What is microfinance

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  • Publié le : 29 juin 2010
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 Giving loans and financial services and facilities to people with low income who don’t have access to traditional banking system. Usually traditional banks not providefinancial services to people with little or no cash income. However risks exist because the bank has little recourse against defaulting borrowers.
 Help for the development of a country’s financialsystem
 It is believed that this system will give a chance to poor people to get out of poverty: providing poor people the capital they need to open their own business or to expand it
 However there islow information concerning the benefice of microfinance. In fact, over-borrowing can be a danger for poor people
 Lending money to poor people has a long term view because it can develop a healthynational financial system
 Success of Grameen Bank inspired the entire world
WHAT IS A MFI (Microfinance Institution)?
 Organization providing financial services to people with low income andvulnerable with no access to traditional banking system
 Exist many kinds of microfinance institutions : structure or mission
 80’s: emergence of non-governmental organizations providing little loansto poor people
 90’s: became financial institutions
 Since these years these non-governmental financial institutions have proven that poor people are reliable and can have access to financialservices
 Registered legal organizations
 Offer different financial services
 Not follow bank regulation
 Can be government-owned
 Can be member-owned
 Can be formed bysocial-view shareholders
 Can be form by profit-maximizing shareholders
 The services a MFI offer are limited by the structure of the institution
 Way to help people so the name ofcharitable MFI corresponds. However it consists on a MFI which is not aimed at profit
 Role of donations: charitable MFIs exist thanks the help of donations
 International and private donors,...
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