Microfinance

Many people in developing countries cannot get loans from banks because they lack collateral, credit histories or steady incomes, and the loan amounts they need are too small to be profitable for traditional lenders. Microfinance institutions fill this gap.

A key innovation was group lending, in which small groups of borrowers support and guarantee each other's loans, reducing the need for collateral. The Grameen Bank in Bangladesh, founded by Muhammad Yunus, pioneered this approach; Yunus and the bank received the Nobel Peace Prize in 2006.

For example, a woman running a small market stall might borrow a small sum to buy more stock, repaying it in weekly instalments from her increased sales.

Microfinance has helped millions of people start or grow small businesses and manage financial emergencies. However, research has found its effects on poverty to be more modest than early supporters hoped, and some microlenders have charged high interest rates or caused over-indebtedness. Mobile money has expanded access to financial services further.