Microfinance, Microenterprises and Small Businesses

Microfinance is the provision of a broad range of financial services such as– deposits, loans, payment services, money transfers and insurance products – to the poor and low-income households, for their microenterprises and small businesses, to enable them to raise their income levels and improve their living standards.


Microfinance is the provision of loans and other financial services to the poor. The microfinance has evolved due to the efforts of committed individuals and financial agencies to promote self-employment and contribute to poverty alleviation and provision of social security.


Core Principles for Microfinance:

 ➣ the poor needs access to appropriate financial services.

➣ the poor has the capability to repay loans, pay the real cost of loans And generate savings.

➣ Microfinance is an effective tool for poverty alleviation.

➣ Microfinance institutions must aim to provide financial services to an Increasing number of disadvantaged people.

➣ Microfinance can and should be undertaken on a sustainable basis.

➣ Microfinance NGOs and programs must develop performance Standards that will help define and govern the microfinance industry toward greater reach and   sustainability.



Microfinance has a very important role to play in development according to proponents of microfinance.

UNCDF (2004) states that studies have shown that microfinance plays three key roles in development. It:

_ helps very poor households meet basic needs and protects against risks,

_ is associated with improvements in household economic welfare,

_ helps to empower women by supporting women’s economic participation and so promotes gender Equity.