Microfinance

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Microfinance refers to the provision of financial services to low-income individuals for building assets, guarding against risks, or stabilizing consumption. Microfinance encompasses a spectrum of services that range from the provision of micro loans to support productive activity or self-employment, to savings schemes, to money transfers to economic players who would otherwise have no access to financial services.

A microfinance institution (MFI) is an organization that provides financial services to the poor. This very broad definition includes a wide range of providers that vary in their legal structure, mission, and methodology. However, all share the common characteristic of providing financial services to clients who are poorer and more vulnerable than traditional bank clients.

Although microfinance has still low penetration rates in Africa compared to other world regions, it is growing rapidly. From 2006 to 2007, MFIs in Sub-Saharan Africa experienced an increase of 25 percent in borrowers and 31 percent in savers, reaching about 5.2 million borrowers and more than 9 million savers on the continent.  In North Africa, data was only available for Egypt and Morocco because of the limited number of MFIs in the other countries. For these two countries, growth in the number of borrowers was of over 30 percent for both, while the growth of the loan portfolio amounted to above 30 percent and 60 percent, respectively.

Differences remain in rates of penetration of microfinance services across the continent: West Africa shows the highest, with five out of the ten countries with the highest penetration rates for both savers and borrowers. Microfinance services have experienced the highest growth in penetration in Eastern and Southern Africa, and the lowest in Central Africa.

African governments have increasingly been focusing on the inclusion of microfinance into the formal financial system, by either extending banking and non-banking financial legislation or issuing microfinance-specific laws and regulations. Since 2002, in Sub-Saharan Africa, thirty-one countries have passed or revised microfinance legislation, while twenty-four countries have adopted national microfinance strategies.

Resource Centers

Microfinance Gateway
Maintained by CGAP, the Microfinance Gateway is the most comprehensive online resource for the global microfinance community, featuring research and publications, original articles, organization and consultant profiles, and the latest industry announcements, news, events, and job opportunities.

MIX Market (Microfinance Information Exchange)
The Microfinance Information Exchange is the leading business information provider dedicated to strengthening the microfinance sector. The organization’s core focus is to provide objective data and analysis on microfinance providers.