Microfinance Q&A
Microfinance is the provision of financial services and particularly loans (often referred to as microcredit) to entrepreneurs in developing nations who would not otherwise have access to capital. Through this service small businesses and jobs are created, helping to lift both individuals and communities out of poverty.
The finance is provided by local lenders known as microfinance institutions which historically had been funded by charities and NGOs. With demand for funds (estimated at $280 billion) far outstripping supply (estimated at $25 billion) commercial microfinance funds are now being used to channel money from the capital markets of developed economies through to local lenders.
These funds deliver much needed finance to microfinance institutions but also have the ability to provide investors with a potentially good return.
- When did microfinance start up?
- What does a microfinance institution look like?
- Who borrows from microfinance institutions?
- Why are default rates so low on microfinance loans?
- How big is the market?
- Are microfinance returns uncorrelated with developed stock markets?
- What are the risks?
- What are the potential returns for the investor?
