What does 'microfinance' involve?

Microfinance involves providing financial services to low-income individuals or those who do not have access to traditional banking services. This can include small loans, savings accounts, and insurance, designed to help individuals start small businesses, improve their economic situation, and alleviate poverty. The focus is on empowering those who are typically marginalized in the financial system, allowing them to engage in productive economic activities that they otherwise might not be able to afford.

This distinguishes microfinance from options that relate to larger entities or different financial strategies. For instance, lending exclusively to large corporations would not fall under microfinance, as its core mission is to support individuals and small enterprises. Additionally, using microfinance as a method to regulate macroeconomic policies or offering high-interest loans to startups diverges from its foundational purpose of promoting economic inclusion and sustainability for the underbanked.