Microfinance is the provision of financial services (such as the supply of working capital loans, consumer credit, savings, pensions, insurance, and other basic financial services) to poor and low-income clients by different service providers, most often referred to as ‘Microfinance Institutions’ (MFIs).
More broadly, microfinance gives low-income households and small businesses access to banking and financial services to which they otherwise do not have access, enabling economic growth and development. Since the poor have relatively few assets to pledge as collateral and banks have high management costs, microfinance is often the only way for rural poor to obtain access to credit and banking.
In areas where income is irregular and undependable, MFIs will typically deliver loans to small-scale borrowers, taking little or no collateral, although other methods include group lending and liability, pre-loan savings requirements, gradually increasing loan sizes, and an implicit guarantee of ready access to future loans if present loans are repaid fully and promptly. Having access to credit helps the poor to smooth cash flows and avoid periods where access to food, clothing, shelter, or education is lost. The credit can also be used to build assets, providing future security and self-empowerment.
Innovative agricultural finance and risk management: Strengthening food production and trade in the transition region (2012)Kyrgyzstan and Tajikistan: Expanding Finance in Rural Areas (2006)Kyrgyzstan and Tajikistan: Expanding Finance in Rural Areas (2006)Romania: Bank Lending To SMEs in Rural Areas: an Analysis of Supply & Demand - part 1 (2005)Romania: Bank Lending To SMEs in Rural Areas: an Analysis of Supply & Demand - part 2 (2005)Bulgari: Bank Lending To SMEs in Rural Areas: an Analysis of Supply & Demand - part 1 (2005)Bulgari: Bank Lending To SMEs in Rural Areas: an Analysis of Supply & Demand - part 2 (2005)
Bulgaria: Expanding ProCredit's Operations in Rural Areas (2004)
ADB Supports three Uzbekistan Banks on Microfinance Lending, April 2010IFC Helps Increase Microfinance Access for Small Businesses in Armenia’s Rural Areas, January 2010IFC Helps Azerbaijani Microfinance Institution Enhance Services for Entrepreneurs, May 2009EBRD supports microfinance in Tajikistan, April 2007EBRD expands microfinance in Azerbaijan, November 2006Facilitating microfinance in the Kyrgyz Republic, November 2006EBRD expands microfinance in Azerbaijan, September 2006