credit helps poor people out of poverty by allowing them to invest in more sustainable means of generating income, which in turn provides an improved way of life.