Three billion people in the world do not have access to formal financial services delivering savings, loans, insurance, and remittances today. They are not capable to make savings or loan to maintain the household; in a consequence, cannot expect stable life for their family in the future.
Under this circumstances, a number of organizations have taken up the challenge to help those who have no access to financial services almost for 30 years. These organizations, called microfinance institutions (MFIs), are mostly cooperatives offering financial services, non governmental organizations and programs implemented by international institutions. By the end of 2004, approximately 10,000 of MFIs have supported more than 80 million people worldwide.
The size of such institutions are various. The small and community-oriented offer microfinance services to a few hundred people in rural villages or urban shantytowns. On the other hand, large MFIs have explored their operations nationwide and offered their services to more than ten thousands of customers;millions of customers in some cases. Several institutions have even become largest banks in their respective countries.
Although microfinance is not panacea for global poverty, a numbers of studies have reported its positive effect on the standard of living of millions of low-income families. In fact, an impact study, carried out by PlaNet Finance Morocco in 2004, revealed that microcredit led local people to generate more income and obtain investment opportunity and access to the market;as a result, such improvements creat positive impact on the macro economy of the country.
Gender inequality impedes economic growth, thus, women's empowerment is highly required for economic development. Microcredit would encourage women to start their own business and promote their economic independence in the household. It has been shown that women are often more altruistic than men and likely to spend their income on their families more than that men do. Microcredit for women promises more direct impact on improving their life and leads to effective support for their children accordingly.