Microfinance is a type of financial service that provides small loans, savings accounts, and other financial products to low-income individuals, typically in developing countries. Microfinance institutions (MFIs) are organizations that provide these services to the poor who lack access to traditional banking services. The goal of microfinance is to help lift people out of poverty by providing them with the financial tools they need to start businesses, invest in their education, and improve their standard of living.
Microfinance works by providing small loans to individuals who are unable to obtain credit through traditional banking channels. These loans are typically used to start or expand a small business, such as a street vendor or farmer, which can generate income and help lift the borrower out of poverty. In addition to loans, microfinance institutions also offer savings accounts, insurance, and other financial services to help people manage their money and build assets.
Microfinance has become a popular development strategy in many developing countries, with the aim of reducing poverty and promoting economic growth. However, there are also criticisms of microfinance, including concerns about high interest rates and the risk of borrowers becoming trapped in a cycle of debt.
Overall, microfinance has had a positive impact on many people’s lives, providing them with the financial resources they need to improve their standard of living and contribute to their local economy.
