What is Microfinance

Today I will show you what is Microfinance

Microfinance is a source of financial services for small businesses and entrepreneurs lacking access to banking and related services of bank . The 2  main mechanisms for the delivery of financial services to such clients are:

  1. relationship-based banking for small businesses and individual entrepreneurs
  2. group-based models, where some entrepreneurs come together to apply for loans and other services as a group.


In some countries , for example Southern Africa, microfinance is used to describe the supply of financial services to low-income people , which is closer to the retail finance model prevalent in mainstream banking.

For some, microfinance is a movement whose object is “a world in which as near-poor households and  near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not only credit but also insurance , savings and fund transfers .” Many of these who promote microfinance generally believe that such access will help poor people out of indigene , including participants in the Microcredit Summit Campaign. Some others, microfinance is a way to encourage employment , economic development and growth through the support of micro-entrepreneurs and small businesses.

Microfinance is a broad category of services, which includes microcredit . Microcredit is provision of credit services to poor clients of banks . Microcredit is one of the aspects of microfinance and the they are often confused. The critics can attack microcredit while referring to it indiscriminately as either ‘microfinance’ or ‘microcredit’ . Due to the broad range of microfinance services, it is very hard to assess impact, and very few analysis have tried to assess its full effects . Proponents often claim that microfinance lifts people get out poverty, but the evidence is mixed. However ,what it does do  is to enhance financial inclusion.

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What is Microfinance
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