In todays modern world the alleviation of poverty is a primary concern of every nation. Again the developing countries across the world are facing a real challenge in this respect. The inflation and several other factors are also adding to this problem. In such a situation, the international micro finance proves to be of great help.
The basic conception of microfinance is to extend the financial facilities to the poorest of the poor. These people do not have the proper employment and and not even any property to produce as collateral to the banks against which the commercial banks can provide any kind of financial help. On the other hand, the banks are also not interested in the processing of small loans because the loan casts of such loans are high in comparison to other loans. The risk involved in these loans are assumed to be very high.
Through microfinance, poor people are provided with financial loans on very easy terms and nominal interest rate. Through this financial assistance these people are doing very well and the whole scenario of these countries are changing very rapidly. Another important factor is that the repayment rate of these loans are very high.
The microfinance loans are very helpful in providing practical solutions for the problems like housing and urban services. But the main problem was the risk factor involved in the loans. But once it is proved that the assumptions were wrong, the flexibility of these loans have been increased.
There are nations like Nepal and Bangladesh, which are focusing on the development of the women through these options. The microfinance projects like Grameen Bank of Bangladesh and the project running under the Nepal Rastra Bank are important examples of this.
At the same time, the character of microfinance is changing globally. Right now, about 20% of the funds, for the purpose of microfinance is provided by the commercial sector. But in the coming years, this participation is expected to change totally and the starting of the change is the $40 million bond issued by the Grameen Foundation USA with the purpose to provide help to the microfinance organizations of nine developing countries. Bangladesh, Bolivia and African nations are leading from the front in this field. In 2005, the international microfinance year was celebrated by the United Nations Organizations.