Two of the toughest financial issues for people on low incomes are getting access to loans at an affordable interest rate and getting rid of high-interest, short-term debt. That's where microfinance comes in.
Microfinance is the provision of financial services such as loans and savings accounts to people on low incomes who can't easily access mainstream financial services. Loans generally have either a low interest rate or no interest and are for small amounts.
Access to microfinance helps people on low incomes become financially independent and, in turn, this makes a significant difference to their well-being, dignity and confidence.
Microfinance, particularly lending for small businesses, is burgeoning in developing countries. World Vision Micro and Kiva are two examples of microfinance organisations offering loans to entrepreneurs in poor areas. However, microfinance is also prevalent in developed countries.
In Australia, Good Shepherd Microfinance offers low or no interest loans that help households with essential living costs such as fridges, education or medical expenses. Good Money, a joint venture between Good Shepherd, the National Australia Bank and the State Government of Victoria, has a number of community finance stores that offer financial counselling as well as financial services.
