Microfinance provides banking services to unemployed and low-income individuals, primarily aimed at poverty alleviation and economic development. It allows access to small business loans and contributes to the empowerment of communities, particularly women, while benefiting millions globally. Notably, the microfinance sector in Bangladesh has significantly reduced rural poverty and expanded its services over the years.

1. INTRODUCTION TO
MICROFINANCE
Microfinance Management

2. Microfinance Definition
 Microfinance is a banking service provided to
unemployed or low-income individuals or groups
who otherwise would have no other access to
financial services.
 Microfinance allows people to take on reasonable
small business loans safely, and in a manner that is
consistent with ethical lending practices

3. Microfinance Definition
 Microfinance refers to the offering of financial
services to poor and low-income people.
Traditionally, the poor have been considered “high
risk” and have not been well served by institutions
like banks and mutual funds. A central goal of
microfinance is poverty alleviation, by building a
world in which as many poor and near-poor
households have permanent access to an appropriate
range of high quality financial services

4. Background
❖Targeting unemployed and low-income individuals
and group.
❖ Providing banking services.
❖Microfinance allows people to safely take on
reasonable small business loans in a manner that is
consistent with ethical lending practices.

5. Benefits of Microfinance
❖Inclusion of the poor into the financial systems,
❖ Opportunities to start-up,
❖Lower interest rates compared to local money
lenders.
❖ Self-employment
❖Opportunity for education and community
development.

6. Cont
❖Entrepreneurs who create a successful business
create jobs, trade and overall economic improvement
within the community.
❖Empowering women in particular, as many MFIs do,
leads to more stability and prosperity for families.

7. Cont
❖The World Bank estimates that more than 500
million people have directly or indirectly benefited
from microfinance-related operations.
❖The International Finance Corporation (IFC),
estimates that more than 130 million people have
directly benefited from microfinance-related
operations as of 2014.
❖These operations are only available to approximately
20% of the 3 billion people who qualify as part of the
world’s poor.

8. Key Principles of Microfinance
 The Poor need a variety of financial services, not
just loans.
 Microfinance is a powerful instrument against
poverty
 Microfinance means building financial systems that
serve the poor
 Financial sustainability is necessary to reach
significant numbers of poor people
 Microfinance is about building permanent local
financial institutions

9. Cont
 Interest rate ceilings can damage poor peoples
access to financial services
 The government role is as an enabler, not as a
direct provider of financial services
 Donor subsidies should compliment, not compete
with private sector capital
 The lack of institutional and human capacity is the
main constraint
 The importance of financial and outreach
transparency

10. Microfinance in Bangladesh
❖Bangladesh’s microfinance sector was first
established in the 1970s, its main goal was reducing
rural poverty.
❖Microcredit accounted for a 10 percent reduction in
rural poverty in Bangladesh over that time—meaning
MFIs lifted some 2.5 million Bangladeshis from the
ranks of the poor.
❖Today, Bangladesh’s MFIs cover some 32 million
members and give out more than $7.2 billion
annually.

11. Cont
❖Modern microfinance in Bangladesh has expanded
its scope from home-based activities and self-
employment to include savings and insurance,
microenterprises, and productive employment
❖Microcredit also helped to diversify borrowers’
economic activities, boosting incomes in the process.

12. Cont
❖Household income grew over the study period,
driven by rising non-farm income.
❖Two of Bangladesh’s top MFIs (Grameen Bank and
BRAC) are among the world’s most efficient
microfinance institutions.
❖Microfinance also encourage individuals to invest in
small business, provide self-employed training and
also provide resources to establish business.

13. Summary
❖Microfinance works as banks for low-income/
unemployed individuals.
❖Especially in those areas where banks are not
available.
❖Major objectives is minimize poverty and
unemployment rate.
❖Play vital role to develop nation’s economy.

14. END