Microfinance provides financial services to people who lack access to traditional banking. Small loans, savings accounts, and insurance products can transform the economic prospects of individuals and communities living in poverty.
The concept gained global attention through Muhammad Yunus and Grameen Bank, which demonstrated that very poor people, particularly women, could be reliable borrowers when given appropriate financial products and support.
Microloans typically range from 50 to several hundred dollars. These small amounts fund activities like purchasing inventory for a market stall, buying a sewing machine, or acquiring livestock. The income generated enables loan repayment and ongoing economic activity.
Group lending models reduce risk while building community. Borrowers form small groups that provide mutual support and accountability. The social pressure of group membership contributes to repayment rates that often exceed those of traditional banking.
Microsavings accounts are equally important but receive less attention. For people without safe places to store money, access to a secure savings account provides protection against emergencies and enables gradual accumulation toward larger goals.
Criticism of microfinance has highlighted cases of predatory lending, over-indebtedness, and exaggerated impact claims. Responsible microfinance institutions address these concerns through transparent terms, borrower protection policies, and honest impact measurement.
Digital financial services are expanding microfinance access through mobile money platforms. In regions where physical bank branches are scarce, mobile phones provide financial services to millions who were previously excluded from the formal economy.
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