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Monday, February 23, 2009

Microfinance Overview

This is banking or financing considered as service that is provided to entrepreneurial poor or enterprising groups who have no access to capital to upsize their businesses.

Generally, the goal of microfinance is to aide low income people (engage in economic activities) to become self-sufficient and to be empowered by providing a means of saving money, borrowing money and (health and life or business insurance) in the hope of uplifting their economic status.

The Business Concept of Microfinance

Microfinancing is not a new business concept but a trend on this time relatively due to economic crisis. The purpose of Microfinancing operations is to alleviate poverty .Several studies and researches conducted by the World Bank concludes microfinance stimulus economic situation of the enterprising poor.

Microfinance is similar with common banking services, microfinance institutions charge their clients (referred as “beneficiaries”) interest on loans.

Some competitors condemn microfinance operations for making profits out of the poor. Due to its significantly low interest rates compared to loan schemes presented by normal banks.

According to the World Bank, many people have been reached from microfinance programs. Most of these beneficiaries are, generally, in the third world countries like Philippines, India, Vietnam, and Bangladesh.

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