Microfinance is defined as a set of financial services aimed at population groups characterized by going through adverse economic situations. This encompasses low-income individuals, small businesses, self-employed and even at risk of poverty.
The main meaning of the creation and development of microfinance services responds to the need for financial and banking entities to offer their services to those segments of the population in economically more unfavorable circumstances and, therefore, with more difficulties in accessing they. It provides a viable option for people with low incomes or small businesses that cannot obtain credit, savings accounts or insurance in conventional financial institutions (banks), because they do not cover the necessary requirements. For example, not having an endorsement or collateral.
Microfinance is generally characterized by focusing on products with a small amount of money and perfectly suited to the needs of each client. Therefore, it is common for lenders to produce prior evaluations or feasibility studies when undertaking one of these actions, seeking to encourage their economic improvement.
In that sense, the evolution of microfinance products is constant, due to the frequent changes that society experiences and its adaptation to changes in the economic environment.
There are companies or entities specifically aimed at working with these types of tools. On the other hand, large commercial banks have more and more departments and foundations directed to this field.
Common services in microfinance
A typical instrument of this economic field is microcredit. However, there is a wide variety of financial products and services that would make up the microfinance pool. The services offered by microfinance institutions are usually:
Mini-credits or Microcredits
Debit account to be able to make money transfers.
As well as insurance or micro insurance to cover a variety of needs, such as death, illness or loss of property.
Services aimed at saving or investment (especially for business entrepreneurship).