Banking turned upside down.
Microfinance is about giving poor, creative people access to small loans and financial services so that they can obtain a steady income and a secure future.
Being poor has nothing to do with lack of ingenuity and drive, but is a result of unfortunate circumstances and lack of opportunities. Included in this is the inability to access capital. Many poor people have difficulties getting loans from traditional banks and financial institutions.
The result is that impoverished people must resort to money lenders and loan sharks, who charge exorbitant interest rates for loans, making it nearly impossible to pay them back and pushing people even further into poverty.
Microfinance is a practical solution to this problem. Although microfinance can take a variety of forms, the basic concept is to provide access to small amounts of capital (often as little as $50 or $100), so that people can invest in a small business.
They may use the loan to buy a pregnant cow that will provide milk, a sewing machine that will make beautiful garments or water pump that can irrigate the fields in a more efficient way. Each of these is an investment that will help entrepreneurs develop their ideas and start a business, enabling them to earn a living for themselves.
Traditional development assistance has often looked at poor people as passive and in need of outside help. Microfinance, on the other hand, recognizes them as fully-capable, creative individuals who have the talents and abilities but are lacking in resources. They are able and willing to do something with their lives if given the chance. Microfinance is the chance that they have been waiting for.
Banking turned upside down
Microfinance turns traditional banking upside down. While banks usually lend money to wealthy men, microfinance provides loans for the poor, particularly women.
Regular banks and financial institutions require collateral to secure loans, but the majority of poor do not have anything to their name. Microfinance is based on trust, recognizing the creativity and hard work of the poor as sufficient collateral. Loans from a bank require a lot of paper work, but microfinance is accessible for illiterate people too.
No matter how we look at the statistics, women always comprise the majority of the world’s poor. According to the United Nations Development Programme, women represent half of the world’s population, yet they own only 1% of the world’s wealth. In many places, women are suppressed not only financially, but socially as well.
Despite these statistics, studies have shown that women are generally better than men at managing an income and meeting the family’s basic needs. Women invest in their children, ensuring that future generations will have a better chance at life. For this reason, the majority of our microfinance projects are aimed particularly at women.
More than a loan
Microfinance includes a range of services offered to people with low incomes. These may be loans, savings and insurance, but can also take the form of non-financial services, such as training within administration, management and marketing.
Strømme Foundation is involved in nearly 80 microfinance projects in South America, East and West Africa and Southeast Asia. We only work through partners on the ground, because they know the local conditions and where help is needed the most. Some of these partners are major microfinance institutions, while others are grassroots groups based locally in the villages.
Reaching 100 million poor
Over the past two decades, microfinance has grown enormously worldwide. In 1997, 13 million poor people around the world were given the chance of a better life through microfinance. Ten years later, in 2007, microfinance was available for 100 million of the world’s poorest people, according to the annual report from The Microcredit Summit Campaign.
The numbers continue to grow, as more and more people are recognizing the potential that microfinance brings to fostering entrepreneurship and creating a world free from poverty.
Strømme Foundation's competence
Strømme Foundation has particular competence within the following areas:
- Business management training for women in the informal sector
- Development and administration of microfinance institutions (MFIs)
- Development of community groups for saving and lending
- Support of entrepreneurial talents