What is Microfinance?
Sometimes called “banking for the poor,” microfinance is an amazingly simple approach that has been proven to empower very poor people around the world to pull themselves out of poverty. Relying on their traditional skills and entrepreneurial instincts, very poor people, mostly women, use small loans (usually less than (N25,000), other financial services, and support from local organizations called microfinance institutions (MFIs) to start, establish, sustain, or expand very small, self-supporting businesses. A key to microfinance is the recycling of loan money. As each loan is repaid—usually within six months to a year—the money is recycled as another loan, thus multiplying the value of each Naira in defeating global poverty, and changing lives and communities.
Generally, microfinance is the providing of financial services to the poor, of which microcredit (or microloans) is a part. We run a microloan program, where we loan $100 – $500 to an individual to invest in an income-generating idea. Most of the borrowers have chosen to invest in animals (chickens, pigs, cows), because that is what they know how to do, and have been doing it profitably for most of their lives. Other borrowers invest in ideas such as: crops, their small restaurant, or products for their retail business (shoes, sesame seed, vegetables, animal feed). Upon receiving a loan and investing it in animals or in their business, each borrower then pays back the loan according to their capacity with the earnings from their investment. For animals, for example, the borrower would pay back the loan in full upon selling (or butchering) their animal. For a business loan, the loan is paid back in monthly installments according to their capacity. Once the loan is repaid, the money is t
