We’ve all heard the saying “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” That’s all well and good, but if the man has no fishing pole, those fishing skills aren’t much help. Microfinance can get him that fishing pole. Odds are that this fellow will catch more fish than he can eat. He can sell a few, pay you back for the pole, and become financially self-sufficient. That’s a win-win situation all around.
Microfinance – banking the unbankable
Microfinance, sometimes called microcredit, is providing credit, savings, and general banking services to the millions of people who are unable to qualify for these services from a regular banking institution. Generally, this means a person lacking a certain amount of collateral – assets or money used to “secure” regular financing. Banking the “unbankable” is made possible with community-based approaches to lending because in general, banks are for people with money, not for people without (van Maanen, 2004).
A microcredit loan might range from under a $100 to perhaps a few thousand dollars, depending on the situation. These loans are also beneficial to the creditor- they are a manageable amount for the client, and easier to pay back than a regular, large loan. These microloans tend to have an extremely high success rate when it comes to being paid back, and several organizations providing these loans report a success rate around 97%.
The concept of microfinance began as an alternative way to assist developing countries. The concept is nothing new; the term “microfinance” became a buzzword in the 1970s and has been slowly developing and evolving for decades, but the positive impact of this service isn’t limited to the developing world. There are plenty of “unbankables” right here in Canada – people who have valuable skills, fantastic ideas and the drive to succeed, but who are trapped by their financial situation. We at GoForth Institute believe that to build a nation of successful entrepreneurs, these super-humans need access to three things:
- Entrepreneurship education
- Mentorship, advice, counselling and support
- Access to microfinance and loans
Microfinance can mean the difference between being dependent on aid and being self-sufficient. It can mean the difference between small business failure and entrepreneurial freedom. It can be the differentiating factor – the tipping point – between the world as we know it now, and the world as it could be, if every person’s skills, drive and potential had the opportunity to flourish.