Microfinance is the extension of small loans to low-income people who do not qualify for traditional bank loans. It has been proven an effective tool in the ongoing struggle against poverty, by empowering the poor to better their financial situation through entrepreneurial activities.

Lets look at it from a 'solution to a problem' perspective.

A Problem - vicious cycle of poverty:
In India, almost 36% of the rural population do not have access to the formal banking services. Although, India has a good network and outreach of banks in the rural areas, but a small number of population has been served by these banks and specifically, low income generating clients have been left out. As a result, this 36% population has mainly relied on informal money lending sector for fast access to money whose exorbitant interest rate reinforces the indebtedness that ultimately results in life time poverty for the poor.

A potential solution - Microfinance
Microfinance, in simple terms, is a way to bank the unbanked (i.e. poor). It is the extension of small loans to low-income people who do not qualify for traditional bank loans.

Microfinance Institutes (MFIs) is an organization that provides financial services to the working poor. This very broad definition includes a wide range of providers that vary in their legal structure, mission, and methodology. However, all share the common characteristic of providing financial services to clients who are poorer and more vulnerable than traditional bank clients. Commercial banks in India have realized the business opportunity in Microfinane, and there investments acts as fund source for MFIs as dipicted in the following picture.

At 30$F, we partner with MFIs whose objectives align with ours i.e. to reduce poverty!!