| Abstract (ENG): |
The term “Microfinance” refers to a range of financial services including loans, mortgages, savings, insurance, and money transfers that is provided to poor and low-income clients who were previously excluded from formal means of borrowing and saving. Microcredit and microlending, the most widespread instruments of microfinance, stand for very small and unsecured loans that microfinance institutions provide to individuals or groups for the purpose of starting, continuing, or expanding small business ventures. In order to reduce transaction costs and to profitably deliver very small loans to unsalaried borrowers who have little or no collateral security, microfinance institutions apply various innovative instruments including pre-loan savings requirements, group lending, joint liability, and successively increasing loan sizes.
The microfinance revolution started 30 years ago when Nobel Prize laureate Muhammad Yunus founded the Grameen Bank with the objective of pioneering methods for providing credit and banking services to the rural poor population in Bangladesh. Most microfinance institutions started as state-owned development banks or not-for-profit organizations like non-governmental organizations, credit unions and other financial cooperatives. Today, however, an increasing number of microfinance institutions transformed to for-profit entities as they often require a license from banking authorities or to raise capital.
Microfinance is one of the great success stories in the developing world which is widely recognized as a beneficial and sustainable solution in alleviating global poverty. Microfinance spurs entrepreneurship and enables poor households to manage external shocks like sickness of a wages-earner, theft, crop failure, or natural disasters in an appropriate way. In addition, microfinance contributes greatly to women’s empowerment as it enabled them to gain social and economic self-reliance, influence, and control over resources by using the loans for own business activities. |
| Citation: |
Schuster, Tassilo
(2015)
Chapter M - "Microfinance".
In:
Dictionary of Corporate Social Responsibility : CSR, Sustainability, Ethics & Governance / Idowu, Samuel O. et al. (Eds).
Cham: Springer.
(CSR, Sustainability, Ethics & Governance).
ISBN 9783319105369
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