Small Money Big Impact

CHAPTER 2Microfinance – the Concept

I believe in microfinance because it isn't just a path out of poverty. It's the road to self‐reliance. By allowing people to team up and literally become their own bank, you can mobilize people and resources and alleviate poverty on the global scale.

Her Majesty Queen Rania al‐Abdullah of Jordan¹

The financial markets in many industrialized countries are a result of capital structures similar to those of microfinance.

Microfinance is a form of impact investing yielding not only financial but also social returns; a sustainable combination of economic performance and social impact.

Financial inclusion by means of facilitated access to financial products promotes higher income, leads to better health and education and reduces economic inequality.

2.1 HISTORY

Microfinance has become a household name and a story of success over the last few decades. However, its origins date back much further. Today's modern financial markets in many industrialized countries are a result of capital structures similar to those of microfinance. Deeming the concept of microfinance to be a relatively new one, and thereby confining its roots to the recent past, would not only mar its historical importance and overall impact but also neglect the consolidated findings of the past centuries. These invaluable experiences are the basis for any future development.

As early ...