Microfinance 

The Business of Global Poverty
Faculty from Harvard's Global Poverty Project discuss the roles that business should play as the world confronts what may be the most explosive socioeconomic challenge of the new century.

Microfinance is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and, their microenterprises.

Microfinance is an approach that has been proven to empower people around the world to pull themselves out of poverty. Relying on their traditional skills and entrepreneurial instincts, receipients of small loans (usually less than US$200), other financial services, and support from local organizations called microfinance iinstitutions (MFIs) to start, establish, sustain, or expand very small, self-supporting businesses. A key to microfinance is the recycling of loan dollars. As each loan is repaid—usually within six months to a year—the money is recycled as another loan, thus multiplying the value of each dollar in defeating global poverty, and changing lives and communities.

Microfinance services are provided by three types of sources:

• formal institutions, such as rural banks and cooperatives;
• semiformal institutions, such as nongovernment organizations; and
• informal sources such as money lenders and shopkeepers.

Source: Grameen Foundation

Microfinance FAQ