...who are excluded from the traditional banking system. These populations are generally unable to give guarantees (income, property) to financial and banking institutions, which thus refuse their requests for credit.

Through MicroFinance Institutions (MFI), microfinance helps persons excluded from the banking system avoid having to resort to usurers, i.e. private lenders who practice 100 to 300% interest rates.

The microloans granted are usually small amounts running from $30 to $2,000, depending on the geographical region and the type of MFI. The loans granted by MFIs can sometimes be higher if the borrower's business calls for a larger investment (e.g. purchase of a new vehicle for a taxi driver). Loans may be individual or collective (community banks, solidarity groups, etc.).

Although MFI interest rates are clearly lower than those charged by usurers, they may still seem relatively high compared to the rates offered by so-called traditional banks. However, these rates cover the transactional cost of microloans (higher than for larger loans) along with follow-up and support expenses (visits and/or regular MFI meetings with the borrower; accounting and small-business management training sessions).

Furthermore, MFI interest rates enable the institutions to secure loans for themselves in order to refinance and expand their financial service offering.

The microloans granted by MFIs help men and women develop and strengthen their Income Generating Activities (mostly micro-businesses, e.g. selling produce in markets), thus improving their economic living standards.
A majority of these loans are granted preferentially to women, because they present better loan repayment rates and they reinvest more systematically the income for their household needs (health care, children's education, home improvement).