What is Microfinance?
By Isabelle Wisco (MSB’22)
Simply put, microfinance fosters financial empowerment. Its origins date back to the 18th century when, during economic crisis, the Irish Loan Fund provided small-scale loans to underserved Irish citizens. Now, about two hundred years later, the field of microfinance has expanded into a worldwide phenomenon. In 2016, for instance, an estimated 123 million people borrowed a total of $102 billion in microloans. Further, many organizations have gone beyond loans to serve communities with other resources, like economic education, insurance, savings programs, and more. Despite the variety of approaches to microfinance, the core mission remains: aiding those whom traditional financial systems often overlook.
When people lack access to proper financial resources, they encounter significant barriers to economic initiative and growth. For many, trustworthy business capital is hard to find. Paying out of pocket, for instance, is not feasible for those making just enough to sustain themselves. Moreover, traditional financial institutions, while credible, lend based on criteria that consequently exclude certain communities. On the flip side, predatory lending, while feasible, employs abusive loan terms that further disadvantage the same communities. Microfinance fills this clear gap by prioritizing underserved communities and offering them opportunities to work towards financial independence.
As the largest student-run microfinance initiative in the nation, our organization holds a particular focus on Small Business Loans and Group Financial Coaching. The former allows small business owners to obtain the necessary capital to grow their business. Beyond just providing loans, however, HMFI also crafts meaningful relationships with clients to ensure we fully understand their needs and goals. After all, to its core, microfinance is about human interaction. Perhaps our Group Financial Coaching sessions best exemplify this claim, where HMFI members directly engage with individuals and discuss how to best manage their finances.
In some sense, the term “microfinance” is somewhat of a misnomer. Far from “micro,” our impact creates change that goes beyond simply providing economic resources. We are committed to empowering individuals so that they can effectively manage their wealth to thrive in their everyday lives.