About Microfinance

Microfinance Services Pty Ltd

Expanding Financial Services for the Poor

About Microfinance...

Most poor people need the supply of financial services all the time. Like everyone else, they borrow and save money to run their businesses, invest in improvements and make some expenses such as school fees or wedding celebrations for instance. The financial services they have access to can be unsafe, expensive or not suitable. While there is a long history of informal small savings and credit services around the world, over the last twenty years a more systematic external approach has emerged, which is called microfinance .

Microfinance schemes were developed to give poor people access to savings and credit services at a reasonable cost, where such services were not being supplied by the formal financial system. Despite great initial scepticism, microfinance institutions (MFIs) have managed not only to defy their critics in the formal banking sector, but to out-perform commercial banks in the areas of volume lending and on-time repayment. Thus they have become a powerful tool for poverty alleviation.

Characteristics of Successful Microfinance Schemes are:

The service focused upon client needs and capacities.
Clients enjoy positive incentives for participation in savings schemes and for timely loan repayment.
Services are provided at or near client’s homes or workplaces.
The cost of microfinance services enables prices that are able to undercut the existing informal money market (e.g. traditional moneylenders).
Substantial collateral is not an absolute requirement.
Credit products offer a manageable schedule of repayments that are appropriate to the cash flow of clients.
Financing terms and conditions are tailored to suit individual needs as much as possible. This is becoming particularly important in areas where microcredit supply is high and programs begin to compete for clientele.
Transparency: objectives are clear, and significant efforts are made to ensure that the rules are known to all clients, as well as being universally and consistently applied. Thus, staff and clients must have the same understanding of program objectives and regulations.
Because of the large number of small transactions, the organisational operating procedures are simple and efficient in order to control costs and to reduce transaction costs to clients .
The use of rigorous performance monitoring and evaluation of MFIs.

2006 Nobel Peace Prize ... Muhammad Yunus

Muhammad Yunus of Bangladesh, one of the pioneers of microfinance, and the Grameen Bank have been jointly awarded the 2006 Nobel Peace Prize.

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