gE Blog Series: Global Entrepreneurship Week Part 4 - Microfinance

In the spirit of Global Entrepreneurship Week, today we will look at one of the most innovative concepts of entrepreneurship in recent years: the emergence of microfinance. Microfinance empowers poor individuals, mostly from developing countries, by lending them the capital needed to start their own small business. Access to capital for most individuals would not be available without the institutions that support microfinance. It is seen by many experts as a long-term solution to alleviating poverty, by promoting economic development and fostering international entrepreneurship.

Microfinance is nothing new; it can be traced back to the 18th century, when banks began lending small amounts of money to local farmers to purchase equipment, livestock, and seed. Microfinance can be described as lending small sums of money to borrowers with little or no collateral. In effect, these loans allow entrepreneurial minded individuals the money necessary to start their own small business. The goal of microfinance is to create a world where entrepreneurs are free from the limitations of poverty.

Today, microfinance is a growing industry with countless opportunities for expansion. There are many non-profit organizations supporting microfinance, as well as a few large financial institutions that have started to invest in it. Microfinance increases entrepreneurship in developing nations by allowing innovators to create and expand business.  The main benefit of microfinance is that it is not just quick fix for developing nations, but a model that provides the basis for systematic change in impoverished communities. This is crucial for global entrepreneurship expansion, opening the gates for millions of entrepreneurs to start their own businesses.

Microfinance is seen as a sustainable way to promote social equity using a viable business model that encourages entrepreneurship. It cultivates the entrepreneurial spirit and inspires individuals to create their own success. To learn more about the microfinance movement, check out the globalEDGE business review, Microfinance: The Journey from Non-Profits to Major Financial Institutions. We also have a very informative online course module about recent developments in microfinance.