By Whitni Thomas, Investment Relations Manager, Triodos Bank
- Microfinance institutions (MFIs) provide financial services to people on low incomes who do not have access to credit and other financial services.
- An estimated 2.7 billion people have no access to formal financial services. They are unable to open a bank account, negotiate a loan to start a business or buy insurance.
- Recent turbulence in the sector is leading many intermediaries to refocus on the social objectives of microfinance.
- There are various intermediaries and funds through which individuals can invest in microfinance.
Microfinance institutions, or MFIs as they are often called, provide financial services to people on low incomes who do not have access to credit and other financial services. While the services and products vary, MFIs typically make small loans (of around £50) to poor people for short periods of time. The original premise of microfinance was that people who were traditionally excluded from the banking sector because of lack of income or collateral could borrow to meet their credit needs. These needs either go unmet or are met at the exorbitant terms set by moneylenders or loan sharks.
Case study 1: Triodos Microfinance Fund
Case study 2: Coutts Microfinance Pilot Donor Advised Fund
1 Microfinance offers social investors an opportunity to combine financial with social returns. As with any investment decision, we advise you to consult an investment professional in evaluating your options.