While Nigeria has experienced amazing economic growth over the past 20 years that is projected to continue well into the next decade, such rapid growth has also left us with a dramatic income disparity. Microfinance acts as a means to target wealth inequality and work towards bridging the gap. Because the poor or impoverished don’t have access to resources, their skills go underutilized, because they themselves are underutilized.
Microfinance, commonly referred to as microcredit which is actually a subsect within microfinance, acts as an opportunity for people who may not otherwise receive approval for a loan or credit to still obtain financial services. The concept was built around the idea of inclusion and access for all. In order to participate in growing economies, people need access to funding no matter their income bracket. Through microfinance, specified banks can offer the same services on a smaller scale that still have the ability to make a global impact. Because of the limited resources and opportunities, many of the impoverished or low-income groups cannot engage in local business practices or institutions and therefore cannot change their standings. This can change that.
Nobel Peace Prize Winner, Dr. Mohammud Yunus, is often seen as the forefather of modern-day microfinance. He used his money to make small loans to Bangladeshi women in order to help them purchase materials needed to start their furniture business. As Kiva describes, “ He discovered these very tiny loans, which traditional banks did not want to make due to the perceived risks and costs, could make a disproportionate difference to a poor person and given the chance they would pay them back creating a viable business model.” Given his successful experiment, Yunus went on to found the Grameen Bank and inspired others to implement similar practices.
For example, “ Women represent between 60 and 79 percent of Nigeria’s rural labor force but are five times less likely to own their own land than men. Women are also less likely to have had a decent education. “ Microcredit and financial inclusion organizations create some of the best opportunities for these women to gain valuable capital that can pay off long-term upon obtaining the necessary resources. While these programs are geared towards those with an entrepreneurial spirit or business opportunity, they also have programs intended to support those who don’t conform to this mold yet still have more basic necessities in order to sustain or improve their standing.
No matter the case, microfinance acts as an opportunity to help a class that is often otherwise forgotten or excluded based on their fiscal standing.