Microfinance: how does it work?

Everything you need to know about microfinance - how are loans granted? What are the various types of microfinance? What is the aim of microfinance?

What is microfinance?

Microfinance is an umbrella term used to designate financial products and services for people excluded from the traditional banking circuit. Microfinance allows such people to finance their livelihoods, save, provide for their families and protect themselves from life’s everyday risks.

How are these loans granted?

In order to grant loans to borrowers who, broadly speaking, cannot guarantee that they will be able to pay back the loan, microfinance institutions use methods that have been tested and developed over the past thirty years. Experiences in various countries in the Southern hemisphere show that in microfinance, the average loan redemption rate is close to 100%.

What kind of services are offered?

The aim of microfinance is to boost the socially and economically vulnerable members of society and give them the means to attain dignity and autonomy. These services help beneficiaries attain a better and more regular source of income, enabling them to save and set aside money for health insurance, home improvements, their children’s education and so on. As they gain in independence, they become the agents of their own development.

What is the aim of microfinance?

The aim of microfinance is to boost the socially and economically vulnerable members of society and give them the means to attain dignity and autonomy. These services help beneficiaries attain a better and more regular source of income, enabling them to save and set aside money for health insurance, home improvements, their children’s education and so on. As they gain in independence, they become the agents of their own development.