History of Microfinance

Microfinance started in Bangladesh and parts of Latin America in the mid-1970s to provide credit to the poor, who were generally excluded from formal financial services. The model gained popularity and has since been replicated in low- and high-income countries.

Over time, financial service providers have developed a better understanding of the wide range of financial needs of low-income people in both urban and rural areas. These needs might include asset building, managing irregular income flows, and coping with crises, such as sickness, death, natural disasters, and conflict. Many financial service providers now offer a wide range of products beyond credit, such as savings, insurance, and money transfers, to help poor people manage their financial lives.

New technologies continue to create opportunities to broaden the reach and lower the cost of delivering financial services to poor people. Financial services are now available in many markets to anyone with a mobile phone, with innovation driving both improved product design and delivery.

Today, microfinance is increasingly seen as one component of the broader financial inclusion system, comprised of various players with the common objective of delivering high-quality financial services to low-income people.

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