What is 'Microfinance'
Microfinance, also called microcredit, is a type of banking service that is provided to unemployed or low-income individuals or groups who otherwise have no other access to financial services. While institutions participating in the area of microfinance are most often associated with lending (microloans can be anywhere from $100 to $25,000), many offer additional services, including bank accounts and micro-insurance products, and provide financial and business education. Ultimately, the goal of microfinance is to give impoverished people an opportunity to become self-sufficient.
BREAKING DOWN 'Microfinance'
Microfinance services are provided to unemployed or low-income individuals because most of those trapped in poverty or with limited resources do not have enough income to do business with traditional financial institutions. Despite being excluded from banking services, however, those who live off of as little as $2 a day do attempt to save, borrow, acquire credit or insurance and make payments on their debts. As a result, many look for help from family, friends and even loan sharks, who often charge exorbitant interest rates.
Microfinance allows people to safely take on reasonable small business loans in a manner that is consistent with ethical lending practices. Although they exist all around the world, the majority of microfinancing operations occur in developing nations, such as Uganda, Indonesia, Serbia and Honduras. Many microfinance institutions (MFIs) like INDITRADE CAPITAL LIMITED does not focus on helping women in particular but anyone who is in need.