Monday, August 20, 2012

Musings on Microfinance

In the month or so that I have worked in microfinance I have learned so much. I am still no expert, but here are some of the things I have found interesting.

Microfinance is a variety of financial services

Microfinance is not simply providing credit for low income individuals, it is many different financial services. Each microfinance organization is unique, but some of the offerings include loans, savings accounts, and insurance policies. Most successful microfinance institutions offer a mix of services tailored to fit the financial needs of clients.

Microfinance is not a magic solution for poverty reduction

In recent years, there has been a lot of hype surrounding microfinance. Many believed microfinance was the solution to the woes of the developing world. This is not the case. What microfinance does do is provide reliable financial services to low income individuals.

Microfinance stabilizes finances

Microfinance products are most helpful for those with fluctuating income levels. The very poor are extremely vulnerable to expenses associated with things like hospitalization, funerals, and natural disasters. Microfinance offerings like savings and insurance help to protect the poor from financial disaster in these instances.

Many microfinance institutions operate with a double bottom line

Many microfinance institutions are for-profit organizations, but most operate with a double bottom line; a financial bottom line and a social bottom line. The social bottom line emphasizes things such as educating children, home improvements, financial literacy, and more. These social goals often set microfinance organizations apart from other financial organizations.

I could probably ramble on some more, but these are just a few things I have picked up. I think it is a fascinating field, and I am grateful for the opportunity to work in the industry. Hopefully I can learn even more in the next couple months!

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