Microfinance Institution Reviews Montrose CO

Although it is widely recognized that microfinance alone will not end poverty, it is a vital step in that direction. Microfinance institutions, also known as MFIs, offer financial services to underserved, impoverished communities.

Previously, entrepreneurs seeking loans in these communities had to provide collateral to borrow from unlicensed lenders at inequitably high interest rates. A number of factors, including high administrative costs relative to small loans and small returns, had kept banks from setting up shop in impoverished communities when surer profits were to be had elsewhere. 

The lack of an efficient financial services industry has held back many would-be entrepreneurs with viable business plans from realizing their own potential.  Women, in particular, have been excluded as loan candidates in developing communities. The lending practices of many emerging microfinance institutions, such as the Grameen Bank of Bangladesh, have given people living in extreme poverty the opportunity to realize their potential in the business community.

But the benefits of establishing microfinance institutions go beyond microcredit services alone. Services offered by microfinance institutions include savings accounts, insurance, health care and personal development. When Muhammad Yunus, founder of the Grameen Bank of Bangladesh, saw the vast amount of latent human capital possessed by people living in impoverished communities, he realized these people had the potential to help themselves if given access to the benefits of efficient financial markets, particularly access to credit. What resulted was a new approach to solving the problem of widespread systemic poverty. Despite the formidable challenges involved in transforming impoverished communities, Yunus and others have proved that it can work. 

Microfinance institutions also provide insurance and health care services By reaching out to those people living in extreme poverty, Yunus was able to determine their concerns and interests. This understanding made it possible to arrange services in a way that made sense for each community. In his book Banker for the Poor, Yunus referred to some of the benefactors of his innovative banking practices. “When I visit center meetings, not only in Bangladesh but all over the world, in countries as diverse as Malaysia , the Philippines, South Africa, and the United States, I realize how resilient and creative human beings can be when given the chance.”

There are pros and cons for both for-profit and non-profit organizations. Some people are more comfortable with a non-profit because they are turned off by the idea of making a profit by helping impoverished people. In most cases, non-profits can provide for loans issued at lower rates than for-profits can.

Fostering strong, efficient financial markets is important in enabling communities to sustain economic growth. This is more likely to occur when profits are...

Click here to read the rest of this article from NuWire Investor