Microfinance is basically the provision of services for clients with low income, clients who are poor, as well for clients who are self employed. These clients often do not have access to related services such as banking. Most of the time, people know microfinance as a form of small loans, however microfinance incorporate other financial services such as banking, insurance and money transfer for clients who are underprivileged.
Microfinance gives the opportunity to people with low income as well as who are poor to get access to services and opportunities such as financing to start income-generating businesses and activities, protection against risks, stabilize consumption as well as building of assets. Microfinance is considered to be one of the most powerful tool in helping the world to fight poverty and assist in improving the lives of the poor and underprivileged.
Microfinance is very beneficial and helpful to those who are economically and financially poor, as well as have low income, and are not eligible or have no access to financial services provided to financial mediators such as banks. Since there are not much job opening for everyone to fill in, those who are underprivileged are often self employed in order to generate income. Microfinance can help the poor to operate small businesses such as stalls, grocery shops, workshops, food processing and so much more. Statistic reports that 2/3 clients of microfinance are mostly women.
Microfinance had become so popular all around the world due to its ability to help overcome and alleviate poverty. Research shows that when poor people are given access to financial services such as insurance, savings, loans and money transfer facilities, they are often able to get themselves out of poverty. This is why microfinance is considered to be a great, sustainable and long term solution to help fight poverty all around the world. In other words, microfinance is like the saying goes, teaching a person how to fish rather than giving them a fish. Microfinance helps the poor to climb out of poverty.
Microfinance are often provided by non governmental bodies, and by nonprofit organizations. They often provide financial services to those with low income such as micro-loans, micro-insurance, savings and money transfer facilities. Microfinance could be really helpful and beneficial, and people should not take advantage of it. It should only be provided to those who are able and will use the help that they get productively.
Microfinaqne is increasingly being provided by microfinance institutions which are for profit but with much higher level of
social responsibility. Part of the reason being that if credit is set aside, other microfinance products do require some for of prudential regulation which look at shareholders’ capital among others.
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