March 1, 2006
María OteroWhat is microfinance?Microfinance is about making loans to very small businesses whose owners are generally below the poverty line, who require initial loans of maybe $300 to $400 and have no collateral. Microfinance banks focus on businesses which have assets probably below $2,000 and often have one or two employees. Microfinance banks can be profitable, with rates of return on assets that vary between 3.5% to 5% and returns on equity of over 20%. Lending to the poor is both sustainable and profitable. It enables the poor to create wealth.
How do microfinance banks differ from regular banks?Microfinance is being incorporated into the banking system throughout the
María Otero, president of Accion International, a development organization, explains how microfinance can help reach new clients and create markets for banks in Latin America.