“Where once the poor were commonly seen as passive victims, microfinance recognizes that the poor people are remarkable reservoirs of energy and knowledge. And while the lack of financial services is a sign of poverty, today it is also understood as an untapped opportunity to create markets, bring people in from the margins and give them the tools with which to help themselves.”
– Kofi Annan during 2005 Microfinance Symposium
The general goal of Microfinance is the provision of financial products to small entities that face an absence of financial infrastructure, especially retail banking. Insufficient access is still reality in many less economically developed countries, particularly in rural areas. The World Bank estimated that in 2014 over 2 billion adults lacked proper access to formal financial services.
This is where Microfinance – if devised properly, can bring relief to people in need of finances. How? A widely used tool is a Microcredit, through which institutions provide customers with a very small loan. These credits are ideally aimed at establishing a rudimentary income for the borrowers. Customers often use these loans to bridge seasonal expenses, purchase input material or cover short term cash shortages. (01.02.2016)
What are typical Microfinance actors? Are there negative sides to Microfinance? What are differences to normal retail banking? What other Microfinance products are there?