Microfinance is the practice of making financial services available to the poorest people in the world earning about $ 1 per day who do not have access to typical banking services.
The typical financial services include small dollar loans, savings accounts, insurance, fund transfer capabilities, in short, the typical banking services that are not readily available to the poor or aspiring entrepreneurs. Microfinance Institutions (MFI's) fill these important services by giving poor households permanent access to a range of high quality financial services. By making microcredit, that is small dollar loans averaging about $100, and a wide variety of financial services available, such access to capital and services will help poor people out of poverty.
Microfinance also promotes economic development, employment and growth through the support of micro-entrepreneurs and small businesses and is gaining momentum as a credible way to raise money for the poorest people in the world. In fact, a recently published World Bank report indicates that microfinance is no longer considered a mom and pop business, but now provides close to $14.8 billion dollars in funds to the poor. The corresponding loans and profits of the largest microfinance companies in the world have grown dramatically over the last few years as well. Microfinance Institutions rely on a wide variety of methods developed over the past 30 years to deliver very small loans to borrowers who have little or no collateral to provide to secure the loans.