Microfinance is a practice used to provide basic financial services, such as loans, savings, and various insurance services to the poor. Because this is a service provided for low income homes, transactions are typically less than $100. Microfinance has generated excitment from people concerned with international development in poor countries, where typical investment programs are not widely accessible.
Criticism of Microfinance
Both proponents and opponents of microfinance have criticized the high interest rates charged to some borrowers. Indeed, Mhuammad Yunus, who won the Nobel Prize for Economics in 2006 argued that lenders in impoverished nations who charge more than 15% above long-term operating costs should face penalties.
References
Fast Facts
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1973
ShoreBank, which specialized in microfinance, was founded
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2006
Muhammad Yunus and Grameen Bank won the Nobel Prize for his work in microfinance
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Access to Credit
Fewer than 2 per cent of poor people have access to financial services (credit or savings) from sources other than money lenders.
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Demand
• There is a potential demand for microsavings services from 19 million savers.
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Men use Microfinance
• Though women appear to benefit most, studies indicate that many loans awarded to and paid back by women are in fact used by men.
