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Microfinance today

Microfinance is a vital and growing counterpart to development aid – directly reaching those in need and promoting lifelong self-reliance. 

 

 

Initially, microfinance relied on the goodwill of charitable or non-governmental organizations. More recently, informal credit providers have been professionalized and commercialized. Most now operate as registered financial institutions, fully authorized and regulated by their local governments.

 

Loans, not aid

By providing fair loans instead of aid disbursements, microfinance institutions are a sustainable, long-term solution. Today’s microfinance is largely based on the Grameen Bank model, made famous by Nobel Prize winner Muhammad Yunus. Local field offices work with borrowers in small groups. Collective responsibility within the group serves as collateral to safeguard the loans.

 

Filling the gap

Microfinance steps in where traditional banks are unwilling or unable to operate, providing loans and services where they would otherwise be unavailable. Borrowers without collateral are viewed negatively by ordinary banks and the amounts involved in microfinance offer them insufficient returns. Microfinance fills a gap in the market otherwise claimed by predatory moneylenders.

 

 

Changing lives Today's microfinance is the helping hand that lets individuals turn their own lives around. No one exemplifies this better than Nguyen Thi Naht, a struggling single mother in Vietnam. She saw there was no seamstress in her village, so she borrowed less than € 100 from the local Oikocredit project partner and

signed up for a dressmaking course. After paying that off, she borrowed € 135 to buy a sewing machine. Today, she is proud to have a stable income that provides for life's necessities, meets her repayment schedule, and pays school fees to educate her two children.  

 

 

Learn more:

• Why support microfinance? 
• Our project partners