Imagine living on a farm in a developing country.
In a nutshell, microfinance is financial services offered to the poor.
Microfinance was brought to life by Dr. Muhammad Yunus, a professor from the University of Chittagong in Bangladesh.
Microfinance has evolved since the early days in Jabra and has made a dent in global poverty reduction.
A reason why there is so much activity in microfinance is because this business can actually make it rain.
While it is true that microfinance has positive impacts, it can actually be a double-edged sword.
To prevent microfinance institutions from exploiting people, the government can step in. However, an incompetent government can cause further problems.
Microfinance is not a scarf: one-size-fits-all approaches don't always work.
The key is good intentions and smart government regulations.
In microfinance, the goal to help the poor and the goal to make money are in conflict with each other. Institutions make money off of their clients by collecting interest and fees, but they must also help people; kind of counterintuitive. The dilemma is to do both. Companies must make money to stay in business, but they can't forget why they entered this business in the first place. Keeping their intentions constant is important to make sure that they are not exploiting their clients.
It is also important to craft policies that protect customers and promote microfinance's growth. A country must ensure that its citizens have sustainable access to financial services regardless of income. That country must also keep microfinance in its borders to help its citizens. Moreover, because all countries' conditions are different, the government has to be mindful of all intricacies before making any major legislation. As always, with great power comes great responsibility.