For resourceful people
Where traditional development aid often has considered the poor as passive and needy, microfinance highlights the poor`s resourcefulness and creativity. Microfinance has proved to be an efficient and resilient tool for leveraging the potential of economically poor but innovative people.
Access to capital and business knowledge is the most important entry barrier for people who want a way out of poverty. The greatest asset of developing countries is the entrepreneurial flair of their people.
How microfinance works
Microfinance may alleviate poverty in different ways of which the most important ones are:
- Provide capital for small businesses. Better businesses improve the income for families, and stimulate employment.
- Access to reliable savings that generate a modest interest rate, thus reducing the risk of saving money in the home, and protecting their savings from the effects of inflation.
- Financial intermediation promotes the economy of a country. The money exists in the economy, but it has to be intermediated to stimulate growth.
- Stabilize the consumption of vulnerable groups, thus reducing one of the main problems for poor people: the variation in income.
- Reduce the negative impact of shocks. Basic insurance products can help vulnerable entrepreneurs to overcome adverse shocks that may otherwise jeopardise their businesses and push them further into poverty.
What microfinance is and is not
Microfinance is not a panacea for world poverty, but it is a useful tool to be used in conjunction with others. For this reason AMAS works closely with the non-financial activities of Mission Alliance to provide a range of services to holistically assist in development.