About Microfinance


Microfinance means the provision of financial services (credit, savings, insurance, etc.) to those living in poverty and excluded from the financial system. These people do not have am income and do not own property, and are therefore unable to provide bank guarantees and are therefore generally "forgotten" by financial institutions and banks. Access to financial services and the development of microenterprises is one of the key pillars to sustainable development (in addition to Democracy, Education and infrastructures).

  • Microcredit allows those living in poverty to set up a small business capable of generating income: a microenterprise. The loan can then be repaid using the income generated by this enterprise.
  • A secure savings plan service allows the poorest populations to ensure that their families have a future, and through micro-insurance, savings protect populations from external factors (natural catastrophes, macro-economic crises) affecting those populations most at risk from them
Microfinance has developed over nearly 30 years, at the initiative of NGOs (Non-Governmental Organisations). These days, the following can be identified as the key players in the field :
  • Microfinance Institutions (MFIs) : These are most often set up at the initiative of local communities and created with the support of International Cooperation Agencies and international NGOs. In France, organisations such as GRET, CIRAD or IRAM, have assisted in the creation of several MFIs. In the United States, networks such as ACCION, Opportunity International or FINCA have assisted in the creation of these MFIs, with funding coming from international cooperation organisations. In 2004, it was estimated that over EUR 80 million had been loaned to clients of these Microfinance Institutions, whilst demand is estimated to have been EUR 500 million
  • Public banks and national development banks : their involvement in this sector has increased, with national public institutions often acting as a "banker" for microfinance institutions. In Mali, an Institution such as the BNDA (National Bank for Agricultural Development) finances nearly 80% of MFIs, and in Mexico Institutions such as FIRA or Financiera Rural is responsible for refinancing many MFIs. Public banks sometimes directly provide microfinance, as did BancoEstado in Chile, for example (in 2005, this was one of the first microfinance programmes in Latin America, with over 150,000 clients)
  • Commercial Banks : these have been increasingly involved in this sector, on several levels. They are able to assist MFIs, either by refinancing their activities or by providing technical assistance, as is the case, for example, in India with ICICI (the country's second major commercial bank). They can also directly develop their own Microfinance activities, as does Financial Bank in Benin via its branch office FINADEV, and BanColombia in Colombia via MicroEmpresarios, a specialised client segment.
  • Donors : Bilateral cooperation (USAID, AFD, KFW, DFID), multilateral cooperation (European Commission, United Nations, World Bank, Regional Development Bank): all donors are active in developing the sector and assist in its development.
PlaNet Finance's role is to assist all parties involved in this sector to devise more effective programmes to facilitate the access of the poor to microfinance activities.

FACTS & FIGURES

IN 2005 :
1.2 billion people worldwide live on less than one dollar/day adjusted to purchasing power parity (PPP)
1 billion other people live below the poverty line of 2 dollars
(Find data for what the situation will be in 2050 and state where this data comes from)
80% of the world's population does not have access to credit; 500-600 million of these people would be eligible for microcredit.
The aim of the Microcredit Summit Campaign in 1997 was to "provide, by 2005, the poorest 100 million families with access to credit and other financial services and enterprise development assistance".
Over 80 million people are now assisted by over 10,000 microfinance institutions.
54.8 million of these people are amongst the poorest populations. These 54.8 million people and their 274 million family members is the equivalent to the populations of Great Britain, France, Germany, Italy, Ireland and Sweden.

MICROFINANCE IN CHINA

To find out more about microfinance in China please visit the China Microfinance Web Portal at www.microfinancechina.net
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