Microfinance has emerged over roughly the last 30 years as a revolutionary way to combat poverty.  In simple terms, microfinance involves providing small scale financial services (like loans, savings accounts and insurance) to the poor.  Many clients use loans to help start, stabilize or expand small businesses in industries such as agriculture, animal husbandry, soap production, crafts making, textiles, transportation, and small retail operations, just to name a few.  The increased income produced from their business often leads to better nutrition, health, housing, women’s empowerment, and the ability to send children to school. 

Loan clients are often women who  lack a consistent income stream and collateral, and may even be illiterate, so they cannot access traditional/formal financial services.  In many cases, 95%+ loan repayment rates have been reported.   When loans are repaid, the funds are re-lent, often to new recipients, beginning a new cycle, and leading to an exponential impact from the same funds. 

A unique and appealing feature of microfinance is that it relies less on charity and more on a “hand up” approach.  Moreover, microfinance is more financially sustainable since credit services rely on loans that are repaid and recycled rather than purely charitable funds or government grants that are exhausted once they are spent. 

While microfinance has accomplished much in the roughly 30 years that it has been in existence, action is still required on our part if more of the world’s impoverished people who can benefit for these types of services are to be reached.  For example, capital is needed to add to existing loan funds and to mobilize savings.  Technological innovation and development is also needed to drive down costs and increase efficiencies.