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Friday, December 16, 2005

MicroFinancial Institutions

Well, these days have been doing some research on MicroFinancial Institutions (MFIs). Thought I would put that up here and 'enlighten' u guys as well :)
Now, to the topic.

MicroFinancial Institutions are credit bodies that extend very small loans to unemployed, poor entrepreneurs and others living in poverty who are 'not bankable'. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimum qualifications to gain access to traditional credit. Microcredit is a financial innovation which originated in developing countries like Bangladesh, India etc where it has successfully enabled extremely impoverished people (mostly women) to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty. Due to the success of microcredit, many in the traditional banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre-bankable; thus, microcredit is increasing gaining credibility in the mainstream finance industry and many traditional large finance organizations are contemplating microcredit projects as a source of future growth. Although almost everyone in larger development organizations discounted the likelihood of success of microcredit when Muhammad Yunus began it in the mid 1970s, its taking giant leaps in changing the face of Rural places in developing economies.
The United Nations has declared the year 2005 as the International year of Microcredit.
In India, currently, there are around 30 MFIs, most of which are commercial. The total credit so far extended is in tune of about $450 million. This number is expected to rise by another 40-50% by next year.
More details on this very soon :)
Luv

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