Microfinance assists low-income individuals or those who do not have access to typical banking services. Microfinance is the supply of loans, savings, and other basic financial services to the poor.

Microfinance is also the idea that low-income individuals are capable of lifting themselves out of poverty if given access to financial services. As these services usually involve small amounts of money – small loans, small savings, etc., the term "microfinance" helps to differentiate these services from those which formal banks provide. Formal financial institutions were not designed to help those who don't already have financial assets, they were designed to help those who do have means and are a lower risk for default.

Credit is available to the poor, typically, from informal money-lenders who usually charge very high interest rates. Even some micro-enterprises have high fees to offset the administration and processing costs.

Programs serving the very poor clients are somewhat less profitable than those reaching better-off clients, but this may say more about the manager's objectives than an inherent conflict between serving the very poor and profitability. Canefire Microfinance is dedicated to serving the very poor.

There are three kinds of costs any financial institution has to cover when it makes loans. The first two are the cost of money that it lends and the cost of defaults. The third cost is the loan transaction costs. The cost of processing a loan transaction is similar whether the loan is for $100 or $10,000. The staff time to meet with the lender, appraise the loan, track repayments and follow-up monitoring are similar. Every loan applicant is required to complete a business training course that we provide and is accountable to a support group of other participants.

While some studies indicate that microfinance can play a role in the battle against poverty, it is also recognized that it is not always the appropriate method, and that it should never be seen as the only tool for ending poverty.

There are cases where microfinance cannot be made profitable. An example might be where potential clients are extremely poor and risk-adverse, or live in remote areas with very low population density. In such settings, microfinance may require continuing subsidies. Whether microfinance is the best use of these subsidies will depend onevidence as to whether or not it impacts the lives of these clients.

By reducing vulnerability and increasing earnings and savings, financial services can allow poor households to make the transformation from every-day survival to planning for the future. Households are able to send more children to school for longer periods and make greater investments in their children's education. Increased earnings from financial services lead to better nutrition and improved living conditions, which translate into a lower incidence of illness. Increased earnings also mean that clients may seek out and pay for health care services when needed, rather than go without or wait until their health seriously deteriorates.

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