Microfinance Institutions

Your investment in Vision Microfinance enables the provision of small loans to low-income people via carefully selected microfinance institutions (MFIs).

A Microfinance Institution (MFI) is an organisation that provides financial services for MSME - Micro- Small and Medium Enterprises. They are mainly present in developing countries and vary in size and scope. They often start up as non-government organizations (NGOs) which concentrate merely on loans and later turn into regular banks which offer all common financial services.

The lack of „traditional“ collateral of micro-entrepreneurs is compensated by a thorough check of the personal living circumstances and a close contact between the microfinance institution and the micro entrepreneur. Microfinance institutions know their clients intimately, they meet regularly and help and advise them.

Often microfinance institutions give loans to small groups of people who are jointly liable for the timely payment of the debt. The social network is often very strong in developing countries; it ensures that everybody wants to pay back the loan to save face. The payback ratio of micro-entrepreneurs to microfinance institutions is an impressive 95-98%.

Micro credits

Micro credits are small loans with a big effect. They are based on the principle of trust and personal responsibility. To believe in people in turn strengthens their self-esteem.

However, micro credits are no charity. They have to be paid back in time and interest is charged. They are characterised by:

  • Small credit sizes
  • Short maturities
  • Amortization of principal and interest rate in many small installments.
  • Personal relationship between the microfinance institution and the client with frequent personal visits.
  • Detailed knowledge of the living circumstances of clients as a replacement for collateral.
  • Micro credits are an incitement for economy.
  • Money does not dissipate but work.
  • Money is paid back and handed out again.
  • This dynamic cycle enables more and more people to escape