15/09/2016
Microfinance offers poor people access to loans, savings and other basic financial services. People living in poverty require these types of financial services to operate their businesses and both manage and grow their assets, just like everyone else. The difference is, the poor can’t simply walk into a bank and take out a loan or open a savings account. In most cases, they have very little assets or collateral, lack credit histories and employment records, and may not even be able to read or sign their names.
For these reasons, the majority of formal financial institutions do not consider the poor to be creditworthy. Hard-working poor entrepreneurs often find themselves forced to deal with usurious money lenders and loan sharks. Microfinance – and specifically, microenterprise development or “small business development” – offers the poor an opportunity to access small amounts of loan capital and start their own businesses.
Microfinance, especially when used to build up impoverished communities, is a proven and effective strategy in combating poverty.
