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A Quick Guide To Microfinance

November 20, 2012

Today's blog post is courtesy of Ben Smith.

If you’ve browsed this site looking for types of projects and organizations with which to get involved, you’ve probably come across the term “microfinance” more than once. Many organizations, particularly those working in small communities, include microfinance in their mission to serve the poor and underprivileged as it is a way to help others help themselves, with real growth and sustainability the end goal. Here is a primer on what exactly the term means and some organizations that can help you get involved with working in microfinance.

An Overview of Microfinance

Via Creative Commons, epSos.de

Essentially, microfinance is a way for low-income individuals and families to gain access to traditional economic assets such as lines of credit (sometimes known as “microcredit”) and loans, the sorts of tools that families and fledgling businesses would need in a traditional economic setting. Because banks and established financial systems are often either unavailable or inaccessible to those living in poverty, organizations that provide microfinance services offer ways to manage money and allow it to grow that circumvent the need for large institutions. Though the principle of managing money on a small scale has existed for years, the industry of microfinance has only in the last several decades really expanded and provided access to financial services for millions of people who might not otherwise have it.

As with any financial institution, organizations that provide these services require a great deal of administrative help, and to become seriously involved in the field at all does require a bit of education and training first. However, because of the investment and training necessary, working in microfinance has the potential to become a career or at least a serious job for several years. It is also certainly an expanding industry, as the ultimate goal is to help those in poverty sustain themselves and their families. One of the best ways to start getting involved is simply to observe and learn before spending an extended amount of time in the field. There are three organizations I’ve chosen to highlight here, two that are very well-known and one local institution that I can speak about from experience.

Grameen Bank

Founded by one of the pioneers of microfinance, Muhammad Yunus, the GB is likely the best known of any microfinance institution. Started in Bangladesh (“Grameen Bank” means “Bank of the Villages” in Bangla), the organization has now spread its ideas and staff members to much of the rest of the world. The “Bankers Without Borders” program (http://www.grameenfoundation.org/take-action/volunteer) allows working professionals to get involved in a myriad of ways, both virtually and on-site.

Kiva

Kiva is an organization that has really utilized the power of the Internet to put people willing to lend money in touch with people who need money, with zero overhead cost. While this system itself is straightforward, the organization is always looking for translators and other administrative support staff, particularly as they continue to expand. Visit their volunteer page (http://www.kiva.org/volunteer) or their Fellows Program (http://www.kiva.org/fellows) page to learn how to support their work.

Amextra

If you happen to be in the western United States or Central/South America, a solid volunteer organization to get connected with is Amextra. Based in Mexico, a country hit hard not just by drug-related violence but extreme poverty, Amextra works to educate to build stronger communities, one person at a time. Like Bankers Without Borders, Amextra partners with working professionals with expertise in leadership development, healthcare, and other fields. More information can be found in the Training portion of their website (http://www.amextra.org/7_capacitacioningles.html).

Image via Creative Commons, epSos.de.