1. What is microfinance?

2. Definition
Microfinance refers to the provision of financial services to low-income clients, including consumers and the self-employed, who traditionally lack access to banking and related services (Wikipedia)
Microfinance offers poor people access to basic financial services such as loans, savings, money transfer services and micro-insurance (CGAP) 2

3. Objectives of microfinance services
To increase income
To reduce vulnerability
Loans, money transfers
Saving, micro-insurance 3

4. History
In the 70’s : the first known experiences in Brazil and Bangladesh : ACCION and Grameen
In the 80’s: development of numerous initiatives worldwide
2004: 3000 MFI and 120 million accounts.
Grameen bank, BRAC, FINCA, Prodem… 4

5. Microfinance service providers
Formal sector: banks, cooperatives, NGOs, credit unions
Microfinance Institutions (MFI)
Informal sector: money-lenders (usurer), self-help groups, rotating savings and credit associations 5

6. Microfinance methodologies
Individual lending: usually a larger loan for microenterprises - collateral
Group lending: can start from a very small amount - groups of borrowers of between 5 and 30 – peer pressure – women as priority target
Village banking: loan to a community in charge of lending out smaller amounts 6

7. Being a MFI client Saving may be compulsory prior to accessing credit
Collateral may be required
Charges to be paid in addition to the capital to be reimbursed: for opening an account, interest, on late repayments, etc.
Need for repayment capacity
A good repayment record usually gives access to bigger loans 7