About Microfinance

People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, smooth consumption and manage risks. The availability of credit and other financial services together with the high return on their businesses can make a huge difference to them. Responsibility is a must as they strive to build and maintain their credit rating according to historical average default rates:

Consumer credit: 8% | Individual small business loan: 16% | Group or solidary loan: 3% | Mortgages: 7% | Car loan: 10% | Pawn broking: 0% | Rural credit: 4% | Credit cards: 26%

The potential market for microfinance products includes both individuals and small enterprises that do not have access to the traditional financial service providers (primarily banks), as well as, those that would have access but are currently not being serviced by these due to banks’ lack of adequate infrastructure and products.

As competition increases, banks will find lower income segments, such as D segment, more attractive. However, this segment’s high dispersion, limited funds, default risk and unique needs will make its immediate incorporation a difficult one.

The great challenge for microfinance is finding the correct products for the correct customers and to be able to grow hand in hand with these clients.