What is Microfinance?Across the developing world, millions of people survive by operating small businesses known as micro-enterprises. Selling a range of goods and services, they depend on credit to purchase essential inventory and equipment. However, the working poor are typically locked out of mainstream financing by selective lending policies. They lack access to formal financial services and in order to meet the working capital needs of their business, many are forced to resort to non-traditional financing sources for capital. The price they pay is steep — exorbitant interest rates and unsavory credit terms — which reinforces the cycle of poverty.Microfinance was developed to address this problem of financial exclusion. A critical tool for battling poverty in under-developed countries, the practice provides the entrepreneurial poor with fair access to capital and other financial services. Through the work of microfinance institutions, such individuals are able to access credit, invest in their entrepreneurial vision, work towards financial stability, and build a better future for the entire community. Microfinance is recognized worldwide as a powerful economic development enabler and an important tool in alleviating global poverty. |
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