What is microfinance?

Microfinance is a relatively new method used to help combat poverty mostly in third world countries, but some larger groups (accion) have institutions in Chicago and New York. Essentially microfinance is a bank for poor people. The problem is that traditional banks, especially in third world countries, only lend money to low risk clients that have some type of collateral to offer. People in living in poverty are viewed as high risk and have no collateral, so they either don't have any opportunity for a loan or, if they do, the interest rate is way too high. Microfinance banks, which are normally non-profit, provide small loans, from $50-$5000, to impoverished people in the communities they're involved with. These clients, often women and normally very poor, use this money to purchase the start up supplies they need for their business (raising chickens, making sandals, or selling second-hand clothes). This loan is often coupled with an extensive educational aspect in which the clients are taught basic accounting principles and budgeting, and in the long run they are expected to pay of the loans. The goal is to provide impoverished people with the opportunity to become self-sustaining and not handouts that are often unreliable. For more try www.accion.org or the always useful wikipedia.