What is microfinance?
Microfinance refers to financial services for poor and low-income clients. Although most attention has been on the provision of small loans, microfinance in fact also includes the provision of other basic financial services such savings, money transfer and insurance for poor people. Improving access to such services allows poor and low-income people to finance income-generating activities, build assets, stabilise consumption and protect against risks. Microfinance is now widely recognised as a powerful solution to alleviating poverty among the working poor.
Who is microfinance aimed at?
Microfinance is usually aimed at economically active poor and low-income people who have limited or no access to the services provided by formal financial intermediaries such as banks. Since there are so few salaried work opportunities, they are usually self-employed microentrepreneurs often working from home. Typically, they operate small businesses such as grocery shops, market stalls, car repair, carpentry or other workshops, and in rural areas they tend to focus on food processing, agriculture and raising livestock and poultry. Around two-thirds of microfinance clients worldwide are women.