What is Microfinance?

Microfinance is the designation used to describe financial services provided to people that are excluded from the traditional banking system. Most common services are credit (so called Microcredit), savings and insurance, but Microfinance can also offer investment opportunities and other types of financial services.

Microfinance can be offered either by banks or by non banking financial institutions, like NGOs or financial cooperatives.
Typical costumers are either non bankable low income or unemployed individuals and micro start ups.

As far as credit is concerned, the loan amounts are typically very small. “Small”, however has very different meanings in different parts of the world. For example in India, a small loan is typically 75€ with a maximum of 500€ in special cases whereas in the EU, small loans can reach up to 25,000€.