Sometimes called “banking for the poor,” microfinance is an amazingly simple, proven idea that empowers very poor people around the world to pull themselves out of poverty. Relying on their traditional skills and entrepreneurial instincts, very poor people, mostly women, obtain small unsecured loans, usually less than $200, from local organizations called microfinance institutions, or MFIs. They use these loans to start, establish, sustain, or expand very small, self-sustaining businesses. For example, a woman may borrow $50 to buy chickens, so she can sell eggs. As the chickens multiply, she will have more eggs to sell. Soon she can sell the chicks. Each expansion pulls her further from the devastation of poverty. As each loan is repaid – usually within six months to a year – the money is recycled as another loan, thus multiplying the value of each dollar in defeating global poverty.

Microfinance has consistently proven to be one of the most effective strategies in the fight against global poverty. Today, microfinance institutions around the world reach a little more than 100 million people. But there are currently more than a billion people in the world living on less than two dollars a day. Clearly, microfinance has reached only a fraction of those most in need of financial services.