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MICROFINANCE
Describing Microfinance: Microcredit refers to programs, originally and in many cases still donor or NGO sponsored, that primarily provide credit in tiny1 amounts for self-employment but also other financial and business services (including savings and technical assistance) to very poor persons, mainly women. Microfinance is the broader term, more commonly used today. It reflects the fact that thousands of microfinance institutions (MFIs) of varying institutional structure, degree of independence, and funding sources, including those partially or completely commercial in approach and ownership, now exist. These deliver an increasingly wide range of retail financial services to the poor. As well as credit and savings products, money transfers and insurance are being offered by more and more MFIs.
Poor people borrow they often rely on relatives or a local moneylender, whose interest rates can be very high. An analysis of 28 studies of informal money lending rates in 14 countries in Asia, Latin America and Africa concluded that 76% of moneylender rates exceed 10% a month, including 22% that exceed 100% a month. Moneylenders usually charge higher rates to poorer borrowers than to less poor ones. Within microfinance, savings products are increasingly being emphasized. In many cases, the availability of well-designed, safe and accessible savings products for the poorest is as important, if not more important, in poverty reduction than microcredit. There is increasing overlap and interaction between the formal financial sector, that is, banks and other for-profit private-sector financial companies, and microfinance. Delivery Vehicles:
Three Types of Sources of Microfinance
? Formal insti ...