Microfinance 'a critical innovation' for poor African households

Aug 18, 2011

Microfinance has been described as a "critical innovation" that can help Africans living in poverty.

Microfinance has been described as a "critical innovation" that can help Africans living in poverty.

The Herald notes that the poorest households and individuals living on the continent do not have assets and "clearly defined" property titles.

Therefore, it is often difficult for them to obtain credit because they have nothing available to use as collateral.

Furthermore, "financial institutions generally shy away from this market, either because they are unaware of it or because they deem it unprofitable".

Microfinance, however, is a solution because it provides insurance and saving services for those on even the lowest of incomes.

The news provider states that the initiative is "growing quickly" in Africa and provides an alternative to borrowing cash from informal lenders.

Earlier this month, the African Development Bank Group launched a new microfinance initiative in a bid to encourage capacity building within the sector.

It was hoped this would be particularly useful to those living in rural areas.
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