Microfinance is a general term to describe financial services to low-income individuals or to those who do not have access to typical banking services.

Microfinance is also the idea that low-income individuals are capable of lifting themselves out of poverty if given access to financial services. While some studies indicate that microfinance can play a role in the battle against poverty, it is also recognized that is not always the appropriate method, and that it should never be seen as the only tool for ending poverty.

• Microfinance helps very poor households meet basic needs and protect against risks
• The use of financial services by low-income households is associated with improvements in household economic welfare and enterprise stability or growth;
• By supporting women’s economic participation, microfinance helps to empower women, thus promoting gender-equity and improving household well-being;
• For almost all significant impacts, the magnitude of impact is positively related to the length of time that clients have been in the program.” (UNCDF Microfinance)

Many organizations connect microfinance institutions to help poor people alleviate poverty by lending them funds to start and/or supplement their businesses. One example of this is Kiva.

Kiva is a non-government organization that lets individuals lend money to help create opportunity around the world. Here’s how Kiva works:

How Kiva Works from Kiva on Vimeo.

 Basically, the loan process of Kiva can be summarized in 6 steps:

1. Kiva Partners with a Microfinance Institution.
2. Field Partners Disburse Loans and Upload Stories.
3. Lenders Browse Profiles and Lend.
4. Kiva Disburses Lenders’ Funds to the Field Partner.
5. Entrepreneurs Repay Their Loans.
6. Kiva Provides Repayments to Lenders.

For more information about Kiva.org, visit their websites at: http://www.kiva.org/