What is Microfinance?
Microfinance is a broad term covering the provision of access to financial services for very poor families, usually in the developing world. Microfinance is a very popular means of giving the world's poorest a hand-up rather than a hand-out and there are microfinance institutes operating both in the developing and developed world, including the UK.
Microcredit is a term used to describe the process of providing very small loans to individuals, groups and families in order to help themselves out of poverty by engaging in productive activities or setting up their own small businesses. These microloans, of usually no more than $200, are repaid over time with an interest rate which reduces the costs of credit delivery and ensures that inflation levels are covered, meaning the funds can be used again for future loans. Over time, the term microfinance has come to include a broader range of services including micro-savings, and micro-insurance.
