Microfinance is designed to fight poverty by strengthening the economic position of households at or below the poverty line. Microfinance is the provision of small loans (called “micro-credit”) or savings services for people excluded from the formal banking
system.
Effects of Microfinance
In the right environments, microfinance can accomplish the following in the fight against poverty:
- Broaden poor people’s economic choices
- Diversity household income, to make households less vulnerable to downturns in the economy or personal or health set-backs
- Smooth income flows within households to improve quality of life throughout the year
- Strengthen the economic position of women so that they can take greater control of decisions and events in their lives
- Build household assets: from houses to business equipment to land
- Sometimes provide savings: allowing poor households to accumulate safe but flexible cash accounts to draw on when needed.
Microfinance in the HIV and AIDS context
Many of the world’s poor earn their income from self-employment. The AIDS epidemic presents an additional threat to clients and microfinance institutions. Poor entrepreneurs are more likely to be working in the informal sector and have a greater need for microfinance services. The microfinance industry currently serves over 80 million poor entrepreneurs globally, about 70% of who were among the poorest when they took their first loan. These clients fit the profile of those at most risk of contracting HIV/AIDS. Women, who bear the brunt of global poverty, are also the primary beneficiaries of microfinance.
Focus on women
Microfinance has typically targeted women-led microenterprises and today, over 55% of MFIs serve more women than men. This is understandable especially given the fact that women make up about 83% of the poorest clients served by MFIs. The microfinance sector, which serves the poor, is responding to global poverty and factors that cause poverty. Through its focus on women, microfinance may also play a role in reducing a vulnerability to HIV/AIDS by keeping women and their daughters out of high-risk behaviors based on economic necessity.
Impact of addressing HIV and AIDS within the context of Microfinance
At an early stage, households can still make use of loans and can still save money. At this point, microfinance services play an important role in strengthening households’ economic safety net to draw upon in the later stages of AIDS.
A family’s ability to cope with the impact of HIV/AIDS depends on the state of the household’s economic resources before, during , and after the disease affects them.
To mitigate the negative social economic impact of HIV and AIDS, Micro finance services can help smooth out a household’s income inflow and increase food security by financial and non-financial services:
- Provide access to credit
- Promote savings accumulation
- Promote Health Care Insurance
- Train clients in business management skill
- Reduction of stigma through training and sensitization
- Help clients maintain or increase income
- Provide clients with an opportunity to build savings which are secure, easy to liquidate quickly, and retain value
- Reduce clients’ vulnerability to loss
- Enable clients to avoid irreversible coping strategies that destroy future income earning (i.e., selling productive assets such as land or farming equipment)
The outreach is achieved through partnership between Microfinance institutions and organizations working directly with people affected and living with HIV/AIDS such as:
- Faith Based Organizations
- Community Based Organizations
- Non Governmental Organizations
- Governments, – Ministry of Health
- National AIDS Control Council
Click here and read more about the: Joint initiative of STOP AIDS NOW! on Micro finance and HIV/AIDS
