What is an investment in microfinance?
microfinance is the practice of expanding very small loans to entrepreneurs in the poorest parts of development nations. Investing in microfinance has the potential to generate revenues that are double for investors. Microfinance is the largest financial movement to alleviate global poverty and create business opportunities in bad areas, making it a socially responsible investment. In addition, investors, by investing capital in funds that issue loans for microfinance, historically earn financial revenues compared to the risk exposure. Although large amounts of money have already been donated to this nascent segment of the economy, the full potential for investment in microfinance is probably not yet realized.
The demand for microfinance loans is robust. Since 2007, there has been a gap in the field of financing, a contradiction between the amount of money required and the value of $ 250 billion (USD) loans available. The amount of money devoted to microfinance instituting and small invitationsHowever, the Estrators continue to grow in the United States and Europe.
In order for investors to invest in microfinance, they must choose an institution for microfinance (MFI), which is a company that lends to those in the poor world. This MFI extends loans to individuals that are considered to be a credit risk and who are most likely to generate profit using these funds wisely. MFI charges a reasonable interest rate for the loan and investors share profits from these interest payments. If it wasn't for these MFi loans, poor workers would be forced to borrow money from credit sharks that could charge up to 1,000 percent of analized interest for a small loan.
areas in which investments in microfinance could be assigned are some of the poorest areas in the world, from East Asia and Eastern Europe to Sub -Saharan Africa.belonging to the debtor's nation. These investments, also known as microlineans, can be in summary anywhere from less than $ 100 to more than $ 1,500.
Although any investment in microfinance is threatened by a debtor's failure, there is a higher success of women than men in poor areas. Women tend to attract a more conservative business approach that limits the level of failure. In addition, because many entrepreneurs also increase families, many of them run businesses from their own house, which cuts the element and risk of traveling and facilitates creditors to find them for matters related to investment in microfinance.