In this chapter, students will be able to understand: Understanding clients, the market, and the opportunities; size of the microfinance industry; why is microfinance growing? what are the risks of microfinance?
hey exist to satisfy immediate economic needs Delia • Some economists regard informality as a choice They assume that people can choose to be formal, keep proper books, register their businesses, and pay taxes If they “decide” to be informal, their motivation is presumed to be avoidance of the costs of formality Delia • In this view, informals are seen as shirkers who not pull their weight in society and compete unfairly with upstanding formal businesses Delia would be angry and bewildered to hear talk like that For her, informality is simply the life she knows Delia • Today Delia thinks of herself as a successful businesswoman But years ago, she found herself with three young children, no livelihood, no way to earn a living, and no one to help her Her husband had abandoned her for another woman, taking with him the proceeds from selling their market stall Delia • Delia and some women friends formed a group to get a loan from what is now Mibanco, Peru’s leading microfinance bank They borrowed as much as they dared, having nothing more to offer as security than each other’s group solidarity Delia • Delia’s first and probably biggest hurdle was to save enough for a new stall She invested and improved her business and her family life, upgrading the stall several times, increasing her inventory, building rooms in her house to rent out, and educating her three daughters Delia • Over many years, she has worked her way up from a $100 or $200 group loan to an individual loan of $3,000 Delia • Delia’s first steps in launching her microenterprise were small and may have appeared unpromising When she started, the shelves had only a few items Delia • Many retail businesses like hers crowd the market, so she had to keep her prices very low It was hard to obtain a large enough sum of money to make significant improvements Delia • Today the walls are filled from floor to ceiling Every bit of space provides an opportunity to stock something else ... businesswoman But years ago, she found herself with three young children, no livelihood, no way to earn a living, and no one to help her Her husband had abandoned her for another woman, taking... to plan and invest because she could count on accessing a loan when she needed it, as long as she paid it back faithfully Delia • • And finally, she had the experience of being trusted and valued... selling their market stall Delia • Delia and some women friends formed a group to get a loan from what is now Mibanco, Peru’s leading microfinance bank They borrowed as much as they dared, having