WHY DO MICROFINANCE?
Around 2 billion people live on less than 2 dollars a day. A relatively small proportion need emergency relief. Most are poor people who need help with getting a business started, improve living conditions or help with tuition fees so their children can get an education. Access to capital and financial markets can help create a better life.
Microfinance has, in recent years, experienced significant growth as this has proven to be a very effective way to help people out of poverty.
Microfinance in relation to assistance
Microfinance is self-help. With the help of a loan, small investments provide help to many individuals and groups. Often there is not much that is needed: simple technological solutions for agricultural production, a sewing machine for a tailor, a refrigerator for storage of today’s catch, the first stock for a fruit vendor or commodities for a small sidewalk restaurant. Microfinance does not replace emergency and other direct aid but is an important prerequisite to help people to move on when their basic needs are covered. Therefore, many microfinance institutions were started by aid organizations as part of their aid work. Most micro-banks are however sound commercial enterprises and, over time, we see a tendency for foundations to be converted to independent financial institutions and banks.