In many developing countries, the self-employed make up more than 50% of the labour force. Most of the self-employed — especially those who are poor — have no access to banks, credit, or other financial services. Often they are forced to borrow from moneylenders who charge exorbitant interest rates that trap them in a cycle of poverty.
Microfinance is a proven tool helping those living under $1.25 a day to pull themselves out of extreme poverty by allowing them access to small loans at reasonable rates. Graduation microfinance programs, which are programs designed to prepare the very poor to successfully make use of a microfinance loans, offer education/health training for their members and families, and some programs also provide other financial/business services, such as savings accounts or insurance. Such programs give individuals a small food allowance and a small assets (livestock/seeds), as well as financial and entrepreneurial support, have proven to be most successful.
- An estimated 2.5 billion working-age adults globally do not have an account at a formal financial institution.1
- By 2011, 3,652 microfinance institutions reported reaching 205 million clients. 137 million of these were living on less than $1.25 a day when they received their first loan.
- The Grameen Bank in Bangladesh reports microloan recovery rates of 97%.2
- Nearly 75 percent of microfinance borrowers worldwide are women – and more than 82 percent of the poorest clients.3 Women tend to concentrate on putting income towards improving the health and livelihoods of their families.
- World Bank, Measuring financial inclusion: The Global Findex Database, 2012