Microfinance enables the active poor to lift themselves out of poverty through entrepreneurship.
The poor are excluded from formal financial markets and are dominated by the tough and often unreliable rules of informal markets. This is especially true of the role of microentrepreneurs and microbusinesses. They are looking for opportunities, for access to small loans, for know-how and the legalization of their business environment. These businesses represent substantial and largely untapped potential to make a significant impact on poverty reduction. They can be an engine of growth for developing economies but for vast numbers very few financing options exist.
And that’s what microfinance and the Enabling Microfinance Fund in particular is all about. Unlocking the potential of those micro, small and medium sized enterprises.
Making loans and fighting poverty are normally two of the least glamorous pursuits around, but put the two together and you have an economic innovation that has become not just popular but downright chic. The innovation - microfinance - involves making small loans to poor entrepreneurs, usually in developing countries.
We developed microfinance to fight loan sharks - I was telling people don't go to loan sharks - not trying to take advantage and make money for myself. I would be a junior loan shark if I did ... It is not a panacea.
Microfinance recognizes that poor people are remarkable reservoirs of energy and knowledge, posing an untapped opportunity to create markets, bring people in from the margins and give them the tools with which to help themselves.
Small loans can transform lives, especially the lives of women and children. The poor can become empowered instead of disenfranchised. Homes can be built, jobs can be created, businesses can be launched, and individuals can feel a sense of worth again.