Microfinance offers financial services such as savings, loans, insurance, and money transfers to low-income people who are denied access to traditional banks due to their financial situation or a lack of identification. Traditional banks do not always provide adequate resources for some people. Microlenders care about social impact rather than just profit. According to (Deborah Wolfe, Oct 09, 2020) “In 2018 alone, the global microfinance industry helped 139.9 million clients through savings, loans, insurance and transfers. Microfinance empowered the poor with financial tools, more choices and greater capacity to change lives.”
Micro finance was first introduced in Bangladesh by Muhammad Yunus, the founder of one of the world’s largest microfinance institution, Grammen Bank. He established this bank to assist his country's people, especially women and people living below the poverty line, to become financially successful and self-sufficient. Yunus believed that credit is a fundamental human right. He became known as “Banker to the Poor.” (According to Adam Gorlick, November 17, 2008).¨ Yunus said, "The majority of people on this planet do not have the opportunity to do banking at conventional banks. They say all the time that the poor are not creditworthy. And we showed how creditworthy they are."
Microfinancers give people a chance at success. Microfinance doesn’t just lend you money, it offers programs that teaches people how to use their money to start a business. Emmanuel Davila, Interim Director of the Illinois Small Business Development Center, stated that ¨Micro lending can fill a gap where traditional lending can’t. It has become challenging for small business owners, especially start ups, to acquire capital. Micro lending can help entrepreneurs get the financing they need to improve their cash flow, expand, or even start a business. Small businesses create jobs and provide people with a sense of pride and community and are overall good for a strong and stable economy and society.¨
Although Microfinance helps and supports the poor, there are limitations such as expensive loans and limited impact in reducing poverty. According to Stephanie Swepson Twitty, a President CEO—Community Economic Development Professional, ¨I must admit, I am unfamiliar with how this financing tool works in underdeveloped countries. However, I am keenly aware that even microfinance dollars, in America, have eligibility requirements that are inequitable and not inclusive.¨ If you want to successfully obtain a microfinance loan, you should learn everything you can about the organization that is lending you money. Pay rate, interest rate, and taxes should all be considered.
Resources Links: https://www.worldvision.ca/stories/economic-empowerment/microfinance-what-it-is-and-how-it-works
Interviewers : Emmanuel Davila & Stephanie Swepson Twitty