Why MicroFinance...  what, who, how.
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How

A practical scenario of how microfinance can help

Imagine, you have an idea for your own small business, you need to borrow some money to start it, you know you can earn a decent monthly profit, you may even grow the business and hire some people. But you are too poor, have no credit, have no rich relatives and certainly have no assets. You are also so poor, it shows. The banks don’t want you even walking into their branches. You turn to the local money lender. They want to charge 10% interest a day, yes per day. You turn to another money lender, they offer a loan, to be repaid 150% in 6 weeks.

Or, maybe, there is an MFI operating nearby. You find out that they can offer you a micro loan to be repaid weekly over a 6-month period, at an interest rate of 35% per year. 
Who should you choose?



Microcredit or Microfinance? a definition

Microcredit is a subset of Microfinance.

Microcredit, or micro loans, is the provision of small sums of credit or loans, (as small as say US$50) to borrowers who are operating their very small or micro businesses. Generally, in time, with hard work and training support, the micro entrepreneurs and their enterprises thrive and grow. Lifestyle entrepreneurs find a steady source of income, while leaders emerge and grow their enterprises into job producing ventures.

Microfinance is the provision of a bundle of financial services that you and I take for granted from our neighborhood bank, the ability to go beyond getting a loan, to save and earn a market return on our savings, to buy insurance, to transfer funds, to obtain home loans, to obtain education loans, retirement planning and ever more sophisticated forms of financing and investing.


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