Microfinance: Poverty Reduction through Self-Sufficiency

Abstract

Micro finance is a revolutionary step towards the alleviation of poverty. Small loans are given out to a group dubbed the "economically active poor." These finances help individuals to microenterprises and to become self-sustainable. The resulting benefits from these loans allow the poor to become empowered and take control of their lives. Though there are several pitfalls to micro finance, if used properly this approach to poverty alleviation may ultimately increase GDP in developing countries. Two approaches to microfinance have resulted since its creation, poverty lending and financial systems. Each has its advantages and disadvantages, but bringing the two ideas together could ultimately increase the amount of penetration of micro finance throughout the world. The main objective of this paper is to help individuals better understand how microfinance benefits the poor. In addition, it will be shown how microfinance can help to boost the economies of developing countries relating to growth and inequality.