Microfinance offers financial products and services to clients who, due to their economic and social status, experience difficulties in accessing the traditional financial sector.
It is important to consider microfinance (or inclusive finance) as a tool, which enables the most financially fragile groups, generally excluded from formal financial systems, to access credit, savings, and other financial products. Microfinance also offers opportunities to increase their income, create sustainable businesses, and improve their living conditions and those of their families.
The right of economic initiative must be equally accessible to all. At the same time, to be truly equitable and sustainable, economic initiative cannot be a priori guaranteed in its outcome, but must take place on the basis of precise commitments of the part of those who access credit.
How and where practice Microfinance
Many microfinance projects have been implemented all over the world. Some of them have been successful, and others have failed. They all constitute a useful basis of experience for understanding the nature of the dynamics at play and improving the effectiveness of this valuable instrument.
Microfinance is today a sector with infinite potential but at the same time, it is a complex universe, which poses more questions than it offers answers about its application. Working with microfinance projects in contexts characterized by social stability and an economic context with good development potential is more efficient and has more chances of sustainability than practicing it in situations where the level of poverty is extreme. Furthermore, microfinance can be done by strategically privileging categories of beneficiaries, selected by the level of exclusion (rural communities or the poorest segments of the urban population) and the potential for multiplying social impact (e.g. women empowerment): in any case, the outcome is not a foregone conclusion and the chances of success, both in terms of quality of impact and sustainability, depend on many variables to be taken into account.
A network made by various actors working in this field is an important tool for identifying shared guidelines and not always starting from scratch. Obvious? Maybe, but actually, everyone starts from there. Thinking that microfinance is simple, but it is not: it is a powerful tool, which may change such delicate balances, that if you have not thought of a sustainable plan of action from the outset, you risk doing damage by thinking you are doing well.