Microfinance FAQ

What is Microfinance? 

It is the lending of small loans and provision of financial services to entrepreneurs who lack access to traditional banking institutions.  Created as a sustainable solution for poverty alleviation, microfinance helps poor men and women with an entrepreneurial spirit move toward economic self-sufficiency as they are given access to capital.

How does Microfinance reduce poverty?

It empowers people.  By increasing household incomes, building assets and reducing vulnerability to humanitarian disasters, microfinance clients can overcome the cycle of poverty.  As entrepreneurs, they are able to plan for their family’s future, manage cash flow and apply funds to household priorities.  Microfinance helps equip people to make their own choices and work their way out of poverty. 

What is a Microfinance Institution (MFI)?

A MFI is a local lending office within a community that is managed by local professionals.  These offices ensure are protected and widely invested.  MFI’s are the “boots on the ground” lifeblood of the growing Microfinance movement.

What is a Microfinance Investment Vehicle (MIV)?

Fundamentally, MIV’s are pooled investments that target infusing capital into the microfinance sector.  Private Investors, Endowments, Foundations and Institutions provide MIV’s with the majority of their funding.  As for the recipients, they range anywhere from direct invesment into individual MFI’s to investment into other MIV’s.  In this role as intermediary investment vehicles, MIV’s are growing rapidly in nearly every aspect including total assets, assets devoted strictly to microfinance and regional funding.  MIV’s link MFI’s to the global capital markets,  a virtually limitless source of funding.