Microfinance is a general term and strategy used to help fight poverty by providing a variety of financial services to poor and low-income individuals who do not have access to banking and related services.  Microfinance is a broad category of financial services, which includes microcredit, savings, and microinsurance. 

 

Small loans are used to start or grow micro businesses and to provide support for their families’ needs. In addition to loans, microfinance offers poor households savings, insurance money transfers and other financial services, through group lending or to individual clients.

As the poor do not have access to banking services, “microfinance institutions” (or MFIs) throughout the emerging markets have filled that role. Since its beginnings in the 1970’s, microfinance has expanded to also include healthcare and social services to engender income-producing activities, building personal assets, and institutional support for its service providers.