microfinance

Microfinance is the provision of financial services (credit, savings, insurance, etc.) to people living in poverty, who do not have a regular salaried employment and are usually excluded from the formal financial sector.

Currently, microfinance serves 150 million people in the world, served by over 10,000 Microfinance Institutions, (cooperatives, NGOs, microfinance banks…) or commercial banks.

THE ACTORS IN MICROFINANCE

• Microfinance Institution (MFIs) offer microfinance products and services to unbanked populations. They take many forms: savings and loan cooperatives, local or international NGOs, Village banks, programs set-up by international institutions, etc.
• Commercial Banks support microfinance operations, either indirectly, by supporting existing MFIs through financing or equity investment, or indirectly, by creating a branch or range of microfinance products and services (downscaling).
• Microfinance Investment Vehicles participate in the financing of the sector. They are over 75 worldwide.
• Governments and Local Authorities develop adapted legal frameworks and national sustainable development strategies with microfinance components. They also support banks, ministries, and local authorities, to include microfinance in sustainable development projects.
• Insurance Companies insure the MFIs and their portfolios and distribute microinsurance products via the MFI networks.

POTENTIAL GROWTH OF THE SECTOR

When PlaNet Finance was created, in 1998, there were 3,000 Microfinance Institutions for 12 million beneficiaries. Eight years later, 10,000 MFIs help more than 150 million clients, in 85 countries. However, there are still 500 million poor workers, potential clients of microfinance institutions.

Financing :

• The outsanding portfolio of MFIs worldwide reaches 30 billion USD.
• The potential demand is estimated at 300 billion USD.