Microfinance provides small loans to the poor, enabling them to generate income, establish credit, and access financial services. MFIs also offer savings accounts and junior savings programs for women and children. These services improve living standards and promote business in poor areas. Large institutions and technology providers also offer financial services to the poor.
It is difficult for banks to profit from lending to the poor, and without established credit, the poor can pose an investment risk to any institution. However, programs designed to reduce poverty and provide financial services to the poor have been developed. These options often fall under a product known as microfinance, which involves extremely small amounts of money lent to the poor by banks, other lenders and foundations. They are small loans that in poor and remote areas can go a long way.
Lending is among the services for the poor primarily provided by microfinance institutions (MFIs). These banks often lend to people in underdeveloped countries who otherwise could not earn any money. With an extremely small loan, a poor individual can run a household or start a business and begin generating income on their own as well as learning financial discipline.
There are financial services available to certain demographic groups of the poor, including women and children. An MFI might, for example, offer women in an impoverished community the ability to open a savings account. Not only does this teach financial discipline, but it allows these women to earn interest on savings, which in turn grows that investment. Poor children can start learning to save through the junior savings programs offered by MFIs, creating the potential to lead an entire generation to success and out of poverty.
The benefits of services for the poor, such as microfinance, are immeasurable. This funding enables poor residents to generate an income stream and subsequently run a household, enables them to establish credit so that future loans and grants are available, and promotes business and commerce in a community that may otherwise be unproductive. The chances and opportunities for education among the children of the poor have increased due to these financial services for the poor. Illness is mitigated as funding increases access to medical products, facilities, and even health care. The result is improved living standards in poor and remote areas.
Sometimes financial services for the poor are provided in the form of a provision by a large institution, such as a foundation. With little or no money, it is nearly impossible for some of the world’s poor to access technology, including banking services. The programs of large foundations and technology service providers often provide poor rural communities with cell phones and services, allowing poor communities to complete financial transactions on these devices.
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