What is Microfinance?

Microfinance offers the less privileged people access to basic financial services such as loans, savings, money transfer services and micro insurance. People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, and manage risks.

Usually their needs are addressed through a variety of financial relationships, mostly informal. Credit is obtained from informal moneylenders, but usually at a very high cost to borrowers. Savings services are available through a variety of informal relationships - savings clubs, rotating savings, credit associations, and other mutual savings societies. These however tend to be unreliable and somewhat insecure. Traditionally, banks have not considered the less privilege to be a viable market.

For the less fortunate, different types of financial services & products have evolved. Non-government organizations (NGOs); cooperatives; community-based development institutions like self-help groups and credit unions; commercial and state banks; insurance and credit card companies; telecommunications and wire services; post offices; and other services offering new possibilities.