Microfinance In Africa

INTRODUCTION

In the modern world, microfinance has been recognized as one of the most innovative tools for a sustainable economic development. In the last decade, the discussions on microfinance at the international have been multiplied because this type of financial services does not simply arouse interests about the financial world, but also about numerous political and social matters. Many times, diverse scholars expressed different innovative techniques for alleviating poverty, but the microloan idea provided by professor Dr. Muhammad Yunus, seemed to work better in driving the people away from the poverty traps. Hence, microfinance institutions are alternative financial service providers that usually offer financial services to the low-income

This data clarifies that instead of the low-income people who are most needy, the world’s most rich people are facilitated in obtaining credit from any bank or financial institution. The reduced access to credit for the low-income individuals and households, particularly, in the developing countries, is considered one of the major obstacles for their economic and social development. Thus, the main two reasons why individuals and households face greater difficulties in obtaining a loan from a standard bank can be – first, inability to provide any asset as collateral, and the second, demand for a small size credit. However, microfinance believes in people who were always considered unreliable. Microfinance activities propose alternative solutions to become self-employed, and especially, restores social dignity to the low-income

Most of the time, poor people does not qualify to get a loan from a standard bank because they fail to offer any collateral for their loan. Thus, the main objective of microfinance is to alleviate the poverty level.

Barr, Michael S. (2004, p.278) defines «Microfinance is a form of financial development that is primarily focused on alleviating poverty through providing financial services to the poor. Most people think of microfinance, if at all, as being about microcredit, lending small amounts of money to the poor. Microfinance is that, but it is also broader, including insurance, transactional services, and importantly, savings». According to the United Nations «Microfinance refers to loans, savings, insurance, transfer services, microcredit loans and other financial products targeted at low-income