Today we read about microfinance and
small business development. Microfinance is a
form of financial services for entrepreneurs and small
businesses lacking access to banking and related services. In other words, it is the supply
of money to the poor- normally in the form of small loans. There are two
main mechanisms dealing with the delivery of financial services. They
are relationship-based banking for individual entrepreneurs and small
businesses; and group-based models. One category of microfinance is
micro-credit. Microcredit is provision of credit services to poor clients-
these are small loans. It is the provision of being able to loan other people
money. It is mainly focused on women because there seventy percent of those suffering
from poverty are women. One concern with microfinance is that they will
start to drift over to people who don’t need it, so it is critical for them to
stay helping the people who are in critical condition. Five hundred million
people living in poverty could benefit from a small business loan and only one third of the population has access to a
nearby bank. The purpose of the microcredit is to help the poor person do
something so that they can better themselves and become self-employed.
Hopefully they can make a profit and eventually repay the loan.
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