Getting financing in a Third World country can be next to impossible.
The primary function of a microfinance loan is to help alleviate poverty. Prospective borrowers are given loans to start or expand a business. Some loans are given so borrowers can improve their profit margins by purchasing in bulk or buying equipment for streamlining production. Microfinance institutions also educate about finances and entrepreneurship, empower women and connect people from across the globe to help stamp out poverty.
Spread Education
Microfinance loans provide an opportunity for parties receiving a loan to become educated on not only financing a business, but operating that business and how best to manage profits. Institutions that offer microfinanced loans often require anyone borrowing money to become educated on money management before getting a loan.
Empower Women
Many microfinance institutions specifically target women. Studies have shown lending to women, especially in areas where women are marginalized, has a positive effect on women's self-confidence, how women are viewed by the community and their family and on the community in general.
Bridge the World
Some organizations, such as Kiva, have connected ordinary donors in more developed parts in the world with prospective borrowers in impoverished nations. While Kiva donors don't get interest on the loan payment, they do get updates on the progress the borrower is making on paying back the loan.
